Tag: finance

Although Beijing announced some new stimulus measures, it appears markets prefer to focus on the “great uncertainty” that Chinese officials see ahead (due to the coronavirus) leading to a decision to not release a target for economic growth has thrown the “v-shaped” recovery narrative out the window (for now).

“We have not set a specific target for economic growth this year,” Li said, speaking in the Great Hall of the People.

“This is because our country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the Covid-19 pandemic and the world economic and trade environment.”

WTI has crashed over 9%, with the July contract trading back down at a $30 handle…

And US futures are notably weaker with Nasdaq leading the drop…

The shifting away from a hard target for output growth breaks with decades of Communist Party planning habits and is an admission of the deep rupture that the disease has caused.

“The nascent demand recovery is still vulnerable, and the drop in prices today is an injection of reality,” said Victor Shum, vice president of energy consulting at IHS Markit in Singapore.

“China not giving a GDP target means they are not quite certain about the recovery yet.”

The question marks over China’s economy come as relations with the US deteriorate dramatically, clearly damaging the “v” or “u” shaped recovery narrative that has seemed to dominate both equity and oil markets in recent days.

A while back, we reported on one notable US Intel leak claiming Beijing deliberately waited until Jan. 22 to warn the world about the possibility of a widespread outbreak (before that, Beijing insisted there was no evidence of human to human transmission, implying that this would likely be an isolated incident) so the CCP would have time to grab up all the PPE and other vital supplies.

That was why, when the tidal wave of infections finally hit in the US, a sudden and inexplicable shortage of PPE forced nurses and doctors in some of the most notorious hotspots – including NYC – to work without masks and gowns. Many used garbage bags, or used one disposable mask for a week or more.

Now, Fox News reports that the CCP appears to be gobbling up all the capacity once again as businessmen complain about suppliers warning about being unable to process new orders.

China’s Communist Party is again seizing factory lines churning out the world’s supply of medical safety gear — sparking fears the country is preparing for a second wave of the coronavirus, American traders in China told The Post.

New Yorker Moshe Malamud, who has done business in China for over two decades, was moving tens of millions of pieces of protective gear to the U.S. at the height of the crisis but said suppliers in recent weeks had been overwhelmed with orders from the Chinese government.

“I was placing a larger order with one of the bigger distributors and he tells me, ‘I can complete this order but after this we’ve been contracted by the Chinese government to produce 250 million gowns,’” said Malamud, who lived in China for a decade before founding aviation company M2Jets.

Thermometer makers have also been inundated with government orders.

He said he heard a similar story about another manufacturer making thermometers.

“We hear how China is up and running and the virus is past them, so I asked, ‘What are they ordering 250 million gowns for?’ and of course no one is talking.”

“I’ve been hearing this a lot from other manufacturing institutions that say, ‘We can give you a little bit, but basically we’re concentrated between now and the end of the summer manufacturing stuff for the Chinese government in anticipation of a second wave,'” he continued.

Last month, leading U.S. manufacturers of medical safety gear told the White House that China had prohibited them from exporting goods as the crisis mounted, a Post report revealed.

Beijing has already forced some 108 million Chinese in northeastern Jilin Province back under “partial lockdown” following another outbreak. They’re also carrying out a mass-testing campaign in Wuhan.

Although Dr. Anthony Fauci has repeatedly warned that the US should brace for a second wave of the virus, a second wave isn’t a foregone conclusion. As NYT opinion columnist Nicolas Kristof wrote in his column published in Thursday’s paper, “epidemiology is full of puzzles.” In 2003, the WHO feared a deadly resurgence of SARS that fall. But instead, the virus petered out. As Dr. Fauci explained once several months ago, we know little for certain about the virus, and because of this, it’s important to be prepared for the worst-case scenario.

And if the outbreak in Brazil continues to rage out of control, the possibility that Brazilians could reinfect the entire Western Hemisphere is looking increasingly plausible.

Authored by Robert Blumen via The Mises Institute,

We are all in this together. No, by that I do not mean what Andrew Horney calls “all those cloyingly saccharine, feel-good public service announcements being delivered by famous faces on television and social media platforms, telling us “we’re all in this together.” We are all interdependent through the production of goods and services that constitutes the market order.

Some critics of the current crisis see it as yet another case of the rich getting one over on the rest of us. I will argue that this cannot be correct, because the rich as well as the poor (and the middle class) depend on the freedom to produce, and are all harmed by the lack of it.

Angelika Albaladejo writes, “The Rich Are Getting Richer,” citing a new report that “shows that some American billionaires are making substantial gains during the global health crisis.” Wilamette Week asks, “How Will the Rich Get Richer During the Pandemic-Fueled Economic Collapse?“

Israel Shamir in “Deep Pockets Love Lockdown” suggests that the rich do not like the widespread availability of travel:

No more travels for us. The very rich folks will regain their solitary possession of Venice, the Côte d’Azur, and all the other elite destinations so recently inundated by mass tourism. Once again they will have it as good as they had it in the 19th century. Travel is a luxury, and ordinary people do not deserve luxury. They tried to keep us away by making travel as unpleasant as possible with body searches, but it didn’t help. If this global pandemic doesn’t stop us, they are simply going to cut us off.

The greatest influence on everyone’s standard of living is the overall production of the society they live in. Under the current prohibitions, some businesses gain market share—a larger piece, but sliced from a much smaller pie. The rich, who enjoy and can afford luxury goods, depend on the productivity of all members of society for these goods. Those who can afford to fly first class, or perhaps in their own private planes, depend on the engineering advances from the mass production of airplanes that have reduced the cost and made private jets “affordable.” Time-shared private aviation costs in the low six figures.

High-end travelers rely on the proliferation of airports made possible by the masses of middle-class travel worldwide; on the sizable labor pool of skilled pilots with commercial air travel experience to fly their private planes; on the development of air traffic control through the management of millions of flights annually; and on the gradual improvements in air traffic control to improve air travel safety.

Fine hotels where the rich stay in suites exist nearly everywhere due to middle-class and business travel. International brands are able to bring quality hotels online and up to international standards quickly due to experience operating in many global markets, and they are able to staff new hotels with experienced managers from existing properties, where they have honed their skills.

The private chefs that the rich hire to cook for them emerged from a vast food service industry consisting of culinary schools and fine restaurants even in small- to mid-market cities, where chefs learn their craft. The ingredients are available because of demand to feed the millions. Restaurants are often funded by investors who either specialize in the restaurant sector or made their money in another business. The top-tier chefs who work privately for wealthy people have reached the top of a competitive pyramid through years of restaurant experience, travel, studying under other experienced chefs, and trying out different restaurant concepts to develop recipes and techniques. The Gordon Ramseys of the world stand atop a vast competitive pyramid of chefs.

The writers who suggest that the lockdown is another means for the rich to get richer, perhaps by buying up discounted assets in a financial panic and eventually monopolizing all commerce, lack an understanding of capital markets.

Financier and political advisor Bernard Baruch is reported to have gone to cash, to have shorted the US stock market in the late 1920s leading up to the crash of 1929, to have advised friends to do the same, and to have made millions on the trade. Kennedy family patriarch Joseph P. is reported to have done likewise, realizing that the market was at a top when shoeshine boys gave him stock tips.

Fortunes have been made by shorting bubbles before market crashes or buying up assets on the cheap in the aftermath—but does that benefit “the rich”? This ignores that for every Bernard Baruch who sold millions of dollars in assets there had to be another buyer who bought them near the top and suffered the losses that Baruch avoided.

Those who own most of the assets are by definition “the rich.” A rich person is someone whose property consists mostly of capital goods—directly owned, through businesses or through stocks and bonds, which are claims on capital goods. When Baruch wishes to sell $1 million in assets, which, as Dr. Evil has observed, used to be a lot of money, there must be a buyer who has that much cash on hand to pay for them. This buyer can only be another rich person, or an organization that represents a large number of individuals—a pension fund, a life insurance company.

Collectively all assets are at all times owned by someone. “The rich” as a whole can not exit asset ownership, because there is no external population of Martians who will take those assets off their hands (unless the Fed buys the entire stock and bond market, which I don’t rule out, and perhaps the Fed governors are from another planet).

Most of the world’s wealth is in capital goods; those who own the most of them are the rich. When markets are repriced—downward—the rich as a whole suffer most of the market value losses. Those who cashed out at the top benefit at the expense of those who held the assets on the way down. And anyone, at any size, who has cash finds that the purchasing power of their cash has gone up when measured in terms of assets. The position of small investors who have cash on hand improves relative to the rich when asset markets crash. Even those who do not invest in capital goods at all find their position improved in relative terms, because the ability of the rich to bid for consumption goods by offering capital goods has diminished.

At any moment in time, the upward or downward price movements in capital markets are a zero-sum game. But there is a more fundamental way in which we are interdependent. The capital goods underlying financial assets derive their market value from their role in the production of consumer goods. The value of a corporation is derived from consumer demand for its products. Many of the rich became so by starting a business that they still own which grew by satisfying consumer demand. Others have sold a business or inherited wealth which they try to preserve through the ownership (direct or indirect) of capital goods through financial assets.

And from where do consumers derive their ability to demand? We know from Say’s law that consumers demand by supplying their own production to the market. Everyone who works and produces a good or a service, by supplying it to the market, demands some other good or service. In the general glut debate, the proponents of Say’s law used it to show that because every instance of supply constitutes a demand, and vice versa, aggregate supply and aggregate demand are not only equal, but simply different ways of looking at the totality of transactions that occur in the market as a whole.

The demand that the rich depend on to support the valuation of their assets is largely not from other rich people demanding Cartier jewelry, Rolex watches, yachts, and custom basement wine cellars. It is largely from the mass market of consumers through division of labor, which provides the goods and services that we all depend on. The ability of the poor and middle classes to demand comes mostly from their wages, which they earn through their contribution to the production of a range of goods and services. Their supply in turn constitutes the demand for other—different—goods and services, which supports the valuations of businesses, and therefore financial assets.

And although the rich consume higher-quality goods and services than the rest of us, they depend equally on the flow of goods and services, the division of labor, and the development of new products. Although they may cherry-pick the best off the top, there has to be a chocolate sundae underneath to support the cherry.

Most mass consumer goods start out as luxury goods. Then, as the manufacturers work out the kinks and capital investment enables production at a larger scale, these goods become mass market goods. The 1987 movie Wall Street featured actor Michael Douglas in the role as a hedge fund titan. In one scene he is shown carrying what at the time passed for a mobile phone (a luxury good only available to the super rich) about the size of a large brick. When I have traveled in low- to middle-income countries (back in the days when we were allowed to travel more than one hundred yards from our residences), smartphones were ubiquitous. While it is true that the middle class and eventually low-income consumers benefit from the adoption of new products by the rich, the fall in these goods’ costs also makes the rich man’s dollar go further. Improvements in the design and function of the products through generations of products and mass production make better products available to all classes.

Even the government depends on the market, innovation, progress, and falling costs for its nefarious objectives. Governments would like to surveil us all—even more than they already do. According to the BBC News, “More than a million Australians have downloaded a coronavirus contact tracing app within hours of it being released by the government.” The plan is clear enough, but if no people can afford a modern mobile phone with GPS any longer and lack the ability to pay for their data plan, this effort might fall a bit short. The phone, the network, and the existence of either wifi or a mobile signal nearly everywhere are due to carriers’ vast capital investment and the dramatic fall in these technologies’ prices. We can all afford these things because of our participation in the market, producing other goods and services.

I will be the first to say that I do not understand why our insect overlords are attempting to damage social trust (through “snitch” portals) and to destroy our civilization itself through the prohibition of commerce, education, healthcare, athletics, professional sports, entertainment, dating and family formation, the arts, music, dining, family gatherings, religious observance, and all other forms of civilized life.

Nor can I explain the “mask hysteria” that is spreading like a highly contagious virus on social networking websites such as NextDoor.com.

Without an explanation that makes any sense, where does that leave us?

What keeps me up at night is that we have not yet seen the end game, and that when we do it may be worse than what anyone can imagine.

Japan saw an estimated 2,900 foreign travelers in April, down 99.9% from a year earlier, as COVID-19 travel restrictions and lockdowns left the once-booming tourism sector in a state of paralysis.

The drop in foreign visitors was the most significant percentage decline on record dating back to 1964, the Japan National Tourism Organization (JNTO) reported. It was the first time the monthly figure fell sub 10,000. The previous low for monthly foreign visitors was 17,543 set back in February 1964.

The reason for the sharp decline stems from the government’s restrictions on international travel following a surge in domestic virus cases and deaths. On April 3, entry restrictions for international travelers were applied to 100 countries, including China, the US, and Europe, resulting in a collapse of inbound travel that severely impacted the country’s tourism industry.

Before the pandemic, tourism in the country was increasing at healthy growth rates. Around 31.8 million people visited Japan in 2019, up 2.2% over the previous year. Japan had high aspirations to boost tourism to a record 40 million this year, but those estimates were crushed due to the now-postponed Tokyo Olympics that have been rescheduled for 2021.  

Travel restrictions and shutdowns have found success in mitigating the spread of the virus, Prime Minister Shinzo Abe said on Thursday, adding that Japan could lift the state of emergency in Tokyo as early as next week, that is if virus infections can remain low. Emergencies were recently lifted in Osaka, Kyoto, and Hyogo because of a drop in confirmed cases. 

Japan’s tourism industry is expected to remain in a slump throughout the year. The world’s third-largest economy dove into recession for the first time since 2015: 

“The economy entered the coronavirus shock in a very weak position,” said Izumi Devalier, chief Japan economist at BofA, but “the real big ugly stuff is going to happen in the April, June print. It’s going to be three-quarters of very negative growth.”

Read: “Japan Exports Worst Since Financial Crisis; Korea Early May Export Data Just As Dire” 

Abe, like other world leaders, is quickly trying to reopen his crashed economy and simultaneously contain the pathogen’s spread. This difficult task could ignite into a second virus wave later this year.

Japan’s low rate of testing for the virus suggests the scope of the outbreak is still yet to be known. 

Authored by Pepe Escobar via The Asia Times,

In 1999, Qiao Liang, then a senior air force colonel in the People’s Liberation Army, and Wang Xiangsui, another senior colonel, caused a tremendous uproar with the publication of Unrestricted Warfare: China’s Master Plan to Destroy America.

Unrestricted Warfare was essentially the PLA’s manual for asymmetric warfare: an updating of Sun Tzu’s Art of War. At the time of original publication, with China still a long way from its current geopolitical and geo-economic clout, the book was conceived as laying out a defensive approach, far from the sensationalist “destroy America” added to the title for US publication in 2004.    

Now the book is available in a new edition and Qiao Liang, as a retired general and director of the Council for Research on National Security, has resurfaced in a quite revealing interview originally published in the current edition of the Hong Kong-based magazine Zijing (Bauhinia).

General Qiao is not a Politburo member entitled to dictate official policy. But some analysts I talked with agree that the key points he makes in a personal capacity are quite revealing of PLA thinking. Let’s review some of the highlights.

Dancing with wolves

The bulk of his argument concentrates on the shortcomings of US manufacturing:

“How can the US today want to wage war against the biggest manufacturing power in the world while its own industry is hollowed out?”

An example, referring to Covid-19, is the capacity to produce ventilators:

“Out of over 1,400 pieces necessary for a ventilator, over 1,100 must be produced in China, including final assembly. That’s the US problem today. They have state of the art technology, but not the methods and production capacity. So they have to rely on Chinese production.”  

General Qiao dismisses the possibility that Vietnam, the Philippines, Bangladesh, India and other Asian nations may replace China’s cheap workforce:

“Think about which of these countries has more skilled workers than China. What quantity of medium and high level human resources was produced in China in these past 30 years? Which country is educating over 100 million students at secondary and university levels? The energy of all these people is still far from being liberated for China’s economic development.”  

He acknowledges US military power even in times of epidemic and economic difficulties is always capable of “interfering directly or indirectly in the Taiwan straits question” and finding an excuse to “block and sanction China and exclude it from the West.” He adds that, “as a producing country, we still cannot satisfy our manufacturing industry with our own resources and rely on our own markets to consume our products.”   

In consequence, he argues, it’s a “good thing” for China to engage in the cause of reunification, “but it’s always a bad thing if it’s done at the wrong time. We can only act at the right time. We cannot allow our generation to commit the sin of interrupting the process of the Chinese nation’s renaissance.”

General Qiao counsels, “Don’t think that only territorial sovereignty is linked to the fundamental interests of a nation. Other kinds of sovereignty – economic, financial, defense, food, resources, biological and cultural sovereignty – are all linked to the interests and survival of nations and are components of national sovereignty.” 

To arrest movement toward Taiwan’s independence, “apart from war, other options must be taken into consideration. We can think about the means to act in the immense gray zone between war and peace, and we can even think about more particular means, like launching military operations that will not lead to war, but may involve a moderate use of force.”

In a graphic formulation, General Qiao thinks that,

“if we have to dance with the wolves, we should not dance to the rhythm of the US. We should have our own rhythm, and even try to break their rhythm, to minimize its influence. If American power is brandishing its stick, it’s because it has fallen into a trap.”

In a nutshell, for General Qiao, “China first of all must show proof of strategic determination to solve the Taiwan question, and then strategic patience. Of course, the premise is that we should develop and maintain our strategic force to solve the Taiwan question by force at any moment.”    

Gloves are off

Now compare General Qiao’s analysis with the by now obvious geopolitical and geo-economic fact that Beijing will respond tit for tat to any hybrid war tactics deployed by the United States government. The gloves are definitely off.

The gold standard expression has come in a no-holds barred Global Times editorial:

“We must be clear that coping with US suppression will be the key focus of China’s national strategy. We should enhance cooperation with most countries. The US is expected to contain China’s international front lines, and we must knock out this US plot and make China-US rivalry a process of US self-isolation.”

An inevitable corollary is that the all-out offensive to cripple Huawei will be counterpunched in kind, targeting Apple, Qualcom, Cisco and Boeing, even including  “investigations or suspensions of their right to do business in China.”

So for all practical purposes, Beijing has now publicly unveiled its strategy to counteract US President Donald Trump’s “We could cut off the whole relationship” kind of assertions.

A toxic racism-meets-anti-communism matrix is responsible for the predominant anti-Chinese sentiment across the US, encompassing at least 66% of the whole population. Trump instinctively seized it – and repackaged it as his re-election campaign theme, fully approved by Steve Bannon.

The strategic objective is to go after China across the full spectrum. The tactical objective is to forge an anti-China front across the West: another instance of encirclement, hybrid war-style, focused on economic war.

This will imply a concerted offensive, trying to enforce embargoes and trying to block regional markets to Chinese companies. Lawfare will be the norm. Even freezing Chinese assets in the US is not a far-fetched proposition anymore.   

Every possible Silk Road branch-out – on the energy front, ports, the Health Silk Road, digital interconnection – will be strategically targeted. Those who were dreaming that Covid-19 could be the ideal pretext for a new Yalta – uniting Trump, Xi and Putin – may rest in peace.       

“Containment” will go into overdrive. A neat example is Admiral Philip Davidson – head of the Indo-Pacific Command – asking for $20 billion for a “robust military cordon” from California to Japan and down the Pacific Rim, complete with “highly survivable, precision-strike networks” along the Pacific Rim and “forward-based, rotational joint forces” to counteract the “renewed threat we face from great power competition.”

Davidson argues that, “without a valid and convincing conventional deterrent, China and Russia will be emboldened to take action in the region to supplant US interests.”

Watch People’s Congress

From the point of view of large swathes of the Global South, the current, extremely dangerous incandescence, or New Cold War, is mostly interpreted as the progressive ending of the Western coalition’s hegemony over the whole planet.

Still, scores of nations are being asked, bluntly, by the hegemon to position themselves once again in a “you’re with us or against us” global war on terror imperative.  

At the annual session of the National People’s Congress, starting this Friday, we will see how China will be dealing with its top priority: to reorganize domestically after the pandemic.  

For the first time in 35 years, Beijing will be forced to relinquish its economic growth targets. This also means that the objective of doubling GDP and per capita income by 2020 compared with 2010 will also be postponed.

What we should expect is absolute emphasis on domestic spending – and social stability – over a struggle to become a global leader, even if that’s not totally overlooked.

After all, President Xi Jinping made it clear earlier this week that a “Covid-19 vaccine development and deployment in China, when available,” won’t be subjected to Big Pharma logic, but “will be made a global public good. This will be China’s contribution to ensuring vaccine accessibility and affordability in developing countries.” The Global South is paying attention.

Internally, Beijing will boost support for state-owned enterprises that are strong in innovation and risk-taking. China always defies predictions by Western “experts.” For instance, exports rose 3.5% in April, when the experts were forecasting a decline of 15.7%. The trade surplus was $45.3 billion, when experts were forecasting only $6.3 billion.

Beijing seems to identify clearly the extending gap between a West, especially the US, that’s plunging into de facto New Great Depression territory with a China that’s about to rekindle economic growth. The center of gravity of global economic power keeps moving, inexorably, toward Asia.

Hybrid war? Bring it on. 

In the 1950s, there were more than 4,000 drive-in movie theaters around the US. Now there’s less than 300 as America’s love affair with drive-ins died in recent decades. However, stop there, social distancing in a post-corona world could revive drive-ins as people keep their spaces while sitting in cars, watching a movie on a giant screen, which is much better than a crowded indoor theater where a COVID-19 carrier could infect everyone in the space. 

We will revert our attention back to the US shortly, but first, drive-ins are becoming the next hottest thing in Dubai as traditional movie theaters remain closed. Reuters notes that the UAE has opened up an outside theater via VOX Cinemas that can accommodate up to 75 cars at a time.

Tickets cost $50 per vehicle with popcorn, snacks and drinks included. 

“We keep our social distancing so it’s a brilliant idea in my opinion,” Porsche driver Xavier Libbrecht told Reuters during a showing Wednesday. 

The drive-in is located on top of the Mall of the Emirates, a shopping mall in Dubai. The giant screen was erected under the peak of the mall’s indoor ski resort. 

“Any excuse to get out the house during coronavirus times,” said Patrick, another moviegoer said on Wednesday. 

“In the comfort of your own car you don’t have to worry about chewing too loud,” he added.

Back to the US, Google search trends for “drive-in movie theater near me” has erupted to a five year high at the same time lockdowns are easing across the country.

People, who are searching for drive-in movie locations the most, are located in states where partial reopenings are currently underway.

It’s obvious that most Americans will not step into a movie theater anytime soon, considering a second coronavirus wave could be in the makings later this year. So their next best option, with social distancing in mind, and the luxury of their automobile, is to do something their parents or grandparents did decades ago: go to drive-in theaters. 

Short traditional movie theaters, long drive-in theaters in a post-corona world? 

Submitted by Yinon, Weiss, a tech entrepreneur, US nilitary veteran and bioengineer, via RealClearPolitics,

In the face of a novel virus threat, China clamped down on its citizens. Academics used faulty information to build faulty models. Leaders relied on these faulty models. Dissenting views were suppressed. The media flamed fears and the world panicked.

That is the story of what may eventually be known as one of the biggest medical and economic blunders of all time. The collective failure of every Western nation, except one, to question groupthink will surely be studied by economists, doctors, and psychologists for decades to come.

Reliance on Faulty Models

To put things in perspective, the virus is now known to have an infection fatality rate for most people under 65 that is no more dangerous than driving 13 to 101 miles per day. Even by conservative estimates, the odds of COVID-19 death are roughly in line with existing baseline odds of dying in any given year.

Yet we put billions of young healthy people under house arrest, stopped cancer screenings, and sunk ourselves into the worst level of unemployment since the Great Depression. This from a virus that bears a survival rate of 99.99% if you are a healthy individual under 50 years old (1, 2).

New York City reached over a 25% infection rate and yet 99.98% of all people in the city under 45 survived, making it comparable to death rates by normal accidents.

But of course the whole linchpin of the lockdown argument is that it would have been even worse without such a step. Sweden never closed down borders, primary schools, restaurants, or businesses, and never mandated masks, yet 99.998% of all their people under 60 have survived and their hospitals were never overburdened. 

Why did we lock down the majority of the population who were never at significant risk? What will be the collateral damage? That is what this series will explore.

Experts took a measured approach early on

In early February the World Health Organization said that travel bans were not necessary. On Feb. 17, just a month before the first U.S. lockdown, Dr. Anthony Fauci, the longtime director of the National Institute of Allergy and Infectious Diseases said that this new strain of coronavirus possessed “just minuscule” danger to the United States. In early March the U.S. surgeon general said that “masks are NOT effective in preventing [the] general public from catching coronavirus.” As late as March 9, the day Italy started its lockdown, Dr. Fauci did not encourage cancellation of “large gatherings in a place [even if] you have community spread,” calling it “a judgment call.” NBA games were still being played.

So how did we go from such a measured tone to locking up 97% of Americans in their homes seemingly overnight?

Enter faulty assumptions and faulty models

China concealed the extent of the viral outbreak, which, if you believed its data, led many scientists to believe that 2% to 5% of all infected patients would die. This turned out to be off by a factor of 10, but academic epidemiologists have a history of wildly-off-the-mark doomsday predictions.

The March 16 report by Imperial College epidemiologist Neil Ferguson is credited (or blamed) with causing the U.K. to lock down and contributing to the domino effect of global lockdowns. The model has since come under intense criticism for being “totally unreliable and a buggy mess.” 

This is the same Neil Ferguson who in 2005 predicted 200 million could die from the bird flu. Total deaths over the last 15 years turned out to be 455. This is the same Neil Ferguson who in 2009 predicted that 65,000 people could die in the U.K. from the swine flu. The final number ended up around 392. Now, in 2020, he predicted that 500,000 British would die from coronavirus. 

His  deeply flawed model led the United States to fear over 2 million deaths and was used to justify locking down nearly the entire nation. Dr. Ferguson is a character of Shakespearean drama and tragedy. His March 17 presentation to British elites on the dire need to take action ironically may have infected Boris Johnson and other top British officials, as Mr. Ferguson himself tested positive for COVID-19 two days later. Then in May he resigned in disgrace after he broke his own quarantine rules to meet clandestinely with a married woman.

But I don’t place most of the blame on people like Ferguson. If you are a hammer everything looks like a nail. I blame government leaders for failing to surround themselves with diverse viewpoints and to think critically for themselves.

Politicians claim lockdowns were the cause of fewer deaths

It would be highly embarrassing to force citizens to quarantine themselves only to later admit it was all a colossal blunder, so it is easier for politicians and modelers to claim the lower death rates were based on the lockdowns themselves. It was a success!

But several inconvenient thorns keep bursting that narrative — and none larger than Sweden,  the only Western country not to lock down its citizens. Sweden never closed borders, restaurants, businesses, or primary schools. The only legal action officials took was to ban events that entail crowds larger than 50 people.

One of the most well-known and respected models in the United States is from the Institute for Health Metrics and Evaluation and is commonly cited by the White House. Since the IHME model accounts for lockdowns and social distancing, or lack thereof, they should be validated by their predictions on Sweden.

Below is a screenshot of the IHME model for Sweden taken on May 3, along with actual results (black line). The model predicted up to 2,800 daily deaths within 11 days and a final death total as high as 75,000 if Sweden didn’t enact strict social distancing measures.

These were not complicated long-term projections; they were predicting what would happen in the next two weeks based on months of data. Yet the daily death peak was 75% lower than the baseline prediction and 96% lower than the worst-case prediction.

Not to be outdone, Uppsala University (the oldest university in Sweden) also presented a model that could have caused the Swedes to abandon course and lock down as the U.K. did. However, Sweden did not buckle. While the Uppsala University model predicted 90,000 deaths within a month, the actual result was around 3,500.

Besides deaths, there were also doomsday projections about hospital capacity, but those models also proved to be grotesquely exaggerated. On March 29, Columbia University projected a need for 136,000 hospital beds in New York City. The maximum ever used was under 12,000. At peak, New York City still had around 1 in 6 hospital beds open and around 1 in 10 ICU beds open. Hospitals had capacity, both in New York City and in Sweden.

While far below projections, Sweden’s short-term results are worse than Norway, Finland, and Denmark, but better than the U.K., France, Spain, Italy, and Belgium. Sweden likely also benefits from longer-term herd immunity, faster economic recovery, and fewer deaths from lockdown collateral damage.

Political leaders ignored early evidence when it conflicted with their models

There are those who say that we couldn’t have known these outcomes early on, so even if lockdowns were unjustified later they were still necessary early due to lack of information. That is plainly false. Italy’s alarming number of deaths fanned many of the early fears across the world, but by March 17 it was clear that the median age of Italian deaths was over 80 and that not a single person under 30 had died in that country. Furthermore, it was known that 99% of those who died had other existing illnesses.

A much more rational strategy would have been to lock down nursing homes and let young healthy people out to build immunity. Instead we did the opposite, we forced nursing homes to take COVID-19 patients and locked down young people. 

There are now places like Santa Clara County in California, entering its third month of lockdown despite COVID-19 patients occupying less than 2% of hospital capacity and none on ventialtors. Yet there are 2 million county residents effectively under house arrest. Some doctors and nurses in the area had their pay cut by 20% so hospitals could avoid bankruptcy, reflecting perhaps the epitome of this senseless catastrophe.

There were, of course, people warning us all along. Among them was as John P.A. Ioannidis of Stanford University School of Medicine, who ranks among the world’s 100 most-cited scientists on Google Scholar. On that pivotal day of March 17 he released an essay titled “A fiasco in the making? As the coronavirus pandemic takes hold, we are making decisions without reliable data” — but it got little attention. Mainstream media was not interested in good news stories or dissenting views. The world instead marched lock step into its man-made calamity.

With China’s ambitions toward Hong Kong having emerged as the top political fault line in recent days, the market was closely following the start of Friday’s National People’s Congress (NPC) where in addition to disclosures on Chinese political strategy, Beijing announces decisions on targets on GDP, CPI and fiscal deficit.

Which is why many were surprised when in the text of Premier Li Keqiang’s annual address, for the first time China abandoned its usual practice of setting a numerical target for economic growth this year due to the turmoil caused by the coronavirus pandemic. 

“I would like to point out that we have not set a specific target for economic growth this year,” the report said, according to Bloomberg which saw a leaked version. “This is because our country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the Covid-19 pandemic and the world economic and trade environment.”

“We must re-double efforts to minimize the losses resulted from the virus.”

China’s Premier Li Keqiang says the #coronavirus epidemic has not come to an end yet and that the country must work to fulfill targets this year #两会 #TwoSessionspic.twitter.com/BVs9rRwXvj

— Bloomberg QuickTake (@QuickTake) May 22, 2020

As Bloomberg adds, the shift away from a hard target for output growth not only breaks with decades of Communist Party planning habits, but is an admission of the deep rupture that the disease has caused in the world’s second-largest economy. With the growth outlook depending also on the efforts of trading partners to rein in the pandemic, the government is shifting its focus to employment and maintaining stability.

Chinese Premier Li Keqiang announces:
-China to abandon numerical GDP target
-Hong Kong security law to be perfected
-$1 trillion yuan of anti-virus bonds
-Plans to add 9 million urban jobs in 2020 https://t.co/t7124697NLhttps://t.co/nCv65xYbyk

— Bloomberg (@business) May 22, 2020

Among the various other economic goals disclosed by China, are:

• The addition of 9 million urban jobs; surveyed jobless rate around 6% (as we reported recently, the People’s Liberation Army is aggressively hiring all those who lost their jobs due to the pandemic, so at least China’s army will soon be absolutely massive)
• Plans 3.75 trillion Yuan of Special Local Govt Bonds in 2020 (a relatively modest number)
• Sell 1t yuan of anti-virus sovereign bonds in 2020 (even more modest)
• Deficit-to-GDP ratio this year is projected at more than 3.6% and the deficit increase is projected at 1 trillion yuan (about $141.6 billion) over last year (remember when China actually ran a budget deficit)
• China to work with U.S. to implement phase 1 trade deal (a noble goal, also one which will never happen)
• China sets 2020 CPI target at about 3.5% (China may have to launch another “pig ebola” virus to boost food inflation)
• China to use innovative monetary policy tools to finance real economy (so China will do QE as well?)
• China’s monetary stance unchanged; to make prudent monetary policy more flexible, appropriate
• China to use RRR cuts and interest rate cuts, relending
• China to guide money supply ‘significantly’ higher than 2019
• China targets more stable, high-quality imports, exports
• China to keep yuan at reasonable and equilibrium level
• China targets basic equilibrium in balance of payments
• China to cut taxes, fees by about 500b yuan this year
• China to asks large banks to boost lending to small firms by 40% (the US doesn’t hold a trademark on a debt bubble after all)
• China sees defense spending up 6.6% to 1.268 trillion yuan (see “China’s Military Seeks Bigger Budget Amid “Growing Threat Of US Conflict”“)

While none of the above was especially remarkable (with the exception of the hint at QE), the reason why stocks gave the report a thumbs down is because as Premier Li also said, China will safeguard national security in Hong Kong, i.e., China plans on expanding its crackdown on Hong Kong sovereignty, a step that comes one day after China announced dramatic plans to rein in dissent by writing a new law into the city’s charter, and just hours after the Senate passed a bill that will retaliate against China should it do precisely that, effectively ensuring an even further deterioration in US-Sino relations.

Specifically, the National People’s Congress confirmed plans to pass a bill establishing “an enforcement mechanism for ensuring national security” for Hong Kong, with Reuters adding that China’s draft Hong Kong legislation says Hong Kong “should finish enacting as soon as possible the regulations in basic law regarding national security” and that Hong Kong government and legal bodies should effectively prevent, stop and punish activities that endanger national security.

Chinese lawmakers were preparing to soon pass measures that would curb secession, sedition, foreign interference and terrorism in the former British colony, local media including the South China Morning Post reported Thursday, citing unidentified people.

“We will establish sound legal systems and enforcement mechanisms for safeguarding national security in the two special administrative regions, and see that the governments of the two regions fulfill their constitutional responsibilities,” Li said according to prepared remarks on Friday.

As Bloomberg adds, any attempt to impose security laws now could reignite the unrest that hammered the city’s economy last year and serve as a flash point amid broader U.S.-China tensions. Protesters urged democracy advocates to hold rallies across the city Thursday night, with one poster describing the moment as a “battle of life and death,” but mass demonstrations didn’t immediately materialize.

“This is the end of Hong Kong,” said Dennis Kwok, an opposition lawmaker representing the legal sector. “I foresee that the status of Hong Kong as an international city will be gone very soon.”

More importantly, we now have a timeline: the law is expected to pass China’s parliament before the end of its annual session May 28, so retail investors have about a week to ramping stocks higher before the trapdoor opens.

The legislation would still require several procedural steps including approval by the NPC’s decision-making Standing Committee, which could come as early as next month, the SCMP said. The move comes before citywide elections in September in which opposition members hoped to gain an unprecedented majority of the Legislative Council.

* * *

Although national security laws are required to be passed by Article 23 of the Basic Law, Hong Kong’s mini-constitution, successive governments have failed to pass them, with one effort in 2003 resulting in widespread street demonstrations. This new strategy could potentially allow authorities to skip the local legislative process, although the mechanics of how that would work remained unclear.

“It is absolutely necessary that the country’s top legislature fulfill its obligation to guarantee national security, by strengthening the legal framework with regard to Hong Kong,” the state-run China Daily said in a commentary. “There is nothing untoward in this as all countries attach the utmost significance to national security, and the introduction of such a law will safeguard the long-term stability and prosperity of Hong Kong.”

In addition to a more than 3% drop in Hong Kong stocks following the report of the imminent crackdown, three- and 12-month forwards on the Hong Kong dollar rose in New York trading, indicating traders expected more weakness ahead for the currency, which slipped the most in six weeks earlier in the day.

“The market is taking this news negatively for Hong Kong given the likely return of violent protest activities, higher risk for the U.S. to remove certain preferential terms for Hong Kong, such as the special tariff status, and risk-off sentiment,” said Becky Liu, head of China macro strategy at Standard Chartered Bank Ltd.

In addition to an imminent return of violent Hong Kong protests, China’s position sets up an election-year showdown with Trump, who has come under pressure in Washington to reconsider the special trading status before the city’s return to Chinese rule under a promise to maintain its liberal financial and political structure. Secretary of State Michael Pompeo has delayed an annual report on whether the city still enjoys a “high degree of autonomy” from Beijing, telling reporters Wednesday that he was “closely watching what’s going on there.”

On Thursday, Trump warned that the U.S. would respond to any move to curtail protests and democratic movements in Hong Kong: “I don’t know what it is because nobody knows yet,” Trump, speaking to reporters as he left the White House on Thursday, said about the possible Chinese actions. “If it happens, we’ll address that issue very strongly.” He didn’t elaborate.

Assuring that this will only get worse, much worse, a late Thursday tweet from Global Times editor in chief Hu Xijing said that “Hong Kong belongs to China, not the US. If senior officials in Washington are confused about this, President Trump’s granddaughter can tell them this common sense.”

Hong Kong belongs to China, not the US. If senior officials in Washington are confused about this, President Trump’s granddaughter can tell them this common sense. pic.twitter.com/b4ScMx77yV

— Hu Xijin 胡锡进 (@HuXijin_GT) May 22, 2020

The climax came when late on Thursday, senators Chris Van Hollen (Democrat) and Pat Toomey (Republican) introduced legislation to punish Chinese entities involved in enforcing the proposed new security law in Hong Kong and penalize banks that do business with those entities. They acted in response to what they said was the Chinese Communist Party’s “brazen interference” in Hong Kong’s autonomy. Meanwhile, China has repeatedly stressed that the US should mind its own business and not mess in internal affairs, with Hong Kong considered one of them.

Perhaps this is a good time to reread the latest Dalio blog post on why a war between the US and China is now inevitable.

Bikes sales flourished during nationwide COVID-19 lockdowns, as people were confined to their homes and local communities for several months under government-enforced public health orders to flatten the pandemic curve.

During this time, tens of millions of folks were laid off and filed for initial claims, and the lucky ones were able to work at home, which resulted in an unprecedented collapse in fuel consumption as automobiles were not needed. Employed or unemployed, millions flocked to local parks and trails, as they reconnected with nature as a stress reliever. 

Walking and jogging wasn’t enough for some, many ordered outdoor and stationary bikes online, and depending on local government restrictions, they were able to purchase ones at local retail shops. 

Google search trend “bike shop near me” erupted to new decade highs during lockdowns. 

Research firm The NPD Group found that US bike sales in March soared 50% YoY. They said stationary exercise bikes also saw increased sales. Overall, bike sales saw a 31% YoY jump over 1Q20. 

Bike shop owners reported a surge in sales over the last several months, Morgan Lommele, PeopleForBikes director of state and local policy, told NPR News. 

“We’re seeing families, individuals riding bikes in droves, more than we’ve seen over the last 20 years,” said Lommele

She said the best selling bikes were in a price range of $600 to $1,500. 

Lommele said many bike shops experienced “record-level sales, record-level demand for service” in March and over the first quarter. With such an influx in demand, she said some shops experienced labor shortages as workers stayed home due to virus fears. 

League of American Bicyclists said some state governments labeled bike shops as “essential” and were allowed to stay open during lockdowns. 

With depleted supply, bike shops are now complaining about restocking, plus a massive cloud of uncertainty remains due to President Trump’s bicycle and bicycle parts 25% tariffs. 

Lommele said tariffs “really harm our ability to provide a safe, low-cost product to Americans who want to ride bikes.”

In Springfield, Missouri, A & B Cycle’s Assistant Sales Manager Bryant Johnson said sales continued to spike through spring. 

“It’s been completely bonkers,” Johnson told KY3 News. “It’s kind of unprecedented to be this low on stock of bikes.”

Johnson said people want to stay active during the stay-at-home-orders. 

“People just sat around for so long, they’re getting bored,” he said.

Johnson said the backlog is so severe, bikes ordered today won’t arrive in the shop until fall. 

We noted in late April that Peloton sales are booming, and their at-home classes experienced a record number of riders. 

It only a took a pandemic to get America fit again.

Authored by Cabot Phillips via Campus Reform,

The FBI issued a PSA warning of the Chinese government’s intention to steal American medical research in its quest to find a cure for COVID-19.

The May 13 announcement came as mounting evidence continues to expose Chinese efforts to infiltrate America’s college campuses with the goal of stealing research and spreading propaganda.

Gordon Chang, an expert on United States-China relations, and author of The Coming China Collapse, spoke with Campus Reform Editor-in-Chief Cabot Phillips to break down what it all means and what must be done in response.

WATCH:

Pointing first to China’s response to COVID-19, Chang called out the attempt to place blame on other nations, saying “What we are seeing with the coronavirus is an attempt by the Chinese Communist Party to change the narrative around the entire world… the virus has an origin in Wuhan. Beijing has tried to change that, at times suggesting it came from the United States.”

“But also China has been trying to say they’ve had a near perfect response to the coronavirus and western countries have been failing… there’s an attempt to exert Chinese influence. One thing we’ve got to remember is Xi believes China is the world’s only sovereign state.”

Chang went on to point out how China has an extensive operation in place to steal American research, noting that “estimates put the annual theft of American intellectual property at somewhere between $150-600 billion a year.”

“Some of that actually takes place on American college campuses. China has bought a number of college professors, a number of them have been fingered by the FBI and they’re pending investigations, and Chinese students have been engaged in activities…for instance, downloading entire databases for China.” 

Pointing out the danger in allowing the Chinese government a foothold on our campuses, Chang detailed how their Confucius Institutes “report in reality to the Communist Party’s United Front Work Department. That means these are attempts to subvert other countries. Why would China spend so much money on U.S. campuses? It’s not just because they want to teach the Chinese language. They want to put forth narratives and restrict what is said about China on American campuses.”

Pointing out the lack of reciprocity, he noted, “The U.S. is not permitted to have institutes like this in China. You don’t have a Lincoln Center or Roosevelt Institute… we know that propaganda is absolutely critical to totalitarian regimes.” In closing, Chang noted the impact political correctness has had on the failure of American colleges and universities to call out China’s infiltration efforts.

“What we’ve seen in the U.S. is political correctness gone wild in connection with coronavirus.. where any criticism of China is deemed to be xenophobic or creating racism against Chinese Americans. That’s absolutely wrong. You’ve got to remember that the Chinese regime is deeply racist with its Han nationalist ideology. This is something we haven’t quite seen since The Third Reich.

To say criticism of a racist regime is racist is absolutely wrong. People have serious concerns about China and we have to have the right to have open discussions about it without the name calling.”