Tag: finance

Authored by Ryan McMaken via The Mises Institute,

Mexico’s president Andrés Manuel López Obrador has been reluctant to impose mandatory “social distancing” orders on the Mexican population. According to USNews, López Obrador “has maintained a relaxed public attitude” toward COVID-19, and the Mexican government did not impose a ban on “nonessential” work until March 30, long after health officials in other countries insisted Mexico must do so.

According to Dr. Miguel Betancourt, president of the Mexican Society of Public Health, those measures are “too late” and “should have come weeks earlier.” But, even with legal measures in place, it’s hard to say how many Mexicans can afford to follow them. The Financial Times has described what is likely a common attitude in Mexico:

Salvador Almonte has been doing a roaring trade in antiviral citrus cocktails at his stall in Iztapalapa, a sprawling working-class district of Mexico City. He makes about $9 to $13 a day selling juices and sandwiches and—like his customers—cannot contemplate staying at home to slow the spread of Covid-19. “We live day to day,” he said. “If we don’t work, we don’t eat.”…

Cuauhtémoc Rivera, head of the Association of Small Businesses, warned that a quarter of a million corner shops could close, with the loss of 500,000 jobs….If this goes on for a long time, I don’t know how we’ll all survive,” said Enrique Rosas, who has a fleet of 20 taxis.

The Mexican government is right to be hesitant to shut down Mexican businesses. The distance between a “normal” economy and grinding poverty is a lot smaller in Mexico than in a wealthy country like the United States or Germany. While mandatory lockdowns in rich countries will cause mass impoverishment—complete with all the usual mental and physical health problems that accompany it—the stakes are even higher in a middle-income country like Mexico.

Moreover, many Mexicans are already suffering from the mandatory shutdowns in the US. In 2019, for example, Mexicans working in the United States sent more than $39 billion back to Mexico. This is a vital lifeline for many Mexicans, and these remittances are likely to be decimated by the government-forced shutdown.

The Financial Times continues:

Balancing the competing needs to keep citizens healthy without devastating the economy is particularly tricky in Mexico….almost 50 per cent of Mexicans live below the poverty line, another 30 per cent are vulnerable to sinking into poverty and 30m work in the informal sector, where they receive no social benefits.

What Mexico Learned from the H1N1 Panic

This isn’t the first time Mexicans have been commanded to lock down their economy to battle a disease.

During the H1N1 pandemic of 2009, Mexican officials closed schools for a week, locked down various businesses, canceled movies, concerts, soccer games, and “virtually forced the entire population to wear ineffective face masks.” Mexico experienced 390 deaths out of a population of 120 million.

This had devastating effects for Mexico’s economy, especially its tourist industry. According to the Atlantic Council:

The cost of the pandemic was estimated at 1 percent of Mexico’s GDP in 2008….The A(H1N1) outbreak particularly impacted tourism—an important component of the Mexican economy due to its magnitude and its importance as a source of foreign currency; the tourism industry lost an average of 80 percent of its sales. After the first weeks of the quarantine, 90 percent of the country’s hotel and transportation reservations were canceled, along with 290 cruise ship arrivals. It was estimated that in 2009, Mexico lost $3.4 billion from touristic activities due to the pandemic.

In the immediate aftermath, the Mexican government was praised and congratulated for its actions, but many later admitted the Mexican government had overreacted. According to Jorge Castañeda Gutman, former Mexican Secretary of Foreign Affairs,

One year later the WHO acknowledged it had exaggerated, and the Mexican government was moderately criticized for the type of measures it took….The government didn’t know, or didn’t acknowledge, that this response would prove to be undoubtedly more onerous for the country than the epidemic itself.

This disastrous impact on the Mexican economy informs the debate today in Mexico. According to Physician’s Weekly,

The lesson is not lost on the officials running Mexico’s response in 2020, many of whom were also involved in fighting the influenza epidemic. Mexico’s economy last year suffered its first recession since 2009. [Deputy Health Minister Hugo] Lopez-Gatell said on [March 17] countries around the world were repeating Mexico’s mistake in 2009, making decisions based on anxiety and social pressure rather than science….The lesson from the flu epidemic is that acting too soon is counterproductive, he said. “Acting responsibly, we can’t and should not take measures that exhaust our society. Let’s not use up all the interventions too soon. Let’s keep our calm.”

With the implementation of last week’s order, the business shutdowns have now begun. Unemployment will soon follow, but it’s unclear how many Mexicans can sit at home and wait things out. Many will be forced in the the informal economy to bring in at least a little income. Since far fewer Mexicans than Americans have jobs that lend themselves to “working at home,” keeping food on the table will require flouting demands that Mexicans practice “social distancing.”

This isn’t the say things are proceeding as normal. At least one study claims ridership on public transport in Mexico has fallen by 50 percent, and traffic congestion has fallen by even more. But even big declines in usually traffic-choked Mexico City hardly signal a situation in which streets are deserted.

How many will studiously avoid human contact outside the home? Mexican business and political culture suggests many will not. The number of annual hours worked per worker is higher in Mexico than any other country.  Moreover, according to Castañeda, Mexicans react with “skepticism with regard to anything derived from government,” and this “individualistic, incredulous attitude” applies to public health orders as well.

It may be that many Mexicans will fear COVID-19 more than they feared H1N1. But in Mexico, many are also familiar with the hardships poverty brings, and fear of being destitute may trump fears about the disease. Although wealthy Americans with secure employment and luxurious lifestyles like Anthony Fauci continue to insist mass unemployment is merely “inconvenient,” few Mexicans have the luxury of such blasé thinking.

Four and a half years ago, the New York Times published a feature about a man named George Bell, a Queens resident who died anonymously in his apartment, and whose body, after going unclaimed for several months, was eventually interred at the potter’s field on Hart Island, in the Bronx, where all of NYC’s unclaimed bodies are eventually buried.

They say more than 1 million bodies have been buried on the island since shortly before the Civil War, when the city started using it as a burial ground. And now, dozens of patients who succumbed to COVID-19 will likely be buried there too as the city accelerates its potter’s field burials as morgues and funeral homes fill up.

By now, Americans have probably seen photos of the makeshift morgues set up in ice trucks, and the hospital tents set up around the city as it battles the virus. The city has already buried some coronavirus victims on the island, and is planning more burials in the coming days. Though to be sure not all of those expected to be buried died of COVID-19.

“It is likely that people who have passed away from (coronavirus)…will be buried on the island in the coming days,” New York City Mayor Press Secretary Freddi Goldstein told CNN.

Instead of waiting two months to transfer an unclaimed body to the island, the city has sped up the amount of time it will hold a body to 2 weeks.

Usually, about 25 people are buried on the island every week. But since the virus landed, that pace has accelerated to 25 a day, the city said. NYC has also said it plans to bury some victims in local city parks, a plan that was widely mocked for its ghoulishness by New Yorkers.

Deaths across the state – but in the city especially – have been piling up in recent days, as Gov. Cuomo showed earlier.

A city spokesperson added that as long as contact with a family member has been made, a body will be kept, even if it’s just a verbal claim.

Via AdventuresInCapitalism.com,

Last week, we got news that Carnival became the first of many large corporations to aggressively dilute shareholders after a decade of reckless financial engineering.

Visual Representation of the CCL Cap Structure…

Before discussing this malfeasance of capital structure management, let’s rewind three decades.

Excluding brief periods of exuberance at the end of the 1920s and 1960s most public companies historically were staid organizations – they grew a few percent a year and paid out some of their profits in dividends. Boards of directors were mainly recruited from large shareholders who were more focused on sustainability than quarterly numbers or pushing the share price. Sure, there were outliers, there were guys doing crazy things, but a large portion of corporate America was focused on building long-term wealth for the large shareholders (often the families who controlled these businesses).

Then came Mike Milken and his cohort of extortioners and restructuring artists.

Don’t get me wrong, by the 1980s, many US corporations had grown fat and a bit lazy—a good shake-up was needed, but the following generation of financial engineers took things too far. I’m all about improving returns on assets (ROA)—my gripe is that the focus then shifted to returns on equity (ROE).

Here’s a simple exercise, take a mediocre business, add ten turns of leverage and then marvel at how amazing the returns to equity are. For the past generation, every corporate executive has undertaken a similar exercise and congratulated themselves on the results. For the holdouts who refused to lever up, there was a wolf-pack of hedge funds ready to pounce and educate them on why returning too much capital to shareholders was necessary. Is it any wonder that corporate balance sheets are such a mess today? Like a wounded gazelle, if your leverage ratios were low, you were pounced upon and told to lever up.

Coming out of the GFC, Boards of Directors tasked every CFO with a simple mission; figure out how much excess liquidity they’ll need if there’s another GFC that is 50% worse.

What does 50% worse mean? Who cares – CFOs built models and created numbers that were agreed upon. The models mostly looked at how deeply earnings could decline.

Not a single model looked at what would happen if revenue stopped. As a result, there was no rainy-day fund. There was no excess capital beyond a revolver that lasts only a few weeks at best.

What should have been excess cash reserves were squandered long ago on buybacks at all-time high multiples.

As we come out of this COVID-19 crisis, I suspect that Directors will demand larger liquidity buffers.

How much of a buffer? What if you need six months of op-ex in cash on the balance sheet? What if Directors demand Japan style balance sheets? What happens when you take leverage down at most corporations? You end up with middling ROEs and reduced valuations (like in Japan). I suspect that ROEs across corporate America are going to converge towards a new and much lower level. Think of the lesson from Carnival; if you spent a decade buying back stock and then dilute down 80%, have you created any value for anyone?

You think the Carnival execs will want to see their cost of capital do this again anytime soon? (note The Fed’s HY bond rescue)

I think a lot of corporations are about to have some real soul searching after they undertake similar exercises. If you’re a shareholder in an industry with terrible asset-level returns (think of your typical property REIT or pipeline MLP for instance), made palatable by high leverage, you may want to stop and think a bit about how the economics will look when leverage drops precipitously. You may be surprised at just how dramatically the ROE also declines. Conversely, industries that have been plagued by oversupply may now have a moment with reduced competition as companies focus on balance sheet repair instead of growth at any cost.

As the balance sheets of the world are reshaped, there will be winners and losers. You’d be foolish if you aren’t thinking about how capital structure evolution will impact your portfolio. I guarantee you, as you are reading this, Boards of Directors are re-reading their D&O policies and then thinking deeply about the balance sheet…

More stunning drone video has surfaced on YouTube from account Mingomatic that shows residents of Jersey City, New Jersey, avoiding public areas and sheltering-at-home amid the COVID-19 pandemic.

Before we show the video, let’s take a look at changes in the travel of New Jersey residents in the Hudson County area, where Jersey City is located, have been graded an “A-” by “Social Distancing Scoreboard,” which tracks the GPS location of smartphones in a geographical area, to make sure people are abiding by the government enforced public health order. 

In the chart below, the stay-at-home public health order was issued by the state around March 10, which is the point on the chart where changes in average mobility in the county declined. By March 20, confirmed cases and deaths erupted as residents remain confined to their homes.

The drone flyover of Jersey City is quite a remarkable sight. Streets are absent of life, and it’s almost like “I see no people,” instead of “I see dead people,” which was a phrase made famous by the 1999 movie The Sixth Sense. In terms of other films, Jersey City on Tuesday looked like a scene from Will Smith’s I Am Legend movie, a post-apocalyptic world blown up by a virus outbreak, with most of the movie set in New York City.

When financial crises strike, some funds – such as Mark Spitznagel’s Universa which spend “all their time thinking about looming disaster” – make a killing, in this case returning a staggering 3,612% in the dismal for most month of March,  after suffering thousands of little cuts over the past decade in anticipation for the inevitable “fat tail” event, while hoping its LPs will be patient enough as well. And then there are funds which are totally unprepared for the sheer chaos that unfolds in days, if not hours and minutes, after years of peacefully collecting pennies in front of a Fed-driven steamroller and without a care in the world about the future.

An example of the latter is “risk parity”, the group of funds which is basically a levered bet on the Fed’s continued dominance of capital markets, i.e., propping up both stock and bond prices in perpetuation of the biggest asset bubble ever, and which largely imitates a “balanced fund” approach of 60/40 long bonds and stocks. While this strategy works when all assets are rising, as they did for the most part since the Global Financial Crisis, it goes spectacularly wrong when the strategy goes haywire, as it did in March when both stocks and bonds were trampled for a few days, resulting in unprecedented losses as the following chart showing the Advanced Research Risk Parity Index shows.

We previously reported that the world’s most famous risk parity fund, Ray Dalio’s Bridgewater’s All Weather fund, suffered dramatic losses and tumbling as much as 14% through the first half of March, not long after Dalio infamously said that “cash is trash.” However what is less known is that another major quant fund which is heavy into risk parity (and occasionally dabbles in HFT but pretends not to), Cliff Asness’ AQR Capital, appears to have had a far more painful start to the year.

The reason: after reporting some $186 billion in assets under management as recently as January as the following wayback machine snapshot shows…

… the AUM amount has since plunged to just $143 billion as of the fund’s latest update, a staggering $43 billion loss.

To be sure, it is unclear just how much of the fund’s massive 23% YTD drop in assets is the result of losses versus investor redemptions, or what percentage of the AUM decline is the result of risk-parity strategies gone wrong, but a quick look at the performance of the AQR Risk Parity II HV open-end fund shows that whereas the rest of the risk-parity sector managed to recover much of its early March losses, AQR surprisingly has not.

Furthermore, while the AQR website has blamed the terrible returns on the coronavirus pandemic which has shut down the global economy and batters the stock market, unfortunately for the fund’s notorious outspoken and volatile boss, Cliff Asness, 53, AQR has long been suffering from redemptions amid sagging performance well before the current coronavirus black swan (or black bat) event, which incidentally a “hedge” fund should have perhaps hedged against… something which as Universa showed, can be done.

As the NY Post reports, the firm’s Multi-Strategy Alternative fund is down 22% this year following declines of 10% in 2019, and a surge in redemptions; meanwhile its Small-Cap Multi-Style fund, which was up 20% last year, has given up all gains and then some, and is now down 29%.

While investors across the board have gotten hammered this year – because nobody could possible predict that stocks at all time highs in February could possibly go down – industry watchers – correctly – told the NY Post that the declines at AQR, which manages both hedge funds and traditional stock and bond funds, stand out.

“That’s pretty terrible”, one hedge fund manager told The Post. “Things are bad out there, but $43 billion is a death signal.”

But not for Asness. The firm’s twitter-trolling boss, known among other things for defending high frequency traders (despite their proven passion to frontrun ordinary investors, something his former head of trading Hitesh Mittal was surely aware of), for claiming stock buybacks  don’t artificially prop up stock prices (we wonder if his view has changed now that even his former employer Goldman has warned of a “significant” adverse impact on stocks as 2020 buybacks are cut in half), for slamming critics on twitter, for smashing computer screens on his Greenwich trading floor (but only when the screens “deserved it”), “has scowled in the face of redemption threats before” (although back then he was managing more than $225 billion, some 60% more than he does now).

As the Post recounts, citing a Nov. 2018 Institutional Investor report, Asness lashed out at a Twitter critic who claimed to be an AQR investor: “Please redeem now as I find posturing fools in our funds ‘beyond concerning.’ Bye bye.”

He also dismissed the critic who called one of Asness’ expletive-laden tweet storms “beyond concerning as a fiduciary and as one of your investors” as a “fake investor.”

Yet even as his funds foundered, instead of bothering to figure out what he did wrong, Asness – who remains resolutely confident that it is the market that is wrong, not him (although we are confident he will be supremely delighted with the Fed’s latest gargantuan bailout of all speculators himself included ) – saying in a 2019 conference that he would “stick like grim death to his beliefs“, blaming the fund’s continued underperformance not on “strategy” but an “intuition” problem, was more focused on proving to his twitter followers how cool he is, and in a recent tweet rushed to the defense of fellow hedgie Bill Ackman in response to a New York Post column accusing wealthy hedge fund managers like Ackman of making profits off the virus.

“I don’t know Ackman,” Asness tweeted on March 27. “But this is a particularly idiotic hit piece.”

That said, even before the corona-crisis struck, in January AQR cut staff for the second straight year, eliminating up to 10% of its workers, as investors redeemed funds in the wake of 2019’s sagging results, which pulled the fund’s assets to $185 billion… before tumbling to just $143 billion most recently, the lowest in five years.

There is some good news: “AQR has no layoffs planned for the second quarter of 2020,” a spokesperson from AQR told The Post (the third and fourth quarter were left open); That said we are confident that spokesman was not Asness who instead took the “high road” again and did what he does best: responded in furious fashion to the NY Post article, and instead of seeking to convince his LPs that the fund will eventually recover and maybe even turn a profit, wasted about an hour attacking the “hack of a journalist” who wrote the NY Post article…

Well this is fun: https://t.co/vgAmdwmxHF

Where to begin?

First, I won’t be engaging with the hack #journalist (late of deal breaker and business insider who finally made it to the brass ring for liars, the NY Post).

Life does suck for our business right now.

— Clifford Asness (@CliffordAsness) April 9, 2020

… demonstrating again that any hopes of a quick turnaround at AQR are misguided, and that perhaps this one time “reports of AQR’s death” won’t be exaggerated.

Authored by Steve Watson via Summit News,

Former Congressman Ron Paul has called on President Trump to fire Dr. Anthony Fauci, the administration’s senior scientific advisor on the coronavirus task force.

Paul, who has regularly expressed his reservations over allowing the government to enforce a lockdown, says Fauci needs to be stopped before he is given “total control” over the American people.

“He should be fired, but if you don’t do it in the literal sense, the people have to fire him,” Paul said, adding “They have to fire him by saying ‘he’s a fraud.’”

“The plan that they have is when things are getting back to normal, people can return to their work, and they do things, and go to the golf course if they get a stamp of approval,” Paul continued.

“Your liberties are there if you get a proper stamp from the government. It’s an excuse to have total control over the people,” Paul urged.

Fauci Should Be Fired

If Not By Trump, Then By The American People

Watch the whole show: https://t.co/R0BxsKHghJ pic.twitter.com/s66hlzgPrK

— Ron Paul (@RonPaul) April 9, 2020

Fauci, the director of the National Institute of Allergy and Infectious Diseases, said this week that Americans probably should never shake hands again.

“When you gradually come back, you don’t jump into it with both feet. You say, what are the things you could still do and still approach normal? One of them is absolute compulsive hand-washing. The other is you don’t ever shake anybody’s hands.” Fauci told the Wall Street Journal.

“I don’t think we should ever shake hands ever again, to be honest with you. Not only would it be good to prevent coronavirus disease; it probably would decrease instances of influenza dramatically in this country,” Fauci added.

Fauci, who has warned that the virus could kill up to 200,000 Americans, previously said that the United States will not come out of lockdown until there are no “new cases” of coronavirus.

It was an about turn from the doctor’s earlier downplaying of the virus, when he initially claimed that COVID-19 was comparable to a bad flu.

Some have warned that Fauci, as well as his task force colleague Dr. Deborah Birx, both have questionable big money conflicts of interest where solutions to the coronavirus pandemic are concerned.

A few days ago, we reported that Australian authorities had launched a criminal probe into Carnival, the world’s largest travel company, over its handling of the “Ruby Princess”, a cruise ship that became a floating death trap, then contributed greatly to spreading the novel coronavirus across Australia as hundreds of infected passengers were allowed to disembark, fifteen of whom later died.

While Carnival has tried to play down the criminal investigation by insisting that it would cooperate with Australian authorities, prosecutors in the country have made it clear that this is an extremely serious issue: Australian police have put together a 30-person team under the leadership of an experienced homicide detective to investigate the ship and its corporate parent.

On Friday, the Washington Post published an extensive investigation exposing what appears to be unconscionable negligence on the part of Carnival and the ship’s management.

On Thursday, detectives wearing head-to-foot protective clothing raided the “Ruby Princess”, seizing evidence in the form of documents and data, including the voyage data recorder that records conversations on the bridge.

In what has become a depressingly familiar narrative of carelessness and neglect, one of WaPo’s sources said that despite the international catastrophe unfolding around them, little effort was taken by the ship’s crew to keep passengers separated. Measures that were taken, including “health questionnaires” that kept some international passengers from boarding, were almost laughably inadequate in hindsight.

What’s almost worse, is that patients who complained about what ended up being COVID-19 symptoms were charged outrageous amounts of money for basic medication like advil and cough medicine. One passenger who nearly succumbed to a case of COVID-19 she acquired on board the ship was charged $300 for cough medicine and headache pills that probably cost less than $5 at a pharmacy. Talk about price gouging…

When Kiri-Lee Ryder, 41, complained to the ship’s medical team at 1 a.m. one day that she was suffering body aches and severe headaches, she was given headache pills and cough medicine, according to her mother, Carlene Brown. She was also charged about $300.

A week later, the Australian mother of three was diagnosed with covid-19. Ryder spent more than two weeks in intensive care, much of it in an induced coma. Before going under, she phoned her children and mother from the ward, which had banned all visitors.

“It’s silly, but she calls me mommy and she just said, ‘They are going to put me to sleep,'” Brown said in an interview. “And she wanted to say that she loved us. You could hear the struggle for breath in her voice.

“I said, ‘We love you darling, and we will see you when you wake up.'”

But even more alarming than the company’s negligence, was the willingness of passengers to totally disregard any semblance of responsible behavior once the ship’s management said that the odds of outbreak were very low (since the crew had purportedly been “tested” and passengers had been given those “health questionnaires”).

Unfortunately, that wasn’t the case, and 15 people are death because of this error in judgment. But it’s just another example of the extent to which people will believe what they want to believe – that they would be safe at sea while the virus raged on land – if given even the slightest pretext.

Several of WaPo’s sources described passengers failing to cover their mouths and noses when they sneezed, passengers crowding into over-full elevators. As one woman said – “people just didn’t care.”

Hunt, whose mother and father-in-law were infected, said she blamed her fellow passengers, many of whom did not realize that they could pass on the virus without showing symptoms.

“People were selfish and thought they were safe being away on a boat,” she said. “I had people sneeze all over me. I had people squeeze themselves into lifts that were already too full.

“At the end of the day, we knew what was going on around the world. We knew how quickly it spread in ships. People just didn’t care.”

A Princess cruises spokesman said anyone displaying covid-19 symptoms or who had been in contact with an infected person was not allowed on board and that crew members were tested by health authorities before the ship left.

“There was therefore no reason to believe there was covid-19 on the ship,” he said.

At the time, cruise ships worldwide did not conduct onboard covid-19 tests but were expected to provide swabs to health authorities for onshore testing, he added.

But unlike other incidents involving cruise ships, once the “Ruby Princess” returned to port, passengers were allowed to exit. Instead of the “thorough health screening” they were supposed to receive, they were reportedly given pamphlets explaining how to self-quarantine for 2 weeks. Many of those from Europe and the US couldn’t get on a plane right away and fly home. Many waited around in Sydney, renting hotel rooms, while they waited to catch a flight back home. One family that spoke to WaPo eventually flew back to Perth, a city in the far-west of Australia.

A day after they disembarked, the first 13 passengers tested positive, setting off a race to test hundreds of others. Four days after that, the first passengers started to die. Meanwhile, Carnival seemed to make a point of not informing customers that anybody on the ship had been sickened. When cases started to emerge, it took many by surprise.

The Ruby Princess arrived back in Sydney on March 19, three days early. Passengers were told they would be screened by state health officials, Hunt said. Instead, they were given a leaflet explaining how to isolate themselves for two weeks.

Many could not return home right away. About one-third were from the United States or Europe. Ryder and her family spent two days in a hotel, and then took a five-hour commercial flight to Perth.

It took five days after disembarking for the first passenger to die. Another who followed was 75-year-old Karla Lake, whose husband Graeme Lake accused Carnival of allowing passengers to believe they were not at risk.

“They made a point of not letting anyone know at all that anyone was sick,” he told Australia’s Seven television network. “Good as gold, we thought it’s fine.”

Local and federal authorities in Australia have traded blame over who was responsible for clearing the passengers to disembark that day in Sydney, but now that the criminal probe has been launched, it looks like responsibility will ultimately be borne by Carnival. While the government probably deserves some of the blame, it’s worth noting that the “Ruby Princess” response blighted what was otherwise praised as an effective response by the Australian government.

The ship’s former passengers represent the largest share of positive cases in the country, and the largest share of deaths. 15 passengers have died, and more than 660 have tested positive out of the 2,600+ passengers aboard. Australia has confirmed a total of ~6,200 cases and 55 deaths.

And now this company wants a bailout from the US government? We’ll let Chamath Palihapitiya explain why this is such a bad idea.

Carnival is definitely in hot water, a fact that was reflected by a recent move higher in CDS spreads as the cost of insuring Carnival corporate debt against default soared, before legging lower again on Thursday after Jay Powell unveiled his plan to backstop the high-yield debt market.

Update (2115ET): Shortly after completing this post, Apple and Google unveiled a rare partnership to add technology to their smartphone platforms that will alert users if they have come into contact with a person with Covid-19.

People must opt in to the system, but it has the potential to monitor about a third of the world’s population.

In this spirit of collaboration, Google and Apple are announcing a joint effort to enable the use of Bluetooth technology to help governments and health agencies reduce the spread of the virus, with user privacy and security central to the design.

In the coming months, the two tech giants will add the technology directly into their operating systems so this contact-tracing software works without having to download an app. Apple’s iOS and Google’s Android have about 3 billion users between them.

“All of us at Apple and Google believe there has never been a more important moment to work together to solve one of the world’s most pressing problems.”

Don’t worry though – they have “policies” on privacy…

Notably, while the technology will allow governments and health agencies to track contacts, it won’t notify users who they came into contact with, or where that happened.

And do not forget, this (opted-in) invasion of your privacy by the duopolist controllers of practically every wireless device in the world is for your own good…

“…we hope to harness the power of technology to help countries around the world slow the spread of COVID‑19 and accelerate the return of everyday life.“

*  *  *

Authored by Alan Macleod via MintPressNews.com,

In the fight against COVID–19 (coronavirus), Google has announced it is partnering with dozens of governments around the world, sharing its users’ location history, and, in the process, giving us an insight into how much the Silicon Valley company knows about us.

“As global communities respond to COVID-19, we’ve heard from public health officials that the same type of aggregated, anonymized insights we use in products such as Google Maps could be helpful as they make critical decisions to combat COVID-19,” it wrote, presenting its mountain of intrusive data collection as a positive.

“We hope these reports will help support decisions about how to manage the COVID-19 pandemic,” it added, suggesting that location data from its users’ devices could “help officials understand changes in essential trips,” inform businesses and help local governments plan and provide more efficient transport services, thus limiting the deadly virus’ spread.

The data it has released, even to the public, is certainly interesting (and quite worrying). For example, location data gleaned from smartphones shows that there are now 85 percent fewer trips to grocery or pharmacy stores in Italy, compared to early February, before the coronavirus struck the country. Italy went on extensive lockdown, and Google’s data shows it. Retail and recreation visits are down 94 percent, trips to parks are down 90 percent, transit stations 87 percent. The country’s infection curve appears to finally be flattening. In contrast, American retail and recreation visits are only down 47 percent, grocery and pharmacy visits 22 percent, parks 19 percent and transit stations 51 percent, suggesting American people are not staying at home nearly enough to dampen the flames of the virus.

Google insists that its new policy will not breach users’ privacy, promising to “adhere to our stringent privacy protocols and protecting people’s privacy. No personally identifiable information,” it claims “will be made available at any point.” This has not reassured everybody. MintPress News spoke to one advertising executive who rolled his eyes at the announcement.

“Your name is only one data point,” they said, noting that “The layers and layers of information you’re giving it,” like where you live, what your interests are, and which person’s social media accounts you keep frequenting (your own), make it beyond easy to identify whose data you are looking at. “It’s you whether you like it or not, even if you’re name’s not attached to it,” they said.

Non-profit civil liberties group the Electronic Frontier Foundation expressed some concern over the news, too. Although they recognized that the data Google holds could help the fight against COVID-19, they cautioned that consent should be required before data is used and the process must be transparent. “Experts will often be working within private companies with proprietary access to the data. Even if they make all the right choices, the public needs to be able to review these choices because the companies are sharing the public’s data,” they said, calling on Google to release its full methodology.

Whistleblower and privacy advocate Edward Snowden went further, claiming in an interview last month, “there’s not really any hard evidence that this does work.” “This is not GPS on your phone” they are using, he said, claiming that, as long as it was not in airplane mode, some data would be captured whether you consent or not. Technology site The Verge, however, wrote that the data is gleaned only from users who have already opted into storing their location history. Thus, if users disable their location history, this should prevent them from the majority of the tracking.

Technology allows for the monitoring of individuals to better regulate stay at home orders. However, this opens up new possibilities for authoritarian regimes. Israelis who violate quarantining are now subject to up to seven years in prison, and location data could be used against individuals. It would be something to be sent to jail because your phone ratted on you talking a walk. Furthermore, given the country’s history of racist law enforcement, the law has the potential for serious abuse.

Google’s move is merely the latest in a long line linking big tech companies ever more closely with the government and the security state. In their book titled, “The New Digital Age: Reshaping the Future of People, Nations and Business,” Eric Schmidt and fellow Google executive Jared Cohen wrote, “What Lockheed Martin was to the twentieth century…technology and cyber-security companies [like Google] will be to the twenty-first.”

In 2018 Facebook announced it was partnering with the Atlantic Council to help them weed out fake news on its platforms. An offshoot of NATO, the Council is run by dozens of senior former government officials, including Henry Kissinger, Colin Powell and Condoleezza Rice, and numerous former heads of the CIA, including Michael Hayden, Leon Panetta, and Michael Morell. Since working with the Council, Facebook has moved quickly to suppress information and views emanating from Washington’s enemies, including the governments of Russia and Venezuela. And when Trump assassinated Iranian General Qassem Soleimani, Facebook banned all messages of support for the slain statesman, despite the fact that he was popular with over 80 percent of his countryfolk. Facebook explained the decision, noting they were not a neutral service provider but an American company that operates under American laws, and when Trump declares anyone a terrorist, they will comply.

Although Google’s latest use for our data is arguably the only occurrence of it being used to help humanity rather than relentlessly advertising to it, it still has worrying ramifications. Snowden warned that new laws infringing on civil liberties tend to be “sticky,” i.e. very hard to get rid of. Funding both political parties and paid billions by the government and the security state for military contracts, it is increasingly difficult to see where big tech companies like Google end and the government begins.

Perhaps Schmidt and Cohen’s prophecy was correct.

Now that the Fed has effectively nationalized the bond market (don’t worry, stocks are next, it’s just a matter of time) which all the way down through junk bond issues and CLO tranches will no longer reflect the underlying fundamentals but merely what mood the Fed is in on any given day, and where it it tells Blackrock to close the market, the only thing that matters for traders is how to frontrun the Fed, so to make sure that the Fed’s helicopter paradrop is utilized by everyone in the most efficient way, here is a breakdown of everything the Fed will be buying to make sure the bond prices of fallen angels – firms which spent trillions on stock buybacks instead of even considering a downside case – trade near par even as the underlying cash flows drop near zero.

But first some background: the Fed’s revised, and massively expanded, Secondary Market Corporate Credit Facility – which now can purchase ‘fallen angel’ junk bonds – will now be funded with $25 billion of equity capital from the Treasury as opposed to $10 billion previously. The leverage on the equity will be 10x for IG-rated bonds, 7x for bonds below IG, and in a range of 3x to 7x for any other eligible asset. The scope of the facility was also expanded, and in what was the biggest news of Thursday, while it was originally targeted toward IG bonds from US issuers and US-listed IG ETFs, the facility can now also purchase:

1. BB-rated bonds of recent “fallen angels” so long as they were IG rated as of March 22, 2020, and
2. HY ETFs, although the “preponderance” of ETF holdings are expected to be IG.

Additionally, as Goldman notes, while the limits for bond and ETF purchases remain the same (10% of an issuer’s outstanding debt and 20% of ETF assets, respectively), a new comprehensive issuer limit was added: 1.5% of the combined potential size of the Primary and Secondary market facilities (which will be $750 billion, per the above), equating to $11.25 billion. The details on issuer eligibility were also expanded to include being “created or organized” in the United States and having the “majority” of employees based in the United States, which means that many foreign companies will find their bonds purchased under the Fed’s “loopholes.” Finally, the updated language also makes it clear that Banks are explicitly excluded, in addition to sectors receiving direct government support as part of the CARES Act.

Putting this together, Goldman estimates that the potential size of the eligible universe of bonds under the revised criteria at $1.8 trillion.

And here is the answer to everyone’s question: with the Fed not yet buying stocks, what is the next best thing to buy in frontrunning the Fed that carries the highest possible return, and the answer of course is junk bond ETFs.

So after accounting for the above limits per issuers, the effective ceiling on purchases within the $1.8 trillion is $450 billion, in face value. For ETFs that have at least a 50% allocation to credit, the total assets under management before applying the 20% limit is $194 billion and $47 billion in IG and HY, respectively. The full list of US-listed investment grade and HY/junk bond ETFs that are eligible for Fed purchases, and which will almost certainly outperform non-Fed backstopped assets, is the following.

Looking at the list above, anything that has a negative total return YTD will put a frown on the Fed’s face, and only disproportional buying of said ETFs – with complete disregard for the underlying fundamentals because there is a reason why these ETFs, mostly consisting of junk bonds issued by private equity portfolio companies operating in the energy sector, got hammered in the first place – will turn the Fed’s frown upside down. 

Which begs the question: when will the industrious financial wizards at Blackrock, who incidentally are so conflicted they are executing the Fed’s purchases, put together an ETF consisting only of ETFs that are now purchased by the Fed? Because something tells us that particular ETF would do phenomenally well in the coming months as the US economy slides into a depression.

Amid some positive headlines from New York on the virus, and the potential for a deal between the G-20 and OPEC, it appears the risk-off sentiment of a long weekend is being taken out on cryptos for now (as almost the only asset trading in the world currently).

Bitcoin has been clubbed back below $7,000…

Source: Bloomberg

And the rest of the major altcoins have given up most of the week’s gains (Ethereum is still up around 10% on the week)…

Source: Bloomberg

But despite this puke, CoinTelegraph.com’s William Suberg reports that

There are more Bitcoin whales now than at any point in the past two years — and that mimics a trend from its 2016 halving, data shows.

In its latest Week On-Chain report on April 9, monitoring resource Glassnode revealed that current numbers of major Bitcoin investors are extremely similar to early 2016.

image courtesy of CoinTelegraph

Glassnode: whales see “room for growth”

Specifically, 30 days before Bitcoin’s 2020 halving, the number of entities holding at least 1,000 BTC ($6.92 million) is now just under 1,850. At the start of Q2 2016, several months before the previous halving, the number of such entities was almost exactly the same.

The almost uncanny resemblance between these two identical points in two Bitcoin halving cycles suggests that whales know the market well.

Glassnode summarized:

“This trend implies that despite an uncertain market environment, whales remain confident that now is a good time to be accumulating BTC, suggesting that they believe there is further room for growth.”

Bitcoin entities with 1,000 BTC or more. Source: Glassnode

Spotlight on accumulation, large and small

Comments from known whales appear to confirm the belief in future upside. Earlier this week, Bitfinex-based J0e007 delivered criticism of one Bitcoin price model which, he argued, was too optimistic about the speed at which the cryptocurrency would hit $100,000 or more.

At press time, BTC traded at around $6,900 – $300 lower year to date, having failed to hold support closer to $7,500 in line with expectations. 

Meanwhile, it is not just whales who are accumulating. Last month, Glassnode noted that wallets containing a balance of at least 1 BTC were seeing new highs. 

At the time, Cointelegraph cited in-house analyst Keith Wareing, who further believes that major miners will use lower prices to consolidate their positions and accumulate more BTC prior to the halving, scheduled for mid-May.

Additionally, Suberg reports that PlanB, the pseudonymous analyst behind the infamous stock-to-flow model, sees “nothing unusual” in the recent trading patterns:

“CME launched BTC futures Dec 2017. Many point to Dec 2017 ATH as proof futures have suppressed prices. But BTC prices stayed perfectly within S2F bands. I would have expected this to happen with or without futures. Nothing unusual.”

And adds that the current price mirrors the pre-$20K highs.

Stock-to-flow charts Bitcoin’s past and future price based on the interaction between “new” Bitcoins released to miners and the existing Bitcoins in circulation. The model has proven to be extremely efficient, despite facing continued criticism from industry figures.

Bitcoin stock-to-flow price chart as of April 7. Source: PlanB/ Twitter

Last week, the Twitter user known as J0e007, a large volume trader on exchange Bitfinex, described those who champion stock-to-flow as “thousands of muppets.”

Continuing, PlanB suggested that even Bitcoin’s run to current all-time highs of $20,000 and the subsequent bear market was not made worse by futures.

“Oct 2017 was at current $7k level. The introduction of futures sparked hope of massive institutional inflow (“the herd is coming”), and BTC jumped almost 3x to $20k in Dec 2017,” part of another post reads. 

“The herd never came and prices bounced back to $7k and have been oscillating there 2.5 yrs.”