Tag: finance

Going into today’s Softbank results, we knew they would be catastrophic, and sure enough the company did not disappoint (the bears), when the poster child for all that is wrong with the central banks’ “everything bubble” (and the company which last October we said would be the “bubble era” short of the century) reported this morning that it lost 1.9 trillion yen ($17.7 billion) in 2019 after writing down the value of its numerous “unicorn” investments, including WeWork and Uber Technologies.

The company posted an overall operating loss of 1.36 trillion yen in the 12 months ended March and a net loss of 961.6 billion yen, confirming preliminary earnings results released last month. The losses are the worst ever in the company’s 39-year history.

As Bloomberg adds, the company’s $100 billion “unicorn incubator”, the Vision Fund, went from the group’s main contributor to profit a year ago to its biggest loser. Uber’s disappointing public debut last May was followed by the implosion of WeWork in September and its subsequent rescue by SoftBank. The plunge in Uber’s share price was responsible for about $5.2 billion of Vision Fund’s losses in the period, while WeWork contributed $4.6 billion and another $7.5 billion came from the rest of the portfolio, SoftBank said. The $75 billion the Vision Fund has spent to invest in 88 companies as of March 31 is now worth $69.6 billion.

Indicatively, WeWork’s valuation is now $2.9 billion, down more than 90% from its peak. SoftBank has invested more than $10 billion in the company, which means it is underwater by about $7 billion on the office subletting company whose future is now more opaque than ever.

To be sure, Son has been struggling with the impact of the coronavirus on the portfolio of startups weighted heavily toward the sharing economy which have been crushed by imposed social distancing norms and regulations. Son’s investments in hotel-booking service Oyo Hotels & Homes and Uber, among the biggest in his portfolio, have also fared poorly. Oyo, in which SoftBank invested about $1.5 billion, last month furloughed employees in countries outside its home market of India as it struggles to survive the virus. Uber’s shares are trading about 28% below its IPO price.

Having learned from the “best” – such as Boeing – Son responded forcefully in preempting another plunge in Softbank stocks, unveiling two share buybacks in rapid succession. The first 500 billion yen repurchase announced in mid-March initially failed to lift SoftBank’s stock. When the shares plunged more than 30% in the week that followed, Son unveiled a 2 trillion yen follow-up. Hilariously, SoftBank has already used roughly half of the first allotment. The company said on Friday that it had bought 250.6 billion yen of its own stock since March 13 under the original re-purchase plan.

Which, naturally means, it’s time for #3: before the earnings were announced on Monday, the company said it plans to spend up to 500 billion yen more to buy back shares through next March. The announcement is part of a broader plan to sell assets to raise as much as 4.5 trillion yen over the coming year to buy shares and slash debt. SoftBank is likely to raise the funds by selling its stakes in Alibaba Group Holding Ltd., Japanese telecom unit SoftBank Corp. and the company that results from the merger of Sprint Corp. and T-Mobile US Inc.

But while none of the above will come as a surprise to anyone, investors were still eagerly expecting today’s earnings if for no other reason than to see what slides Masa Son would stuff in his presentation.

As a reminder, in the past the Japanese billionaire, perhaps unaware that he moonlights as a comedian, added slides such as the following which were probably meant to telegraph a deep sophistication and to confuse the dumbest money, when in reality the slides were simply idiotic :

Masa did not disappoint, and prefacing by saying that “the situation is exceedingly difficult,” Masa said that “our unicorns have fallen into this sudden coronavirus ravine. But some of them will use this crisis to grow wings.”

And then, perhaps in hopes of killing Q&A time with five (5) surreal slides meant to provoke awkward silence and also to show to everyone precisely what goes on inside his brain, Son showed just what he meant:

Which unicorns will successfully “fly” out of the coronavirus valley? Why obviously those who overcome these two modest “challenges”: collapsing demand and a cash inferno.

Son’s parting words of wisdom: where manufacturing, electricity and food processing pulled the global economy out of the Great depression…

… this time it will be such ‘revolutionary’ services as online meetings, food delivery, online shopping and video streaming that will bail out the global economy….

… resulting in that utopia for every Ponzi scheme: “happiness for everyone.”

Want more? Read the full thing here.

Authored by Ranjan Roy via The Margins substack,

If capitalism is driven by a search for profit, the food delivery business confuses the hell out of me. Every platform loses money. Restaurants feel like they’re getting screwed. Delivery drivers are poster children for gig economy problems. Customers get annoyed about delivery fees.

Isn’t business supposed to solve problems?

Last week’s Uber-Grubhub news set off some antitrust alarms for me and got me thinking about the business of food delivery as a whole. But let me start this newsletter with a story about Pizza Arbitrage.

Market Inefficiencies

In March 2019 a good friend who owns a few pizza restaurants messaged me (this friend has made appearances in prior Margins’ pieces). For over a decade, he resisted adding delivery as an option for his restaurants. He felt it would detract from focusing on the dine-in experience and result in trying to compete with Domino’s.

But he had suddenly started getting customers calling in with complaints about their deliveries.

Customers called in saying their pizza was delivered cold. Or the wrong pizza was delivered and they wanted a new pizza.

Again, none of his restaurants delivered.

He realized that a delivery option had mysteriously appeared on their company’s Google Listing. The delivery option was created by Doordash.

To confirm, he had never spoken with anyone from Doordash and after years of resisting the siren song of delivery revenue, certainly did not want to be listed. But the words “Order Delivery” were right there, prominently on the Google snippet.

He messaged me asking me if I knew anything about Doordash, and oh boy, did I get Softbank-triggered. I had just read about their $400 million Series F and it was among the WeWorkian class of companies that, for me, represented everything wrong about startup evolution through the 2010s. Raise a ton of money, lose a ton of money, and just obliterate the basic economics of an industry.

Doordash was causing him real problems. The most common was, Doordash delivery drivers didn’t have the proper bags for pizza so it inevitably would arrive cold. It led to his employees wasting time responding to complaints and even some bad Yelp reviews.

But he brought up another problem – the prices were off. He was frustrated that customers were seeing incorrectly low prices. 

A pizza that he charged $24 for was listed as $16 by Doordash.

My first thought: I wondered if Doordash is artificially lowering prices for customer acquisition purposes.

My second thought: I knew Doordash scraped restaurant websites. After we discussed it more, it was clear that the way his menu was set up on his website, Doordash had mistakenly taken the price for a plain cheese pizza and applied it to a ‘specialty’ pizza with a bunch of toppings.

My third thought: Cue the Wall Street trader in me…..ARBITRAGE!!!!

If someone could pay Doordash $16 a pizza, and Doordash would pay his restaurant $24 a pizza, then he should clearly just order pizzas himself via Doordash, all day long. You’d net a clean $8 profit per pizza [insert nerdy economics joke about there is such a thing as a free lunch].

He thought this was a stupid idea. “A business as successful a Doordash and worth billions of dollars would clearly not just give away money like this.” But I pushed back that, given their recent obscene fundraise, they would weirdly enough be happy to lose that money. Some regional director would be able to show top-line revenue growth while some accounting line-item, somewhere, would not match up, but the company was already losing hundreds of millions of dollars. I imagined their systems might even be built to discourage catching these mistakes because it would detract, or at a minimum distract, from top-line revenue.

So we put in the first order for 10 pizzas.

The Numbers

He called in and placed an order for 10 pizzas to a friend’s house and charged $160 to his personal credit card. A Doordash call center then called into his restaurant and put in the order for those 10 pizzas. A Doordash driver showed up with a credit card and paid $240 for the pizzas.

It worked.

Trade 1

We went over the actual costs. Each pizza cost him approximately $7 ($6.50 in ingredients, $0.50 for the box). So if he paid $160 out of pocket plus $70 in expenses to net $240 from Doordash, he just made $10 in pure arbitrage profit. For all that trouble, it wasn’t really worth it, but that first experiment did work.

My mind, as a combination trader and startup person, instantly had the though – just run this arbitrage over and over. You could massively even grow your top-line revenue while netting riskless profit, and maybe even get acquired at an inflated valuation 🙂 He told me to chill out. Maybe this is why he runs an “actual business” while I trade options while doing brand consulting and writing newsletters.

But we did realize, if you removed the food costs this could get more interesting.

Trade 2

The order was put in for another 10 pizzas. But this time, he just put in the dough with no toppings (he indicated at the time dough was essentially costless at that scale, though pandemic baking may have changed things).

Now suddenly each trade would net $75 in riskless profit ⇒ $240 from Doordash minus ($160 in costs + $5 in boxes).

This got a bit more interesting. If you did this a few times a night, you could start to see thousands in top-line growth with hundreds in pure profit, and maybe you could do this for days on end.

So over a few weeks, almost to humor me, we did a few of these “trades”. I was genuinely curious if Doordash would catch on but they didn’t. I had visions of building a network of restauranteurs all executing this strategy in tandem, all drinking from the Softbank teat before the money ran dry, but went back to work doing content strategy stuff.

Was this a bit shady? Maybe, but fuck Doordash. Note: I did confirm with my friend that he was okay with me writing this, and we both agreed, fuck Doordash.

Google Hijacking and Fake Phone Numbers

Tricking businesses onto your platform and creating additional headaches for small business owners in the pursuit of Softbankian growth is a bad as it gets. Many restauranteurs were complaining about their Google listings being “hijacked” by Doordash, sometimes even usurping their own preferred delivery.

These underhanded tricks aren’t unique to Doordash though. In recent weeks there has been some great work coming out around a Yelp – Grubhub phone scam. This one is just priceless (seriously, read this Buzzfeed piece). Grubhub for their own sites generates a phone number for each restaurant that goes to a centralized, Grubhub owned call center. If someone calls in and orders via this number, the restaurant gets charged a fee. Apparently, some enterprising BD folks came up with the idea that Yelp could put the Grubhub phone numbers in place of the real restaurant phone number on the Yelp listing. Customers who think they’re “helping” their local restaurants by calling in the order are still creating a fee for Grubhub. 

Food Delivery Platform Existentialism

Which brings us to the question – what is the point of all this? These platforms are all losing money. Just think of all the meetings and lines of code and phone calls to make all of these nefarious things happen which just continue to bleed money. Why go through all this trouble?

Grubhub just lost $33 million on $360 million of revenue in Q1.

Doordash reportedly lost an insane $450 million off $900 million in revenue in 2019 (which does make me wonder if my dream of a decentralized network of pizza arbitrageurs does exist).

Uber Eats is Uber’s “most profitable division” 😂😂. Uber Eats lost $461 million in Q4 2019 off of revenue of $734 million. Sometimes I need to write this out to remind myself. Uber Eats spent $1.2 billion to make $734 million. In one quarter.

Amazon just bailed on restaurant delivery in the U.S.

What is it about the food delivery platform business? Restaurants are hurt. The primary labor is treated poorly. And the businesses themselves are terrible.

 This Business Insider piece did a good job covering the problematic dynamics of the industry:

As this conflict comes to a boil, one thing is becoming clear: there are no winners in this fight.

Restaurant owners are losing money. Diners are seeing their costs raised, either by delivery companies that need to pay delivery drivers or by the restaurant owners who raise prices to offset delivery fees. And delivery drivers still make low, unpredictable wages frequently with no benefits. 

How did we get to a place where billions of dollars are exchanged in millions of business transactions but there are no winners? My co-host Can and my restaurant friend both defaulted to the notion “delivery is a shitty margin business” when discussing this post. But I don’t think that’s sufficient here. Delivery can work. Just look at a Domino’s stock chart. But, delivery has been carefully built as part of a holistic business model and infrastructure. Maybe that’s the viable model. 

After the start of this pandemic, my friend actually launched in-house delivery at one of his restaurants. He said he’s starting to get a sense of the economics and explained he’s starting to get a sense of the volume required per location to make the economics reasonably work. That’s what is so odd to me about third-party delivery platforms. The business of food delivery clearly is not intrinsically a loser. Domino’s figured it out. Every Chinese restaurant in New York City seemed to have it figured out long before any platform came along. My friend is figuring it out.

That’s the thing about how industries have evolved over the past decade. I know I ascribe ZIRP as the cause of all ills in the world, but this sometimes feels like the greatest ZIRP story ever told.

You have insanely large pools of capital creating an incredibly inefficient money-losing business model. It’s used to subsidize an untenable customer expectation. You leverage a broken workforce to minimize your genuine labor expenses. The companies unload their capital cannons on customer acquisition, while this week’s Uber-Grubhub news reminds us, the only viable endgame is a promise of monopoly concentration and increased prices. But is that even viable?

Third-party delivery platforms, as they’ve been built, just seem like the wrong model, but instead of testing, failing, and evolving, they’ve been subsidized into market dominance. Maybe the right model is a wholly-owned supply chain like Domino’s. Maybe it’s some ghost kitchen / delivery platform hybrid. Maybe it’s just small networks of restaurants with out-of-the-box software. Whatever it is, we’ve been delayed in finding out thanks to this bizarrely bankrolled competition that sometimes feels like financial engineering worthy of my own pizza trading efforts. 

The more I learn about food delivery platforms, as they exist today, I wonder if we’ve managed to watch an entire industry evolve artificially and incorrectly. Arbitrage is about taking advantage of market inefficiencies and for all the newly minted day-traders out there, perhaps it’s time to start looking into frontier markets like pizza. 

*  *  *

Note 1: We found out afterward that was all the result of a “demand test” by Doordash. They have a test period where they scrape the restaurant’s website and don’t charge any fees to anyone, so they can ideally go to the restaurant with positive order data to then get the restaurant signed onto the platform. If we had to pay a customer fee on the order, it would’ve further cut into our arbitrage profits (though maybe we could’ve incorporated DashPass as part of the calculation). 

Note 2: A few months ago, in the pre-pandemic times, I was at an East Village pizza place and watched as the owner was arguing with a Doordash driver. The owner insisted the driver take the pizza in a heated bag so the customer didn’t get cold pizza, but leave an ID so the driver would be compelled to return the bag. The driver argued the amount of time it would take to come back to return the bag would mean he couldn’t make enough deliveries to “pay my rent”. #Innovation.

Mohamed El-Erian does not see a smooth, V-shaped recovery from the coronavirus pandemic in the cards – and instead says that it will probably look more like a series of Ws.

“Think of a pendulum swinging, and we don’t know the magnitude of the swings, and we don’t know the duration of the swings or the settling point. So it really is an uncertain outlook,” he told Fox News‘ Chris Wallace in a Friday interview which aired on “Fox News Sunday.

“We should not forget how bad this picture is. With the additional three million [unemployed], that is 36 million people who have signed up for jobless claims in 8 weeks. That’s one quarter of our labor force. So it’s an enormous shock,” he added.

El-Erian also says that reopening the economy will be an uphill battle, and that until a vaccine is readily available, it will take time for people to resume normal activities.

“It’s very difficult for me to convince you I’m healthy and for you to convince me I’m healthy until we get a vaccine,” he said, while noting that the pandemic has “shaken consumer confidence,” and that it will take a while before a public that “isn’t wired for social distancing” to adjust to the new normal.

Another variable is that states are reopening on different timelines, and that it’s unclear how businesses will resume operations with “different states doing different things.”

“We have these three massive uncertainties all in play at the same time, and it’s very hard to say, oh everything’s going to be resolved overnight,” El-Erian added (via Fox Business). “We hope so, but I think we should buckle our seatbelt that it’s going to get bumpy still.“

Authored by Robert Wenzel via TargetLiberty.com,

Memberships in Democratic Socialist of America chapters around the country have surged in the past eight weeks, reports The Atlantic.

An estimated 10,000 people have joined since March, bringing the group’s total membership to roughly 66,000, according to internal figures.

Leaders of the DSA attribute some of this recent growth to Senator Bernie Sanders suspending his presidential campaign in early April, which sent his supporters seeking another outlet for their organizing energies. But current economic and public-health conditions have sparked anger nationwide – and the present moment seems especially ripe for socialist outrage, according to the magazine.

“People are really starting to just look around and say, ‘Man, capitalism isn’t working,’” said the co-chair of the Detroit DSA chapter, who requested to be quoted anonymously for fear of professional repercussions, reports Atlantic’s Elaine Godfrey.

“If the markets can’t even produce hand sanitizer or toilet paper or masks during a plague—what good is this system?”, he asked.

Of course, the problem with the shortages of hand sanitizer and toilet paper are not the result of capitalism but the lack of free-market capitalism, as I explained back in March, here: There is Plenty of Toilet Paper.

Right now, the DSA is emphasizing recruitment, framing their efforts as giving struggling workers “a way to fight back,” the DSA Denver labor chair, Mariah Wood said.

“It’s a good time to be a socialist,” she added.

According to the article, “the DSA is interested in recruiting higher-income workers on the front lines of the crisis, too. Through word of mouth, the Twin Cities chapter has reached out to health-care employees who feel like their workplace conditions are unsafe.”

Keep in mind, socialists are very clever operators. They will use any crisis, including the lockdown which is closer to socialist central planning than anything else, to promote their very shallow understanding of economics and societal organization.

They do, however, understand organizing to gain power, because power-seeking and the desire to rule over others is what they are all about.

President Xi’s generous promises to share a (non-existent) Chinese COVID vaccine “with the world” while extending some $2 billion in aid to the poorest nations apparently failed to dissuade the 54-member African Union bloc of nations from supporting a resolution calling for a WHO-led investigation into China’s handling of the coronavirus outbreak.

Of course, Xi said during his keynote address during this year’s annual meeting of the WHO (which is being held virtually) that China supports a “comprehensive evaluation” of the factors behind the outbreak, while Chinese tabloid editors have sneered that the world better not complain when the outcome shows the US, not China, is responsible for the outbreak.

China is not afraid of an independent investigation into the origin of the coronavirus, hope the US is not afraid of it either. Regardless where the virus originated, China’s stance is the same. But if the investigation finds it originated in the US, Trump’s reelection is doomed.

— Hu Xijin 胡锡进 (@HuXijin_GT) May 18, 2020

President Trump promised in a tweet shortly after the news broke that “we are with them” regarding Australia’s resolution for a COVID inquiry with a tweet…

We are with them! https://t.co/H7DRHXPJYb

— Donald J. Trump (@realDonaldTrump) May 18, 2020

…which prompted even more Chinese disinformation.

The WHA should take note: President Trump said last week that the US began developing COVID-19 vaccine on Jan 11. But at that time the whole world, including China, knew little about this virus, where did the US acquire the knowledge? It should be a focus of the investigation.

— Hu Xijin 胡锡进 (@HuXijin_GT) May 18, 2020

A coalition consisting of more than 110 nations has formed to back the inquiry, according to reports in the Australian press.

The African Union’s 54 member states will co-sponsor the Australian motion, joining 62 other countries including Russia, Indonesia, India, Japan, Britain, the US and Canada, along with all of the European Union’s 27 members as well as Brazil, South Korea, Mexico, Turkey and New Zealand.

Australian Foreign Minister Marise Payne on Monday said it was encouraging to see so many countries backing the inquiry.

“I think what it illustrates is a broad view that given the experience of COVID-19 – over 300,000 deaths, millions of people around the world losing their jobs, the impact on economies from one corner of the globe to the other – that there is a strong view that it is appropriate to engage in a review of what has happened.”

“I don’t want to preemptively speculate about the outcome, those discussions will be under way later this evening. I think it’s a win for the international community.”

The draft resolution calls for impartial, independent and comprehensive evaluation of the international response to the pandemic.

Repudiating Beijing’s claims that the investigation is ‘political sabotage’, Australia’s Deputy Chief Medical Officer Paul Kelly said on Monday it was important to “get to the bottom” of what had happened during the early days of the outbreak.

“I think the most important thing, rather than apportioning blame to one particular country or another country, is that we get to the bottom of what’s happened. And part of that is about the origin, where this virus came from,” he reportedly told a group of journalists.

Meanwhile, Australia is mulling whether to file a complaint against China with the WTO over the 80% tariffs on barley exports imposed on Monday after an “investigation”. It’s just the latest reminder that Beijing is no stranger to ‘political sabotage’ of its own.

As we noted earlier, Rabobank’s Michael Every warned clients in a note published Monday morning that this year’s WHO meeting will be especially tense, saying it “has all the makings of a contemporary Khrushchev-bashing-his-shoe-on-the-table-at-the-UN moment.”

Authored by Mike Shedlock via MishTalk,

In many states workers can do better collecting unemployment than being employed.

Please consider the Coronavirus Unemployment Calculator to determine when and where it’s better not to work.

Under the CARES Act, Americans laid off due to the coronavirus receive an additional $600 a week for the next four months, ending July 31st or upon employment. In addition, the unemployment window has been increased in each state by 13 weeks.

Massachusetts generous unemployment policies combined with the stimulus means all workers making under $73,996 would receive more a week unemployed than they do from working.

Many of these salaries outstrip the state’s median income, meaning the majority of workers would receive more from an unemployment check than a paycheck.

The stimulus package made significant changes to state unemployment. For the next four months, the unemployed will receive an additional $2,400 a month. Similarly, the added 13 weeks provides people longer to find a job in a new hostile job market.

The new package does mean a good chunk of the workforce are now receiving paychecks smaller than they would on unemployment. This includes workers in essential businesses, including hospitals and super markets, who are putting themselves in harm’s way to keep society running.

This is ridiculous of course.

The next stimulus measure needs to cap the benefit at some percentage below what people were making. 

Instead, the next package aims to increase the amounts and pay illegal immigrants as well.

Under threat of a progressive revolt, the House Narrowly Passes $3 Trillion Aid Package

The House narrowly passed a sprawling, $3 trillion coronavirus-relief package Friday night, capping a weeklong effort by Democratic leaders to quash rebellions from various wings of their party.

The House bill includes about $1 trillion in direct aid to states and localities, including grants and education assistance, to deal with the effects of the pandemic. It would put a new round of one-time cash payments into Americans’ bank accounts, extend the duration of enhanced jobless benefits, help cover some rents and mortgages, forgive some student-loan debt and send premium pay to essential workers in fields such as health care.

The bill overcame a key hurdle Friday night when Democratic leaders were able to beat back a Republican effort to strip out a contentious provision enabling undocumented immigrants who have tax identification numbers to receive direct stimulus payments. Key blocs of liberal and Hispanic lawmakers had threatened to oppose the overall bill if that measure were removed, but voting to preserve it was a political challenge for more centrist Democrats, particularly those in districts won by President Trump.

Republicans made clear that the bill has no prospect of advancing in the GOP-led Senate. “It’s a parade of absurdities that can hardly be taken seriously,” Senate Majority Leader Mitch McConnell (R., Ky.) said Thursday on Fox News. Mr. McConnell said that he had spoken recently with President Trump and cabinet officials and that they agree another bill is probably necessary but that “it’s not going to be a $3 trillion left-wing wish list like the speaker is apparently going to try to jam down the throats of her majority.”

Undocumented Definition

Undocumented means illegal.

But it is politically incorrect to be correct. 

Dead on Arrival

The bill of course is dead on arrival in the Senate. 

Heck even 14 Democrats could not stomach the bill, and that’s saying quite a lot.

Undocumented Giveaway in California

Meanwhile, in California, Governor Newsom will give $125 million to “undocumented immigrants” affected by coronavirus. 

They can apply for Covid-19 Relief starting Monday.

California is home to more than 2 million undocumented immigrants who aren’t eligible to receive unemployment or stimulus checks from the government.

But the state has set up funding to help support them during the coronavirus crisis, providing $125 million through a public-private partnership. It’s been touted as the first fund of its kind to support undocumented immigrants. The state will contribute $75 million to the fund, with the remaining $50 million coming from private philanthropic partners.

Public-Private Giveaway

California is willing to give $75 million in taxpayer money to illegal immigrants if private philanthropic partners contribute $50 million to the pot. 

Lovely.

This Mess Could Have Been Largely Solved

On January 24, 2018, Democrats offered Trump $20 billion for a wall. .

Senate minority leader Schumer went to the White House and told Trump he could have his wall. “The president picked a number for the wall, and I accepted it,” Schumer recalled in the midst of the shutdown. He had agreed to a significant sum of money for the wall—reported to be $20 billion, though the Democrat’s office will neither confirm nor deny that figure—in exchange for Trump’s support of permanent protections for the nearly 700,000 young undocumented immigrants covered under the Obama-era Deferred Action for Childhood Arrivals program.

Negotiation Points

• Dreamers need to verify address

• Dreamers need to have no criminal background

• Dreamers need to have been in the US for x number of years (x negotiable)

• Dreamers need to apply for a Dreamer’s Card and will immediately be accepted if they meet the above criteria

• Dreamers not applying for a card and caught in a crime would immediately be deported

• e-Verify tightened

That was one hell of a great starting point that Schumer threw on Trump’s lap.

Instead, Trump got next to nothing for a wall and we still have an immigration mess.

Some of these illegals have been here 5 years or longer, have kids that are US citizens, and are productive members of society. 

Instead of verifying criminal backgrounds and granting a path for citizenship for those who have been her five years or more, the plan is to slosh around money to  all the illegals on a first come first serve basis in California, and to all of them in the House Plan.

This kind of progressive nonsense will not help the Democrats in  November.

Just a few weeks ago, the following chart from Deutsche Bank would have been a joke in serious financial circles. Not any more.

With the Fed’s balance sheet surging to $7 trillion amid heated discussions just how much bigger it will get in the next year as the Fed is tasked with monetizing the US bailout program, DB’s Torsten Slok has come up with a rather “ingenious” and disturbingly non-comedic estimate of what the potential maximum size of central bank’s balance sheet could be. To calculate it, Slok assumes that the Fed may, at some point, monetize all US assets, including but not limited to equities, residential real estate, commercial real estate, all treasury and corporate bonds, farmland and so on.

It all adds up to about $130 trillion…

… roughly 6 times the size of total US GDP and a number we have seen before: it’s also BofA’s 2019 calculation of all US financial assets.

$130 trillion is also a number which even MMTers would admit is the endgame as there will be nothing left to nationalize, or privatize depending on one’s view of who ultimately owns the Federal Reserve.

Via MassprivateI blog,

If you’re anything like me, you are looking forward to finally getting out of your house and maybe having a few drinks or a nice dinner at your local bar or restaurant. But going out to your local bar or restaurant once the lockdown ends comes with a steep price.

That’s because three cities, in Louisiana, Texas and Missouri, will only allow non-essential businesses to reopen if they agree to collect customers personal information.

According to NOLA Ready, The Department of Homeland Security (DHS) and the city of New Orleans are creating a “new normal” by forcing bars and restaurants to collect customers personal information.

“We know everyone is eager to reopen. It’s not going back to normal; it’s what we’re calling ‘the new normal.’ It will be the data and not the date that drives not only the decision but the phased approach to reopen the City of New Orleans. Today, we are outlining what those guidelines will be for the City,” said Mayor Latoya Cantrell.

As Forbes.com explains the “new normal” is for bars and restaurants to become government snitches.

“New Orleans Mayor LaToya Cantrell announced business owners will be required to keep logs of the names and contact information of patrons who enter their establishments once the Big Easy reopens to help with contact tracing—a move that Cantrell called part of the new normal, as New Orleans and Louisiana plan to rollback coronavirus restrictions this month.”

Two different articles in Nola.com reveal how DHS and the city of New Orleans plan to use COVID-19 contact tracing as an excuse to record customers personal information.

An article titled, “Customer logs will be kept under ‘new normal’ amid coronavirus in New Orleans” explains DHS’s plans.

“Contact tracing just doesn’t involve government alone,” Cantrell said in the Tuesday conference call. Businesses will proactively track the names and the contact information of patrons “as part of the new normal,” Cantrell said.

Another Nola.com article titled, “Proposed customer logs raise privacy, logistical concerns” warns that forcing businesses to collect customers private information violates the constitution.

“They’re asking of restaurants, and they’re asking right now and developing guidelines, that are completely impossible to follow and violate constitutional privacy,” Stephen Perry the head of New Orleans tourism and hospitality sector said.

In Travis County, Texas restaurants will do much more than track customers personal information. According to an article in The Austin Eater, restaurants will track customers personal information and note exactly when they ate, where they ate, and which employees served them.

“All restaurants allowing dine-in service and all reopened services with allowed occupancy or capacity of 75 or less are encouraged to maintain an activity log of, as reasonably possible, the contact information for all inside or sit-down customers and employees including the dates and times they were present in the business and the location where they sat or were served if a restaurant or reopened service with seating. In the absence of a such a log, “

How does our government justify forcing businesses to keep detailed logs of who their customers are, what time they ate and what they ate?

Kansas City forces churches and businesses to snitch on churchgoers and customers

A recent article in The New American revealed how the city of Kansas City, Missouri is forcing places of worship and businesses to track people’s personal information.

“As part of its partial reopening of nonessential institutions, Kansas City, Missouri, is now requiring businesses and churches to maintain lists of people who enter their doors.”

Mayor Quinton Lucas’s 10/10/10 rule states “that businesses must maintain a record of time of service for customers on the premises in a seated capacity for more than ten (10) minutes.” It further states that businesses like Salons can satisfy customer registrations by providing authorities with customers names and appointment times.

Kansas City’s 10/10/10 rule also said that religious gatherings like, weddings, funerals, memorial services, and wakes with ten or more people should have their names and personal information collected.

A city FAQ page indicates that businesses must record the names, contact information, and approximate entry/exit time of these customers. It also said the information must be turned over to the department of public health upon request.

A Kansas City news release titled, “Re-Opening Guidelines for KCMO Restaurants, Non-Essential Businesses” revealed that restaurants and businesses have become defacto government spies, keeping personal information of customers for thirty days.

“Restaurants are strongly encouraged to maintain a log of all customers who spend more than 10 minutes seated at the establishment. Logs are to be kept for 30 days at the establishment before discarding/deleting. Log records will be kept confidential and will only be used to aid efforts to notify customers and staff about potential COVID-19 exposure.”

Fortunately, tracking customers personal information is not the norm yet. As USA Today noted, most states are not tracking customer’s personal information as long as businesses take the necessary health precautions.  It should be noted that at least one more state, Oregon, is considering forcing restaurants to record customers’ personal information.

Forcing businesses to record the names and personal information of everyone under the guise of COVID-19 is too high a price to pay for going out to your favorite bar or restaurant.

We cannot allow DHS and local authorities to use COVID-19 as an excuse to create a “new normal” of private business snitching.

As everyone is well aware, today we’re experiencing unprecedented (or at least highly exceptional) developments in four areas: the pandemic, the economic contraction, the oil price collapse and the Fed/government response. 

Thus, as Oaktree Capital’s Howard Marks recently wrote, despite the US stock market’s apparent exuberance, a number of considerations make the future particularly unpredictable these days:

The field of economics is muddled and imprecise, and there’s good reason it’s called “the dismal science.” Unlike a “real” science like physics, in economics there are no rules that one can count on to consistently produce a given outcome, as in “if a, then b.” There are only patterns that tend to repeat, and while they may be historical, logical and often-observed, they’re still only tendencies.

In some recent memos, I’ve mentioned Marc Lipsitch, Professor of Epidemiology at Harvard’s T.H. Chan School of Public Health. In my version of hierarchy, there are (a) facts, (b) logical inferences from past experience and (c) guesses. Because of the imprecision of economics, there certainly are no facts about the economic future. Economists and investors make inferences from past patterns, but these are unreliable at best, and I think in many cases their judgments fall under the heading of “guesses.”

These days, I’m often asked questions like “Will the recovery be V-shaped, or a U, W or L?” and “Which of the crises you’ve lived through does this one most resemble?” Answering questions like those requires a historical perspective.

Given the exceptional developments enumerated above, however, there’s little or no history that’s relevant to today.

That means we don’t have past patterns to fall back on or to extrapolate from. As I’ve said, if you’ve never experienced something before, you can’t say you know how it’s going to turn out.

While unique developments like those of today make forecasting unusually difficult, the presence of all four elements at once probably renders it impossible. In addition to the difficulty of understanding each of the four individually, we can’t be sure how they’ll interact. For example:

• Will the massive, multi-faceted Fed/Treasury program of loans, grants, stimulus and bond buying be sufficient to offset the unparalleled damage done to the economy by the fight against Covid-19?

• To what extent will the reopening bring back economic activity, and to what extent will that cause the spread of the disease to resume, and the renewal of lock-downs?

For investors, the future is determined by thousands of factors, such as the internal workings of economies, the participants’ psyches, exogenous events, governmental action, weather and other forms of randomness.  Thus the problem is enormously multi-variate. 

As Marks asks, rhetorically:

“Who can respond to this many questions, come up with valid answers, consider their interaction, appropriately weight the various considerations on the basis of their importance, and process them for a useful conclusion regarding the virus’s impact?”

Who indeed? Well, it would appear that as long as The Fed keeps printing, or promising to print, or promising that if things get worse it will print, everything will be awesome.

But Marks is not buying that. In a Bloomberg “Front Row” interview, the billionaire hedge fund manager asked “Can the Fed keep it up forever?”

“Those of us in the markets believe that stocks and bonds are selling at prices they wouldn’t sell at if the Fed were not the dominant force. So if the Fed were to recede, we would all take over as buyers, but I don’t think at these levels.”

And thus, the dilemma for policy-makers is no longer their mandate-driven balance of inflation and employment but the just how hard can we push the pedal to the metal to keep the wealth effect going before the engine explodes (or worse still, the financialized economy is exposed for the fallacy that is has become).

What happens, as Marks notes, when the funding runs out? (or if the funding runs out) and we have already seen credit markets – despite all the hype of Fed direct ETF intervention and issuance – are not drinking from the same Kool-Aid jug as the stock markets…

The mantra of “you can’t fight the Fed” appears to be ignored by credit overall, and Marks agrees – expecting a slow and halting recovery from the COVID-19 pandemic and said “there will be plenty” of debt defaults and bankruptcies when corporate borrowers start running out of cash in the months ahead.

“There are large, highly levered companies and investment vehicles that the government and Fed rescue program is not likely to reach and take care of,” he said.

Specifically, Marks notes that while the central bank has committed to buying investment-grade bonds and debt recently downgraded to junk, it hasn’t extended that support to less-creditworthy issuers.

“They could do that,” Marks said.

“And in theory, if they bought aggressively, they could make all the markets rise. Now everyone would know that that’s a Potemkin market, a fake, and the minute they stopped things would collapse.”

Finally, in one of his recent memos to clients, Marks quoted a saying:

“Capitalism without bankruptcy is like Catholicism without hell.”

In the interview, he reiterated that fear, worrying that Fed support for the credit market will result in moral hazard – the likelihood that those who escape the consequences for reckless behavior will be reckless again.

As Marks summed up in his latest letter to investors, no one can succeed in predicting things that are heavily influenced by randomness and otherwise inconsistent.

Maybe Voltaire said it best 250 years ago: Doubt is not a pleasant condition, but certainty is absurd.

Beijing has been working to reframe the global narrative surrounding the coronavirus outbreak by playing up the generous medical aid it has extended to some of its allies (including Italy, Russia, Iran and many BRI partner-nations) while Chinese tabloids and gossip sites spread disinformation like this gem: reports that last summer’s “vaping illness” panic was a coverup orchestrated by President Trump to hide the fact that the coronavirus truly originated in the US.

Amid the first stirrings of a second wave of the outbreak in northeastern China, President Xi on Monday delivered a keynote address to kick off the annual meeting of WHO members at The World Health Assembly (WHA) – which is occurring virtually this year – where he promised to share a China-developed coronavirus vaccine with the entire world (once they’ve developed it, that is).

As Beijing battles for the hearts and minds of residents across the vast geopolitical middle-ground in an increasingly bi-polar world, Xi also pledged $2 billion in financial support for next two years to help developing nations in Africa and elsewhere deal with the fallout of COVID-19. Moreover, Beijing will work with the UN to set up a global humanitarian response depot and hub in China and help establish so-called “green corridors” to ship ‘essential goods’ like medicine produced in China to the rest of the world more quickly, Xi said.

“China will work with members of the Group of 20 nations to implement the debt relief initiative for the poorest countries,” he said.

That’s quite the basket of incentives to dangle in front of the world as more than 100 countries prepare to back a vote to hold an independent investigation into the outbreak.

In the face of mounting criticism, Xi defended China’s actions after the COVID-19 outbreak emerged in Wuhan, and insisted the country acted “transparently” to share information with the rest of the world, despite mounting evidence that China withheld information about the virus’s ability to spread from person to person.

And in a defense that we felt was vaguely reminiscent of Facebook CEO Mark Zuckerberg’s “support” for more privacy oversight of Silicon Valley tech giants, Xi claimed he would support a “comprehensive evaluation” of the early days of the outbreak once the virus had been brought to heel.

“China supports a comprehensive evaluation of the global response to the epidemic after the global epidemic is under control, to sum up experiences and remedy deficiencies,” Xi told the assembly. “This work needs a scientific and professional attitude, and needs to be led by the WHO; and the principles of objectivity and fairness need to be upheld.”

Xi was careful to strike a conciliatory tone – in stark contrast to the belligerent comments toward the US and Australia. The strategy is obvious: Use the growing support for an investigation to milk sympathy for China by portraying the US and Australia as anti-Beijing crusaders hoping to pin all their political problems on Beijing.