Vin Diesel’s Bloodshot Is the Perfect Movie For the New Direct-to-Streaming Era

Faced with nationwide closures and an empty release schedule, movie theaters are asking for bailout money. The chief of the theater owner’s lobby pitched it this way: As public gathering places, theaters are uniquely affected by the spread of COVID-19, and also comparatively inexpensive to prop up. The theater industry hasn’t named a dollar figure, but for less than the price of bailing out one airline, you could save the entire theater industry, he told The New York Times. What’s one more airplane brand next to the magic of the silver screen? Besides, people will need someplace to go when it’s all over.

I am a little bit sympathetic to this line of thinking. I rarely fly, but I see movies frequently. Over the course of my life, movie theaters have provided me with thousands of hours of escape, entertainment, and engagement, both by myself and in the company of others. I genuinely believe that theaters, as director Christopher Nolan recently wrote, are a “vital part of social life.” 

Still, I have to wonder: Have any of these people seen Bloodshot

Bloodshot is a PG-13 action film starring Vin Diesel, based on a somewhat obscure comic book from the 1990s, directed by a first-timer with a background in computer animation. If you asked a machine learning program to survey the last several years of theatrical releases and then generate its own by algorithm, it would probably come up with something like this. Bloodshot is very nearly the median Hollywood film. 

The movie was initially released in theaters two weeks ago, playing on about 2,800 movie screens domestically. Since then, a few things have changed. 

Today, barely any movie theaters are still open in the United States. As a result, many movies that were scheduled to open in the next several months have been delayed until after our viral apocalypse. In the meantime, several recent theatrical releases have found their way to video on demand. Normally this takes months, since theater owners have negotiated an exclusivity period with movie studios. But what’s a theatrical release window when there are no theaters to release into? 

That is why, for a mere $19.99, you can now own-to-stream a 4k digital copy of Bloodshot from Amazon, iTunes, and other fine purveyors of high-quality ones and zeroes.

It’s appropriate for a movie about a soldier given a digital rebirth. Diesel plays Ray Garrison, who is resurrected after losing both his wife and his life on a mission abroad. In his reincarnated form, he’s a supersoldier held together by nanites, tiny bio-machines that rapidly heal wounds and give him super strength. Naturally, he seeks revenge, and with the help of a similarly super-powered squad of nano-soldiers, brought together by Dr. Emil Harting, a twitchy scientist played by Guy Pearce, he embarks on a mission to take down the sociopathic Martin Axe (Toby Kebbell), who stole everything from him. 

From there, the movie goes roughly where you expect it to go—and then, perhaps, a little further, with a twist that essentially turns into a kind of over-muscled sci-fi action-movie riff on Groundhog Day, albeit without the wit or light-footedness that made Edge of Tomorrow so enjoyable. Connoisseurs of slow-motion punching will no doubt appreciate the many slow-motion punches, along with the reasonably competent action scenes that director David S.F. Wilson builds with them. Generally speaking, you can tell what’s going on, which is high praise for today’s mid-budget action movies. 

As Garrison, Diesel spends the movie hulking and glowering in hopes that this will serve as a rough substitute for acting. He has a volcanically low voice that will challenge even the most competent subwoofer, but it’s the only place his character shows signs of depth. You learn more about Garrison from the various performance monitors set up in Dr. Hartin’s lab than from Diesel’s one-note performance. At one point, the camera cuts to a screen purporting to monitor his “brain activity.” It’s low. 

In some ways, this is just par for the course for Diesel—an international superstar thanks to the Fast and the Furious franchise, but better understood as B-movie brawn. He has frequently dabbled in modestly budgeted action cheese. This has occasionally produced high-quality results, as in Pitch Black…but it has also occasionally given us movies like The Last Witch Hunter. (With a title like that, one can at least take solace in the hope that there won’t be any sequels.).  

Diesel has a predilection for gloomy pulp, the sort of enjoyable trash that’s best enjoyed in a college dorm room around 2 a.m. or as a television matinee on an afternoon spent channel surfing or app browsing. Bloodshot is no exception. It’s a movie that was intended for theaters, and it even briefly surfaced in them. But it works better at home, from the comfort of one’s own couch, probably while keeping a distracted eye on one’s phone. It’s not a movie that needs to be watched so much as one that you wouldn’t mind having on. Bloodshot is not a great movie by any means, but watching it from the comfort of my basement living room, I thought: This is not too bad. 

I like movies—especially movies seen in a theater—as much as anyone. I hope our theaters reopen soon. And I genuinely worry that if this pause in theatrical viewing extends long enough, it will ultimately eliminate much of the theatrical experience as we have always known it. But I am also mindful of the potential for salutary effects from this otherwise awful scenario. 

It’s true, as the theater owners say, that when this stay-at-home nightmare is over, people will need someplace to go. But no one needs to go out to see a replacement-level actioner like Bloodshot. Perhaps, in our post-viral rebirth, movies like this will more frequently find a fast route to the couch-based viewing where they are best appreciated. 

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Parents Charged with Endangerment Their Children by Having Large Party at Their House

From Lakewood (N.J.), where there has been a good deal of noncompliance with the ban on gatherings, and police response to such noncompliance (see here and here for past incidents):

Ocean County Prosecutor Bradley D. Billhimer and Lakewood Township Police Chief Gregory Meyer announced that on Sunday, March 29, 2020, Eliezer Silber, 37, and Miriam Silber, 34, both of Lakewood, were charged with five counts of Child Endangerment in violation of N.J.S.A. 9:6-1.

On March 29, 2020, members of the Lakewood Township Police Department were summoned to a residence on Alamitos Drive for a report of a gathering of people blocking the street.  This gathering was in violation of Executive Order No. 107 signed by Governor Phil Murphy on March 21, 2020, which bans gatherings of individuals, whether they be at weddings, parties, celebrations, or other social events.

Upon arrival, Officers discovered a gathering of approximately 40-50 people, including children, on the front lawn and in the street in front of the residence.  The Officers ordered the crowd to disperse, and made contact with the owners of the residence, Eliezer and Miriam Silber.  Eliezer Silber was charged with Violating Any Rule or Regulation Adopted by the Governor in violation of APP.A: 9-49h, as well as Endangering the Welfare of his five children who were at the gathering.  Miriam Silber was likewise charged with Endangering the Welfare of her five children.  They are both required to appear at a future court date in Ocean County Superior Court.

“As I have previously stated, it is my sworn duty to protect all of the residents of Ocean County.  That obligation applies across the board,” stated Prosecutor Billhimer.  “My Office will prosecute any individual who defies or breaks the law, State of Emergency or otherwise.  Everyone must respect and follow the law,” the Prosecutor stated.  “The men & women of the Lakewood Police Department have done an exceptional job in the face of a public health crisis. Their efforts are truly commendable,” Prosecutor Billhimer concluded.

The public and media are reminded that all defendants are innocent until proven guilty beyond a reasonable doubt in a court of law.

Thanks to Larry Seltzer for the pointer.

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Tear Up Your Census Form for a Better America

If, like me, you’ve received not one but three mailings from the U.S. Census Bureau proclaiming “Your Response Is Required By Law,” you’re probably wondering whether to respond, toss the questionnaire in the trash, or fill it with bogus information. We’re in good company, since about a third of households plan to ignore the census, according to the government itself.

In the past, I’ve filled in preposterous answers, then repeated them with a straight face when a harried-looking census field worker knocked on my door (that’s a pleasure I’ll miss this year, with in-person interviews suspended). It’s good fun, it denies potentially dangerous information to a government agency that has a history of misusing the data it collects and, if repeated far and wide, it might spur nosy bureaucrats to try something less intrusive.

Less intrusive would be nice. Census questions, you may have noticed, go a bit beyond the simple head count authorized by the Constitution. Article 1, Section 2 of the Constitution specifies an “actual Enumeration … within every subsequent Term of ten Years, in such Manner as they shall by Law direct.”

There’s nothing in there about demanding names, the types of our homes, the nature of our relationships with the people with whom we live, our ethnicity, or the details of our finances (if you were unlucky enough to get the old long form or the modern American Community Survey). That’s all just bureaucratic curiosity.

Our answers are supposed to be confidential.

“The Census Bureau cannot release any identifiable information about you, your home, or your business, even to law enforcement agencies. The law ensures that your private data is protected and that your answers cannot be used against you by any government agency or court,” the Census Bureau website assures us.

If only that were true. In reality, laws change, and governments use information however they please once they have itsometimes in nasty ways.

“Despite decades of denials, government records confirm that the U.S. Census Bureau provided the U.S. Secret Service with names and addresses of Japanese-Americans during World War II,” Scientific American reported in 2007. “The Census Bureau surveys the population every decade with detailed questionnaires but is barred by law from revealing data that could be linked to specific individuals. The Second War Powers Act of 1942 temporarily repealed that protection to assist in the roundup of Japanese-Americans for imprisonment in internment camps in California and six other states during the war.”

More recently, “the Census Bureau provided neighborhood data on Arab-Americans to the U.S. Department of Homeland Security in 2002,” the article added.

So when the Census Bureau frets that “fewer than seven in ten householders said they intend to fill out the census form,” with many Americans citing “privacy concerns, fear of repercussions, and general distrust of government,” you’re looking at self-inflicted wounds. The Census Bureau worked hard to earn that distrust.

Fortunately, there’s a game plan for dealing with a hostile population that refuses to answer nosy questions posed by government workers. Even before the U.S. Census Bureau alienated the public, its Dutch counterpart, Statistics Netherlands, managed to do the same. As a result, people stopped responding and the Dutch government had to find a solution.

“The last traditional census in the Netherlands, in 1971, met with many privacy objections against the collection of integral information about the population living in the Netherlands,” according to Eric Schulte Nordholt of Statistics Netherlands, writing in 2015. “This increased the non-response problem, and non-response was expected to be even higher if another traditional census were to be held in the Netherlands.”

With questionnaires increasingly ignored, Statistics Netherlands stopped bugging people and switched to using publicly available data along with samples and statistical adjustments.

While head counts in the Netherlands are now less intrusive than the old census, not everything the Dutch do translates to the American context. Statistics Netherlands relies on standardized population registers that don’t exist in the United States, and would be difficultjustifiably so, I thinkto impose on a mobile and distrustful population. People worried about the abuse of data collected every 10 years aren’t going to want to continuously update their whereabouts with Big Brother.

But government has plenty of information on us as it is, from its own records and from private sources. The Census Bureau is already considering “starting the 2030 Census with an ‘in-office’ enumeration of the population using existing government administrative records,” reveals a 2016 report. Between Social Security and the Internal Revenue Service, 90 percent or more “of the U.S. population could be located.”

The Census Bureau would then fill in the gaps as needed. That approach may turn out to be more accurate than a traditional census faced with growing noncompliance and deliberately misleading responses.

As for the interesting questions about finances, ethnicity, and plumbing that the Census Bureau likes to add to the authorized tally… I could point out that the government is only supposed to count us, not interrogate us. But the Census Bureau concedes that most of the information it wants exists in government records, if only it would look.

Figuring out how many Americans there are based on existing administrative records may not only be more accurate than the old-style census, it would likely be a lot cheaper.

“A register-based census costing less than 1 percent of a traditional census is not exceptional,” points out Nordholt of Statistics Netherlands. “A traditional census in the Netherlands would cost a few hundred million euros, while with this method it costs ‘only’ around 1.4 million euros.”

Elsewhere, Statistics Netherlands reveals that the total staff required for the 2011 census was 15 people.

A national head-count based on administrative records would not only be less intrusive, cheaper, and closer to constitutional intent than old-style questionnaires; it would also be safer. Census workers would never again have to go door-to-door in a world that will probably retain concerns about contagion even after the COVID-19 pandemic passes.

Was the guy at the last house coughing because he was sick or just to needle an unwelcome visitor? That won’t be a concern for bureaucrats working desks rather than pounding pavement.

So, if you’re worried at all, toss away that census form or fill it with nonsense with a clear conscience. You’re helping to push the feds to count us in a less annoying way.

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Dallas Fed Manufacturing Survey Crashes To Worst Level Ever

Dallas Fed Manufacturing Survey Crashes To Worst Level Ever

In a stunning miss to expectations, March’s Dallas Fed Manufacturing Outlook survey crashed like never before (from +1.2 in February to -70.0 – massively below the -10.0 expectation).

Source: Bloomberg

As you can see, this is the weakest level ever and the most aggressive collapse ever. As one trader mocked when the data hit, “…is that a bad print?”

The measures production and new orders both were lowest since 2009.

The figures are consistent with severe declines in other regional gauges as unprecedented shutdowns freeze large parts of the industrial economy. Regional Fed bank measures of manufacturing in New York, the Philadelphia area, and Kansas City district all showed record monthly declines.

Source: Bloomberg

Of course, Texas has been hit with both barrels of collapse as the oil price war and national virus lockdown crush markets.


Tyler Durden

Mon, 03/30/2020 – 10:49

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Blain: “Don’t Be Fooled… April Is Going To Hurt”

Blain: “Don’t Be Fooled… April Is Going To Hurt”

Authored by Bill Blain via MorningPorridge.com,

“Damn, he was good. Came out of nowhere. Hit us with a full broadside, cut across our tail and took out our rudder. Damn fine gunnery.”

According to the press, China is experiencing normal traffic jams, while the major threat is reinfection from the West, so borders are locked shut. They are anticipating business as usual. They are in for a shock. 

JP Morgan are on the wires saying markets have made their lows, and although it will be volatile, its time to “average into oversold markets.”

In my opinion… they are fools

I suspect this is going to be a very very bad week for markets. 

April is going to hurt. Last week’s rumbustious rally on the back of kitchen sink government fiscal promises, QE infinity and “the boys will be home by Chistmas” market optimisim, is going to be crushed. The flow is about to get much worse, in a trifecta of economic, business and virus news. 

We are about to learn a sharp brutal lesson about expectations versus reality:

  • There is no swift end in sight. The UK has been warned to expect months of distancing. Trump isn’t reopening the economy for Easter – he’s closing America down till May.

  • Oil prices have crashed below $20. 

  • Rising economic damage, business failures, and confirmation of massive unemployment – especially in US – will come to fore in this week’s data and numbers through the month. Government support packages will take months to become established – months the markets don’t have.

  • Aside from a few ultra-high Investment grade cash-rich corporates, there is a massive industrial scramble for cash underway. Anyone able to raise cash should lift any offer – before a slew of downgrades and defaults closes credit markets completely. 

  • Emerging Market economies were pummelled by dollar strength, are now about to be devasted by the global virus demand shock, and as virus countermeasures hits already unstable nations could well plunge into chaos. 

  • Market chartists will tell you optimistic bear rallies are a standard part of every market crash – and the bottom will be retested a number of times. 

  • There is still pain to come. There are a large number of investors – both institutional want-to-be’s (like JP Morgan) who buy the stimulus and are thinking there are easy returns to be made after such a large “correction”, and retail buyers who are fearful their retirement savings have been shattered who are willing to shake the dice. They can’t quite believe what’s happened, don’t compute the scale of the economic shock, and won’t face up to a changed world till they take more pain.

If any of these are positive reasons to sustain last week’s rally, feel free to explain in the comments section of the Morning Porridge below. 

A number of good analysts suggest the chances of a swift recovery are better than the bleak headlines suggest. They quote issues like obvious market opportunities will swiftly attract smart money – which is true, and the natural resilience of capitalist economies in the face of economic catastrophe – which was once true. 

I hope they are right, but I wonder about human economic behaviour – which tends not to have read Rational Expectations economic text-books. What tends to happen is at the individual agent level, where they seek to maximise personal gain by arbitraging distortions like government bailouts and free money in unexpected ways. 

Not every entrepreneur will use a government guaranteed loan to tide over their business – some may use them to wreck the competition, enrich themselves, invest in risk, or act in a thousand other ways. Market distortions and interventions have unintended consequences which ultimately prove negative – a lesson governements and central banks have been trying to ignore for the last decade of monetary distortion and experimentation. 

(If you don’t believe me, explain why thousands of corporates spent the last decade buying back their stock instead of investing in new productive capacity and new product innovation?)

Get ready for a long-haul of increasingly dire economic news. A month – at least – of Lockdown helplessness, as corporates and individuals scramble for cash, struggle to obtain funds and face unmeetable demands for rent, mortgages, and to pay off debts. It’s going to be brutal. 

Is there any good news? 

Perhaps in the virus itself – but this isn’t about the Wuhan flu. It’s about the economy. In the absence of real data in many countries due to the lack of testing, we’re forced to make guesses. But the trends are showing infections rise (as testing kicks in) and a falling mortality percentage. The pace of mortality deaths is declining – as was expected to happen as lockdowns lower the R transmission rate and the all-important “critical cases in hospital” curves. We will find out how successful its’ been in coming days. 

On the other hand, the first obituaries of coronavirus victims are appearing; including a number of fit, middle aged men, demonstrating the random nature in terms of victims and symptoms. 

To tell a story: after struggling with the disease for over a week, a fit chap in his late fifties I know in London ended up in Hospital, (and fortunately got better quickly once given oxygen and sent home). Meanwhile his partner and her daughter are showing zero symptoms and feel absolutely fine (although badly traumatised by his illness), despite all being cooped up together in a London flat.

The virus storm will likely escalate across North-West Europe and the US this week, while plateaus across Italy and Spain are expected. Will Europe reopen as quickly as China – unlikely because there has been less testing, less source tracing and very little real information to base decisions upon. 

Don’t be fooled – as markets were last week – that there is an easy and quick answer to this crisis. However, there are definitely investment opportunities out there. The trick is grabbing them and holding on through the coming storm..


Tyler Durden

Mon, 03/30/2020 – 10:35

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“This Is The Largest Economic Shock Of Our Lifetimes”: Goldman Sees Negative Prices Amid Oil Devastation

“This Is The Largest Economic Shock Of Our Lifetimes”: Goldman Sees Negative Prices Amid Oil Devastation

Over the weekend, we reported that with the oil industry oversupplied by a mindblowing 20 million barrels daily as roughly 20% of total global output ends up unused in a world economy that has ground to a halt, and instead has to be parked in storage either on land or sea, the unthinkable is about to happen: oil storage space is about to run out, and as that happens the price of oil will continue sliding ever lower and lower until it finally goes negative as some such as Mizuho’s Paul Sankey predict it will, over the next few months, leading to an unprecedented shockwave across the global energy market.

Then overnight, more eulogies for the oil market emerged, with Bank of America writing that oil has now slumped “into the abyss” and it expects to see the “steepest decline in global oil consumption ever recorded, with our base case reflecting a 12mn b/d drop in 2Q20 and a 4.5mn b/d contraction on average for the year” and on a net basis, BofA now expects global oil demand to contract by almost 17mn b/d in April with consumption recovering modestly into 3Q20 and beyond.

The bank also adjusted its oil price forecasts for 2020 and 2021 down to $37 and $45/bbl for Brent and to $32 and $42/bbl for WTI respectively, but in the near-term, it sees both benchmarks temporarily trading in the teens in the coming weeks.

However, by going all “there will be blood” on oil, BofA has only caught up where Goldman has been for the past two weeks, ever since it predicted that the “physical end was near.” Meanwhile, in a note of unprecedented gloom, Goldman now says that “the physical end is here” as the coronacrisis goes global.

As Goldman’s Jeffrey Currie calculates, the oil surplus generated by an unprecedented demand shock has begun to hit physical constraints at refineries, pipelines and storage facilities, “leading to at least 0.9 million b/d of announced shut-ins at the wellhead, with the true number likely higher and growing by the hour.”

With social distancing measures now impacting 92% of global GDP, the ultimate magnitude of these shut-ins which is still unknown will likely permanently alter the energy industry and its geopolitics, restrict demand as economic activity normalizes and shift the debate around climate change.

In other words, what is taking place now is “not only is this the largest economic shock of our lifetimes” but from a practical perspective, “carbon-based industries like oil sit in the cross-hairs as they have historically served as the cornerstone of social interactions and globalization, the prevention of which are the main defense against the virus.”

Accordingly, oil has been disproportionately hit, likely more than 2x economic activity, with demand this week down an estimated 26 million b/d or c.25%.

As a result, and picking up on what we said over the weekend, Goldman now warns that “this shock is extremely negative for oil prices and is sending landlocked crude prices into negative territory.” Of course, it is only a matter of time before this ultimately creates an inflationary oil supply shock of historic proportions because so much oil production will be forced to be shut-in, but first we need to see prices close to zero… or below it.

Currie next focuses on the storage conundrum we discussed yesterday, and how – as we warned – this will lead to negative oil prices:

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.

The good news, however, is that from the devastation that will follow in the coming months, a new – and far more viable – industry will emerge, or as Currie puts it “the current oil crisis will see the energy industry finally achieve the restructuring it so badly needs. We have long argued that it is the supply and demand of capital that matters, not the supply and demand of barrels; as long as there is capital, companies can withstand difficult periods and the barrels always come back.”

The rest of his full note is below:

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.

The oil price war is made irrelevant by the large decline in demand and has made a coordinated supply response impossible to achieve in time. A month ago, the logic of the price war made sense when the demand shock was c.5.0 million b/d. It gave OPEC and Russia the first opportunity since 2012 to completely undercut shale, and finally reverse the production cut in 2016 which we believe never made economic sense to begin with. Not only did OPEC producers sacrifice $220 billion in lost revenues (annually at $60/bbl Brent) and market share, but so did the equity and debt shareholders of higher-cost producers. The artificially higher prices distorted incentives for oil investment, leading to inefficient capital spending by these companies that, by our estimates, destroyed roughly $1.0 trillion worth of market cap since 2016. The policy of production cuts was a strategic error, not only to OPEC+ countries, but to all equity and debt owners in the industry. Now the question is: can the US and OPEC save this market? The demand shock has become so large that they can’t do it alone, a fact they have acknowledged, stating that a balanced market would require a coordinated global production cut — a policy which appears impossible at this point, too late to stop the current surplus and far below other initiatives on the agenda right now.

The key to how quickly prices rebound after this supply shut-in will depend on how much inventory is built. Markets are already hitting transportation bottlenecks without having filled storage capacity. Oil in Canada is now near $5/bbl and WTI Midland $13/bbl with Cushing inventories still only half full. The quicker and harder these capacity constraints are reached, the quicker and more violently the market will rebalance when production shuts in, and the quicker deficits return to the market, putting upward pressure on prices. In the bear market of 2015/16 production shut-ins were based upon a producer position on the supply cost-curve. Unlike then, the logistical nature of the shut-ins suggest they will be completely indiscriminate, inflicting substantial damage on the wells that in some cases will be permanent. Once economic activity begins to normalize, the deficits will likely be substantial as the rebound in demand will be constrained by supply that has been damaged by the shut-ins. This could potentially require continued destruction of commuting and jet fuel demand. Net, if pipelines get clogged up as refineries shutdown, inventories cannot build, reducing the cushion and creating a very quick risk reversal towards oil shortages that could push prices far above our $55/bbl target for next year.

This will likely be a game-changer for the industry. Once you damage the capital stock in oil it is an expensive and time-consuming process to rebuild, assuming it can be rebuilt at all. This contrasts with the rest of the economy where the capital stock is sitting idle and ready to restart, which is why it is expected to exhibit a V-shaped recovery. In contrast, we believe the upstream sector could lose as much as 5.0 million b/d of oil supply capacity. With that much supply loss the industry will unlikely be able to rebound even close to old demand levels without creating substantial price appreciation, the scale of which will be determined by how much inventory is built in the coming weeks. In addition, the geopolitical landscape is also changing. We note the current political situation in Venezuela, where further US sanctions have been imposed for over half a year and where Rosneft divestitures of oil assets occurred over the weekend. At the same time, Iran has been heavily impacted by the coronavirus, which follows the rise in tensions between the US and Iran in January, during which oil reached its recent peak of $70/bbl. On top of this, there could be further geopolitical instability generated by the extreme economic conditions forced upon the many oil producers in Africa and Latin America.

Oil and gas fields are far different from other manufacturing processes. They are organic deposits and as such have decline rates, having shut an older well it may not be economic to bring it back online. Most of these older, more depleted and less productive wells are onshore, not offshore, which makes them the most vulnerable to shut-ins. We believe shut-in economics will be driven by three factors: 1) crude net-backs (driven by local infrastructure constraints and crude quality); 2) variable cash costs (highest in mature fields with low flow rates); 3) decommissioning liabilities (most material for offshore deep-water fields). As such, we believe that shut-ins are most likely at onshore, mature, depleted, heavier and sourer oil reservoirs in countries like Canada, the US, Russia, Latin America and China. Offshore fields are least likely to be affected, due to their generally higher crude quality, lack of infrastructure constraints and high decommissioning liabilities. Mature, heavier oil, high water-cut reservoirs will also suffer the most from a prolonged shut-in and may not return to their pre-shut-in production capacity once oil demand increases.

We believe the current oil crisis will see the energy industry finally achieve the restructuring it so badly needs. We have long argued that it is the supply and demand of capital that matters, not the supply and demand of barrels; as long as there is capital, companies can withstand difficult periods and the barrels always come back. The difference between today and 2015/16 is that shale and high-cost oil producers were already facing sharply higher costs of capital over the past year due to persistently poor shareholder returns. Indeed, these capital restrictions have only been exacerbated by recent events, whereas in 2015/16 capital never dried up – making the likelihood of capitulation by US E&Ps and EM producers much higher today. Further, the rebalancing phase in our New Oil Order framework was cut short in 2016 by Chinese stimulus that boosted demand followed by OPEC+ production cuts that curtailed supply. In the end, we never saw the final regeneration phase of rationalized assets that would have created a more sustainable industry over the longer term.

Today, we have already seen uneconomic firms shut off from capital. This suggests that the overdue rationalization of the industry is finally set to occur. We believe it will be very selective with a clear focus on upgrading portfolios: Big Oils will consolidate the best assets in the industry and will shed the worst assets. There will be local consolidation amongst E&Ps, and when the industry emerges from this downturn, there will be fewer companies of higher asset quality, but the capital constraints will remain. Capital markets focused on de-carbonisation and lack of visibility over long-term demand will constrain the remaining firms, leading to structural underinvestment and higher corporate returns, bringing an end to energy’s lost decade. Only a significant supply shortfall once demand recovers could slow this much-needed industry consolidation and rationalization. A large, sustained deficit would lead to much higher prices until even marginal shale producers respond, as they remain the fastest cycle source of supply.

The climate change debate will almost certainly take a different course when the global economy emerges from this and is faced with the prospect of having to make large-scale investments into carbon-based industries. The silver lining of the coronacrisis is that the virtual shutdown of key carbon industries – autos, airlines and cruise ships –
is likely to cause carbon emissions to fall this year, with initial data from China pointing to a c.20%+ fall during the peak of the shutdown. It is important to emphasize how the current shock is hurting the unsustainable industries but encouraging sustainable industries. The aircraft and migrant workers that used to bring the world fresh fish, fruit and vegetables have been stopped.

Technological hysteresis is already occurring. People are adapting to a more local existence and living off more sustainable activities, consuming less globally-produced fresh food, producing less waste with a more conservative approach to consumption, all of which may have lasting impacts on demand. Further, commuters and airlines account for c.16.0 million b/d of global oil demand and may never return to their prior levels. While oil prices are low today and physical constraints are forcing the behavioral changes, as oil shortages develop once economic activity normalizes, the high oil prices will likely accelerate the energy transition by constraining demand. For example, commuting and jet demand destruction may still be needed to cope with the supply shortage that is likely to occur once significant supply capacity is hampered. Higher oil prices would also greatly improve the relative economics of EVs and hydrogen. But from the supply side, capital markets’ push for de-carbonization is likely to prevent the broad investment the industry will need to get out of this crisis and will reinforce a tight physical market beyond 2020.

Low returns in energy and commodities have been referred to as a lost decade. Oil has handed investors losses of about 8% per year since 2010. However, we believe that a bottom will be carved out in the coming weeks or months that will serve as the foundation for solid future returns similar to 1999. Combining these potential supply constraints with the large fiscal stimulus in response to the virus, we believe that physical inflationary concerns – with the dollar starting near an all-time high – will finally dominate the financial asset inflation that was a feature of the past decade that acted as a drag on energy and commodity returns. In the very near-term, however, we would play it from the short side. Nonetheless, we must keep in mind the fact that each downturn has become increasingly shorter in duration as the system has been able to adapt more quickly, and although oil prices are likely to further decline in the coming weeks, it is important to start focusing on the transition.


Tyler Durden

Mon, 03/30/2020 – 10:20

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“As Good As It Gets’? – Pending Home Sales Surge In February Ahead Of National Lockdown

“As Good As It Gets’? – Pending Home Sales Surge In February Ahead Of National Lockdown

Once again, pending home sales will be the tie-breaker for February housing data (existing sales soared, new sales slipped) and expectations were that it would be weaker (after a huge surge in January) but instead it surged 2.4% MoM (vs 1.8% drop expected).

January’s upwardly revised (from 5.2% to +5.3%) spike was the highest since Oct 2010 and the YoY rise in sales of 11.5% is the highest since April 2015

Source: Bloomberg

This is the highest level (SAAR) of pending home sales since April 2016…

Source: Bloomberg

Pending sales last month increased in all four regions, led by a 4.6% gain in the West and a 4.5% advance in the Midwest. The index for the South, the largest region, was the highest since March 2006.

“Housing, just like most other industries, suffered from the coronavirus crisis, but once this predicament is behind us and the habit of social distancing is respected, I’m encouraged there will be continued home transactions though with more virtual tours, electronic signatures, and external home appraisals,” Lawrence Yun, NAR’s chief economist, said in a statement.

Yun noted that the data do not capture the fallout from measures taken to control the outbreak.

So the question is – have homebuilder stocks over-reacted or are we just not seeing the impact of COVID-19 lockdowns in the data yet?

Source: Bloomberg

We suspect we know which.


Tyler Durden

Mon, 03/30/2020 – 10:04

via ZeroHedge News https://ift.tt/33W0OfN Tyler Durden

In Dramatic Shift, Trump Tells Nation To Stay at Home Until the End of April

Trump pivots on COVID-19 containment strategy and goals. The president has a depressing new vision for defining a coronavirus job well done.

In a televised Sunday night news conference, Donald Trump did an about face from downplaying the number of possible COVID-19 deaths in America, now suggesting that 2.2 million people here could die. Considering the circumstances, he said, getting that number “down to 100,000” deaths would be “a very good job.”

Trump is “reframing the crisis,” tweeted CNN reporter Daniel Dale. One might also call it moving the goalposts, to cover for federal missteps and hubris in handling the virus crisis so far.

But MAGA propaganda aside, the change in Trump’s rhetoric is a welcome one. Last week, Trump was promising that most of America would be back open for business as usual by Easter Sunday. Last night, Trump announced that voluntary social distancing recommendations would stay in place for the month of April.

“Nothing would be worse than declaring victory before the victory is won,” Trump said. (Full remarks here.) He added that “on Tuesday, we will be finalizing these plans and providing a summary of our findings, supporting data, and strategy to the American people.”

Stay tuned ’til then! And expect more reality-style rollout of U.S. COVID-19 policy, as Trump becomes enamored of the “ratings” that being a crisis-time president brings…


QUICK HITS

  • COVID-19 is causing a run on jigsaw puzzles.
  • A spiraling number of New York City police officers have caught the coronavirus:

  • In some good news, Seattle may be starting to see turnaround in its COVID-19 outbreak. Some observers are attributing this to early containment measures. Seattle was “home of the first known coronavirus case in the United States and the place where the virus claimed 37 of its first 50 victims,” notes The New York Times. Yet “deaths are not rising as fast as they are in other states….Hospitals have so far not been overwhelmed. And preliminary statistical models provided to public officials in Washington State suggest that the spread of the virus has slowed in the Seattle area in recent days.”

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Child Custody Conditions Restricting Parents’ Speech and Gun Storage

From last week’s decision in Winkowski v. Winkowski (Minn. Ct. App.):

Appellant J. Vincent Winkowski (father) and respondent Lisa Marie Winkowski (mother) were previously married. They are the parents of A.W. born in 2009 and C.W. born in 2014. [They were divorced in 2016.] [T]he parties share joint legal custody with mother having physical care of the children subject to father’s visitation rights.

Among other things, mother went back to court in 2019 and got two orders from the judge:

{The district court … order[ed] father to “refrain from featuring the minor children or mentioning their names in any YouTube videos” and requiring father to “remove the YouTube videos of his children already posted on his channel.”} … [T]he district court explained in a single paragraph that father and his wife regularly post videos related to survival techniques and firearms on his YouTube channel, “The Family Prepper.” The district court further found that the YouTube channel has 3,500 followers and that A.W. appears prominently in at least two of the videos. There are no other findings regarding the online videos….

In her affidavit supporting her request, mother states that the videos in question were posted without her knowledge or consent, that A.W.’s full name is visible or audible at least once, and that these videos portray “military tactics, guns, how to effectively kill or harm a human, and prepping content.” Mother argued that father should not post such controversial videos of A.W. online without mother’s consent. Mother provided the court with a video in which an eight-year-old A.W. states she is going to teach children how to be safe with guns and how to shoot them. She demonstrates how to remove the magazine of a BB gun, describes the “fundamentals of shooting,” and fires at three targets.

None of the motions filed in district court specifically requested relief related to father’s use or storage of firearms at his home during his parenting time. The district court did not make any findings regarding father’s use or storage of firearms.

The parties’ affidavits included statements regarding father’s use and storage of firearms, and more generally regarding father’s mental health. For example, mother’s opposition to father’s modification motions mentioned concerns related to father’s PTSD, his obsession with guns, and preparing for the end of the world. Mother also noted that during their marriage, father purchased military equipment, guns, assault rifles, and copious amounts of ammunition. Mother also submitted a series of photos of multiple guns left out around the house. Father attached a psychological evaluation in which the evaluator notes that prior to seeking counseling in 2007, father kept a loaded firearm under his bed, was hypervigilant, and had irrational thoughts. Mother also discussed an incident in 2012, when father accidentally discharged his gun. Bullets from the weapon penetrated the parties’ garage wall and went into the neighbor’s garage. There was no criminal prosecution.

The district court addressed father’s mental health, but did not make any factual findings specifically related to firearms. Nevertheless, the district court ordered that “[f]ather’s firearms are to be safely locked in a gun safe at all times when the minor children are with him.” …

The court of appeals remanded for more findings, because the trial court did not provide “sufficient findings to permit meaningful appellate review of these two requirements”:

District courts have broad authority to impose initial or modified limits on the time, location, frequency, duration, supervision, and other aspects of parenting time, such as requirements that a parent participate in therapy or that a parent remain sober during parenting time, based on the best interests of the children.

In this case, the district court granted mother’s motion, prohibiting father from featuring or mentioning the children in YouTube videos and requiring removal of all such videos that had already been posted on his YouTube channel. In addition, the district court imposed a requirement that father lock his firearms in a gun safe at all times when the minor children are with him. Both decisions fall within the broad discretion of the district court.

In its order, however, the district court made only one finding regarding father’s YouTube channel and did not make any findings regarding firearms. This court cannot meaningfully review the decisions of the district court regarding storage of firearms and father’s YouTube channel without more detailed findings addressing the best interests of the children. Therefore, we reverse these two decisions and remand to the district court for further proceedings. On remand, the district court may reopen the record at its discretion regarding the two conditions.

{Should the district court impose any requirements that implicate either party’s constitutional rights, additional findings are necessary. See Newstrand v. Arend, 869 N.W.2d 681, 690 (Minn. App. 2015) (holding that father’s “constitutional freedom of conscience” was not violated by an order requiring father to obtain a psychological evaluation), review denied (Minn. Dec. 15, 2015); Geske v. Marcolina, 642 N.W.2d 62, 70 (Minn. App. 2002) (rejecting First Amendment challenge to injunction against publication of pictures of a father’s children); LaChapelle v. Mitten, 607 N.W.2d 151, 163-64 (Minn. App. 2000) (best interests of the child are a compelling state interest justifying infringement on a mother’s constitutional right to travel), review denied (Minn. May 16, 2000); Sina v. Sina, 402 N.W.2d 573, 576 (Minn. App. 1987) (holding that being exposed to a third religion was not in the best interests of the children, despite father’s First Amendment freedom to exercise that religion).}

I think that restriction on parents’ constitutional rights should require more than just a “best interests of the child” showing. (Perhaps a finding that the father had accidentally shot up the house might justify a restriction on his handling guns around the children.) I’ve discussed this in some detail in this article about restrictions on parent-child speech, and I think much of that analysis should apply to restrictions on parents’ speech depicting their children. But I agree that a court imposing any such restrictions should at least expressly explain what facts it thinks make such restrictions necessary.

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Trump Slams MSM And ‘Sick Puppy’ Pelosi; Says COVID-19 To Peak ‘Around Easter’

Trump Slams MSM And ‘Sick Puppy’ Pelosi; Says COVID-19 To Peak ‘Around Easter’

President Trump gave a wide-ranging interview on Monday on Fox & Friends, where he covered everything from coronavirus and the current situation in New York, to the Green New Deal, to Nancy Pelosi.

Trump said he thinks New York will be “fine” and that they won’t need all the ventilators they’ve requested, adding “After this is over they’ll be selling them for a dollar a piece.

He also said that the virus will ‘spike’ (peak?) around Easter, and that deaths “will be at a very low number.” There have been 2,500 deaths in the US as of Sunday night – up from 2,000 on Saturday and 1,000 last Thursday.

Via covid19.healthdata.org

When asked a question from a nurse who wants to know about hazard pay for front-line responders, Trump said “We are looking at that … either as an amendment or something.”

When host Brian Kilmeade tells Trump that “Russia, Iran and China” are conspiring to blame the United States for spreading coronavirus “using the same principles they used to infiltrate our 2016 election,” Trump replied that the story was fake because it was in the Washington Post.

After saying that 2.2 million people could have died, before calling Nancy Pelosi a “sick puppy” for criticizing his response to COVID-19, calling her comments “a disgrace to her country [and] her family, and adding that he saved America from “deaths like you have never seen before.”

Trump also blamed the media for “building wars” between he and governors, saying they actually get along well. 

More:


Tyler Durden

Mon, 03/30/2020 – 09:50

via ZeroHedge News https://ift.tt/3awl61U Tyler Durden