Tag: finance

Authored by Daisy Luther via The Organic Prepper blog,

Did you ever think we’d reach the point in the United States where you had to have papers to freely travel from one place to another? It appears we’re at the point.

The MTA issued “travel papers” to their workers

On March 17th, a few days before New York issued a shelter in place order, the Metropolitan Transportation Authority issued “travel papers” to their employees to prepare for a potential coronavirus curfew. The NY Daily News reports:

If non-emergency travel is restricted, workers can show law enforcement officials the letter if they’re stopped on the way to work.

“This letter along with current New York CIty Transit identification identifies this individual as an essential employee who is required to travel during the curfew imposed due to the Coronavirus emergency,” states the letter, which is signed by the Metropolitan Transportation Authority’s Police Department’s acting chief Joseph McGrann. “Please give this individual due consideration during this crisis.”

MTA spokeswoman Abbey Collins said the letter was distributed on Monday to a “limited number of NYCT bus employees living in New Jersey” because the state’s Gov. Murphy suggested imposing a statewide curfew between 8 p.m. and 5 a.m. (source)

Clearly, the wheels have been in motion for several days. And it’s not just the MTA.

Your papers, please.

For everyone who thought the article about the Lockdown of America was a “hysterical overstatement” and that they could still do whatever they wanted because it wasn’t really being enforced, what are you thinking now that “travel papers” are being handed out? To me, this sounds like the lockdowns I wrote of yesterday were just the first incremental step toward a society that nobody hopes to see.

Yesterday, readers sent me photos of “travel papers” provided to them by employers so they could get to and from work. These are employees who work in industries like healthcare, pharmacies, and foodservice, as well as those who work in the production, transport, and sales of essential supplies.

One reader wrote, “We were told to show these if we got stopped on the way to or from work and that if the authorities gave us any trouble, to not argue and just go back home.”

Here are some of the papers that people sent. Identifying information has been redacted.

Papers that people sent were from Pennsylvania, New York, Arizona, Michigan, North Carolina, Kansas, New Jersey, West Virginia, Virginia, Oregon, Florida, Louisiana, and Ohio. Industries mentioned in the papers were trucking, grocery stores, medical clinics, hospitals, nursing homes, city transit workers, railroads, food production plants, pharmacies, gas stations, stores like Target and Walmart, and automotive repair facilities.

Most people were given their papers on Friday or Saturday and told they’d need them to get to and from work starting the week ahead.

I wonder who’s going to be checking your “travel papers.”  Will it be the local PD? The National Guard? The military? Maybe it’ll be all those TSA agents who are currently out of work but already accustomed to molesting innocent travelers.

What does this mean for those told they’d be able to go to the store?

We’ve been repeatedly told during task force press conferences that nobody needs to worry about buying extra supplies because the stores will remain open. We were chastised about stocking up and “hoarding” supplies. But if you need travel papers just to get to work, how will a person get to the store when they need to pick up some groceries? Will these papers only be required during certain hours?

It’s easy to prove you just went to the store when you have a bag of groceries in hand, but how do you prove you are going to the store? Will they just begin distributing the food to us as opposed to allowing people to shop for their own food?

A little clarity and less subterfuge would go a lot further toward preventing concern that we’re about to go full Wuhan here in America.

If I didn’t have supplies already, I would head to the store today and get enough for a couple of extra weeks at the very least. Here are some ideas for finding supplies amidst the picked-over inventory that remains.

So, what happens if you get caught without your papers? I’m glad you asked.

It seems like the DoJ is itching to suspend the Constitution.

At this point, the “Department of Justice” sounds like one of those other phrases the government uses to mean the complete opposite. Like the “Patriot Act” which is as far from patriotic as it gets.

And speaking of the Patriot Act, the government is now introducing what I’d like to dub the Pandemic Patriot Act 2.0.

The DoJ has secretly asked Congress to draft legislation allowing them to indefinitely detain people without due process during the coronavirus pandemic. Because who doesn’t want to add a little spice to our economic crisis with the added threat of indefinite detention?

Documents reviewed by POLITICO detail the department’s requests to lawmakers on a host of topics, including the statute of limitations, asylum and the way court hearings are conducted. POLITICO also reviewed and previously reported on documents seeking the authority to extend deadlines on merger reviews and prosecutions…

…In one of the documents, the department proposed that Congress grant the attorney general power to ask the chief judge of any district court to pause court proceedings “whenever the district court is fully or partially closed by virtue of any natural disaster, civil disobedience, or other emergency situation.”

The proposal would also grant those top judges broad authority to pause court proceedings during emergencies. It would apply to “any statutes or rules of procedure otherwise affecting pre-arrest, post-arrest, pre-trial, trial, and post-trial procedures in criminal and juvenile proceedings and all civil process and proceedings,” according to draft legislative language the department shared with Congress. In making the case for the change, the DOJ document wrote that individual judges can currently pause proceedings during emergencies, but that their proposal would make sure all judges in any particular district could handle emergencies “in a consistent manner.” (source)

What the heck are “pre-arrest” procedures, anyway? Is that the part where government investigators go and set someone up to commit a crime like all those “bombing plots” the FBI keeps saving us from?

I wouldn’t be surprised to see another 300-page legislation like the original Patriot Act that was rolled out just weeks after 911, giving us the TSA, indefinite detention, and all sorts of other dystopian nonsense.

Never let a serious crisis go to waste.

In the infamous words of Rahm Emmanuel, the former mayor of Chicago, “You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.”

It looks like the government is taking those words to heart with travel papers and new draconian laws.

Since I wrote the article about America locking down yesterday, more states have joined in. Now New York, California, Illinois, Connecticut, and New Jersey are all under restriction.

Is your state coming soon? Are these lockdowns being rolled out incrementally, starting out gently (sure you can walk your dog!) and then moving on to the point where you can’t leave your house without “travel papers?”

So far, 2020 has brought us an out-of-control deadly pandemic, an economic collapse, statewide lockdowns, and now travel papers and a potential new law to eradicate the Fifth Amendment.

I hesitate to ask what’s next.

Though his silvery mane and piercing blue eyes have helped to make him an instantly recognizable figure in the financial press, most American retirees probably know Bill Ackman as that lunatic who recently inspired their terrified in-laws to liquidate their 401(k)s before the market tumbled into the abyss.

Ackman’s oddly poignant “Hell is Coming” speech will likely be remembered during retellings of the coronavirus market rout of 2020, if not for its surprisingly forceful impact (which remains a subject of debate), but for the many bizarre claims made by Ackman, including his comment about having had a ‘vision’ of COVID-19’s destructive potential.

At the time, some accused Ackman of trying to scare mom-and-pop investors into selling so he could scoop up shares of Starbucks, RBI and several other long plays at better prices. And during an interview with Bloomberg on Monday, the hedge fund investor sounded curiously optimistic, claiming that he had closed his shorts and was ‘100% long’, betting on a recovery, even as the market has moved lower since his “Hell is Coming” remark.

The activist investor said during the interview that his firm, Pershing Square Capital Management, had made a $2.5 billion “recovery bet” on the economy, investing entirely in stocks.

Though he said valuations on some of his favorite plays like Chipotle were “crazy”, Ackman argued that some badly beaten companies, including Hilton and Boeing, were guaranteed winners. Of course, Ackman has been wrong about similar bets before.

Sounding suspiciously similar to his old pal’ “uncle” Carl Icahn, Ackman insisted  “that’s the most bullish thing we’ve done. We are all long, no shorts, you know, ‘betting on the country.

As the markets and the press punish the White House for dithering on the coronavirus rescue package, Ackman sounded almost naively confident in the Trump Administration and the capacity to minimize economic damage. 

“I built a lot of confidence over the last week that the president and his team are heading in the right direction,” Ackman said, adding that he had know ‘inside knowledge’ of any administration decision.

So far as anybody cares, the fundamentals of Hilton and other ‘travel’ stocks remain “strong”, Ackman said.

“If you can buy Hilton at $60 when it was trading at almost $120, it’s going to be a bargain,” he said.

Boeing has seen a slight bump thanks to Goldman Sachs analysts calling the bottom. It appears Ackman feels the same.

“If Buffett will do it, I don’t think the Treasury Secretary should,” Ackman said.

Watch a clip below:

Via InternationalMan.com,

Panicked people are emptying supermarket shelves and stockpiling toilet paper. Hand sanitizer is impossible to find anywhere.

Is the impact of the fear and hysteria greater than the risk of the virus itself?

Doug Casey: Yes, very much so.

• The virus itself is what we can call a first-order effect. I don’t want to spend much time talking about the flu itself because, even though worst-case numbers like a million deaths in the US are tossed around, it’s not the biggest problem.

• The second-order effects – like the economy shutting down from hysteria – are actually much more serious.

• The third-order effects – new laws and state action – will have the longest-lasting consequences. We can talk about them in a minute.

As far as the virus itself is concerned, I’m sure everybody has read lots of articles and listened to podcasts from experts. So knowledge—such as it is—about the virus is fairly widespread. Except very little is certain, even now. FWIW, I say that as a lifetime science aficionado, reading in many areas of science for years.

Just in the last generation, we’ve had hantavirus, the bird flu, swine flu, Zika, West Nile, MERS, SARS, and H1N1. We’ve also had anthrax—which everybody’s forgotten about. Of course, it’s a bacterial infection as opposed to a viral one. They’ve all had their day in the dark sun of mass hysteria.

The point I’m making is that there are thousands of viruses floating around. They mutate constantly. Most of them pass through the population and go viral, so to speak—and we never even notice that they exist.

Now this one is said to be ten times worse in terms of death rate than a normal flu. Is that true? It seems that if you get it, your odds of dying are much worse but still minimal. Normal seasonal cases of the flu kill maybe 50,000 people a year in the US. But we don’t even notice that.

So what’s the worst-case scenario regarding this virus?

Nobody really knows because it is a new virus. They’re still figuring it out, but maybe between 1% and 2% of the people who get it will die, mostly the old, the sick, and the obese. If you’re in one of those categories, you should take it very seriously.

The interesting thing about this virus is that very few have died so far, anywhere; the numbers would have been unnoticeable outside of the media hysteria. Not even a rounding error on a rounding error. The important thing is that it’s said to be spreading exponentially, doubling every three days or so. So maybe things will change radically in a week. Or not. It’s said at least 50% of the US population will get it, although 80% of them will be completely asymptomatic.

If you read all the conflicting reports from China, Italy, and other places, it’s pretty clear we don’t know much. There’s just one thing for absolutely certain: The world has been gripped by a genuinely titanic and insane hysteria.

Anyway, even the worst case from first-order effects – people dying – is being dwarfed by the second- and third-order effects. The important thing about this virus is not the first order of effects—people that it kills directly. It’s the consequences of the hysteria that it’s causing.

That’s what’s really serious.

International Man: What are the secondary or tertiary effects of the coronavirus?

Doug Casey: We just talked about the first-order effects of the virus. Death for a relatively small number of people. An unfortunate part of life on this planet.

Let’s talk about second-order effects. What the virus – or rather the hysteria surrounding it – is doing to people’s livelihoods.

Airlines are shut down. An airliner, all in, costs them $10,000 a day, whether they use it or not. Same, to some degree, for hotels. A restaurant closes down, but the owner still has to pay his mortgage. And the staff mostly lives on tips. How are they going to pay the rent—and if they don’t, then how’s the landlord going to pay his mortgage? The consequences of businesses shutting down, and going bust, are just huge.

For many years, the US has been what’s called a “service economy.” Most people don’t produce actual hard goods like houses, cars, food, and raw materials. We mostly do services. It’s a so-called “consumer economy.” A rather stupid concept actually—the term takes the emphasis off production and puts it on consumption.

When you have a depression, what happens?

Consumers cut back consumption to the very barest basics.

Services are the first to go. Hospitality and travel alone is supposedly ten percent of the world’s economy. People will now keep their cars for years, and maybe, sell the spare car. Forget about new wardrobes. The clothing and fashion businesses get slammed. Everyone will try to sell their big showy houses and get something practical.

Distortions cranked into the economy by decades of money printing are going to be liquidated. Everybody is going to cut back to the basics. A lot of people are going to have to find new ways to support themselves.

It’s especially serious since, it’s said, most of America is one paycheck away from not being able to buy the next meal. Plus, they have lots of debt—which is somebody else’s asset. Counterparty risk is a big deal.

The collapse of the stock market isn’t just tagging speculators. Most older people don’t have enough savings for retirement, and most of what they have is in the market. Will they lose their homes, and wind up eating cat food? Poverty, not flu, is what really kills masses of people. This is why these second-order effects are so important.

The hysteria is unnecessary and foolish. But sometimes hysterias seem to come out of nowhere, like the witch crazes of the 17th century. Did the economy shut down for any of the past viruses that I mentioned?

The answer is no—not even for the Spanish flu, which was largely forgotten until just now. Now, that was serious. It was a chaotic wartime environment, and medicine was primitive—we didn’t even know viruses existed.

Now, as was probably the case in 1918, almost everybody is going to wind up getting the flu because the flu is a virus. By definition, it goes viral.

The main reason given for shutting down everything is to “flatten the curve”, so the numbers don’t spike and overwhelm hospitals. If you’re a serious casualty, you can go to a hospital. But, frankly, they can do nothing for you, except put you on a ventilator, and hope that gives you time to recover. It’s said there are about 150,000 in the US, and you may need it for five or six days.

But life goes on, and the economy will recover.

More serious than the first-order or second-order effects are third-order effects.

In other words, what the government is going to do. For one thing, they’ll probably set up a new national health regulatory agency, and/or give the FDA new powers. Bad move. The FDA is to medicine what Amtrak is to railroads. It should be renamed the Federal Death Authority since it probably kills more people every year than the Defense Department does in the typical decade.

Governments all around the world are putting in onerous new laws and regulations about travel, movement, and business. These things have to be paid for, which means higher taxes. But that’s almost impossible in a collapsing economy. So, not just the Americans—everybody is going to print up boatloads of new money.

Because so many people have no savings and are living from paycheck to paycheck, it’s probably the perfect excuse to set up a guaranteed annual income. People have been already been prepped for the ridiculous concept.

International Man: The stock market had its biggest drop since 1987. Has the everything bubble found its pin?

Doug Casey: Yes. A major second-order effect of this virus is that it just happened to be the pin that broke the biggest financial bubble in world history. And it’s very hard to reinflate a burst bubble.

I don’t care how much money the government prints. That’s just going to cause catastrophic retail inflation.

Will it solve the debt problem? Only the way a heart attack will take your attention off cancer. If you lose your job and your business isn’t making money, your debt is still there, and it’s still compounding with interest. That’s why it’s likely The Greater Depression will start out like the US in 1929.

The thing that worries the authorities is that we might have a catastrophic 1929 style credit collapse; they’re printing tons of money to counter that. We could have in sequence, first, the 1929-style credit collapse and then the 1923 German-style runaway inflation.

This is the worst of all possible worlds, and not unlikely.

It’s entirely the fault of state intervention in the economy and the Federal Reserve creating a bubble economy with all this phony money. That’s where the blame should go. But of course, the blame won’t go there.

The blame will go to capitalism.

It’s also a perfect excuse for Modern Monetary Theory (MMT), which essentially holds that the government can print up all the money that it wants, and there really won’t be any bad effects.

Not only is the government herding people like cattle, but the people are screaming for the government to “do something.” People expect the government to fix the problem. As if it was magic. But there’s no problem the government can’t make much worse.

The government is, quite naturally, further removing responsibility from the individual.

There are going to be vast consequences from this stock market meltdown. Most people already had inadequate retirement funds, and what they had was in the market. There will be recriminations about who was to blame, lawsuits, and lots of new laws as the public screams for Congress to “do something.”

Every government and, indeed, every large company and organization feel that they have to do something or they’re going to be accused of sleeping at the switch. That’s why they’re going wild on the side of caution and control.

In today’s ultra-litigious environment, they’re afraid they’ll get sued if anybody catches something, and it’s traced back to their restaurant, their gym, their conference—anything.

In times like this, Trump—who has zero understanding of economics and is an authoritarian by nature—is ultra-dangerous. He’s capable of doing almost anything to show how decisive he is.

International Man: What other types of responses will we see from governments?

Doug Casey: They’re likely to promote a vaccine. I’m not against vaccines, per se. Edward Jenner and his creation of the smallpox vaccine showed their efficacy 200 years ago. Vaccines against seasonal flu are proven to be only 30–60% effective, at best, but that’s not the problem. Because the hysteria around this thing has been so catastrophic, they’re likely to force everybody to take the vaccine.

Now, this is where it gets really serious because if you don’t take the vaccine or if you escape taking it, you probably won’t get a vaccination card. If you don’t get a card proving you’ve had it, maybe you can’t get on a plane or a train or even go to a public gathering without showing your card.

No doubt, they’ll create a new agency like the TSA. Once it’s created, the thing will be self-perpetuating and won’t go away.

International Man: What else do you see happening?

Doug Casey: Another third-order effect is that they’ll say that cash is a vector of transmission. It’s an excellent impetus to speed up the elimination of cash, which would be a disaster for personal freedom, for reasons we’ve discussed before.

As I said, I don’t fear the virus as much as the second- and third-order effects.

The consequences, the knock-on effects, of the Wuhan Virus could be the biggest thing since the founding of the country, not just since the Great Depression of 1929 to 1946.

The pin that broke the financial hyper bubble may well have started a cascade of consequences.

International Man: What should the average person be doing for prudence and profit?

Doug Casey: Again, it’s likely that we’ll have a deflationary collapse before we go into inevitable hyperinflation. I’ve said this for years. Things you expect to happen always seem to take longer than they should—but once they get underway, they happen much more quickly.

What to do? At this late stage, there’s not much the average person can do. How do you prepare for a heart attack after a lifetime of eating junk food?

It’s too late to pay off debt if you have a lot, but they’ll probably have a moratorium on it, so it‌’s going to be somebody else’s problem. You know what they say: “If you owe the bank a thousand dollars, it’s your problem. If you owe the bank a billion dollars, it’s the bank’s problem.” There are going to be lots of variations on that theme, considering there are a couple hundred trillion of debt out there.

What can you do if you have some savings?

Well, first of all, as far as assets are concerned, you’ve got to have gold and silver coins, although they’re now selling for big premiums and have become hard to get. Previously, they were selling for almost no premium.

So, it’s getting a little bit late for that too.

On the bright side, however, in the next few months, if you have cash, there are going to be fantastic bargains in the stock market in general. But by far the best place will be gold stocks, which are very, very cheap.

Unlike most companies today, they’re coining money because the average all-in sustaining costs of gold mines around the world are under $1,000 per ounce and dropping because about 20%–30% of the typical goldmine’s costs are fuel. The price of oil has also collapsed to $20, and gasoline is at $0.70 in the futures market.

This is the ideal time to buy gold miners. You don’t want to try to catch a falling safe; you want to wait until it conveniently smashes open on the sidewalk. Now is the time.

That’s what the average person should do. Other than that, prepare to enter the trailing edge of the gigantic hurricane we entered in 2008.

On the lighter side, this might be a perversely appropriate time to dust off your copy of Bocaccio’s Decameron. It is, after all, a plague year…

*  *  *

Unfortunately, most people have no idea what really happens when a government goes out of control, let alone how to prepare. How will you protect yourself in the coming economic crisis? New York Times best-selling author Doug Casey and his team just released Surviving and Thriving During an Economic Collapse an urgent new PDF report. It explains what could come next and what you can do about it so you don’t become a victim. Click here to download the free PDF now.

After an all-day curfew was observed by the entire nation Sunday, millions of Indians are remaining on lockdown because of the global coronavirus pandemic.

You will find more infographics at Statista

And now, as if the coronavirus containment scenes from around the world weren’t dystopian enough, the disturbing imagery continues in India, where those suspected of having the coronavirus are now being given hand stamps, according to Reuters. 

The same people are also being tracked using their mobile phones and personal data in order for the government to help enforce quarantines. The tracking effort raises obvious questions about both privacy and mass surveillance. 

More than 200 people have been infected with coronavirus in India, and there had been four official deaths as of yesterday. But officials continue to report cases of people fleeing quarantine.

This prompted the government to institute hand stamping, using indelible ink. The stamps are being used on people arriving at airports in the western state of Maharashtra and southern Karnataka state. The stamps show the date a person must remain under home quarantine and say “proud to protect” on them. 

Supreme Court lawyer N S Nappinai said: “When I first heard of the stamping in Mumbai, I thought it was fake news. I understand the concern but where does one draw the line? Should fundamental rights be suspended in an emergency like this?”

The Indian government is also using citizen and reservation data from airlines to track people. 

Archana Valzade, under secretary in Maharashtra’s health department said: “We found people who were stamped and were traveling. They had signed a self-declaration that they will not travel because they could be carriers of coronavirus. It is their duty as well to stop the infection. Stamping is essential and very useful to reduce the spread.”

Amar Fettle, who is heading the coronavirus control team in Kerala said: “People have been jumping quarantine and it has been a challenge to track them. But we have formed hundreds of squads, including policemen to track and ensure people follow the norms.”

Hospital physician Armida Fernandez concluded: “As a doctor who has worked in the public health service and in the community, I find people are not realizing the seriousness of the pandemic. Knowing the situation of public health in India and that we are dealing with 1.3 billion people … I am for the steps the government is taking.”

Via Birch Gold Group,

Over the past couple of weeks, precious metals prices have been pulling back from their recent highs. For anyone taking a short-term view, it’s not a positive development. But appearances are sometimes much different from reality – especially once you allow a little bit of time to pass.

Historically, since the gold standard was removed in 1971, gold’s price has had two major “bull market” fluctuations, from 1971 to 1980 and from 1999 to 2011.

During those two bull runs, the price of gold shot up 2,100% and 650%, respectively. You can see both reflected below:

You can also see how gold’s price dropped near the start of the 2008-09 financial crisis, but then began shooting up like a rocket about halfway through.

Finally, you can see on the chart where the end of 2015 represents the most-recent “bottom” price for gold. This leaves us with the question…

Where Could Gold’s Price Go From Here?

According to Jim Rickards, when you average out the previous two bull runs, that bottom in 2015 is where the next decade-long bull run for gold could start:

Applying the average gain and average duration to the Dec. 17, 2015, bottom at $1,051 per ounce leads to a forecast that the new gold rally will hit $11,000 per ounce on Feb. 16, 2026.

Of course, Rickards notes that the sample size is small, and to take this prediction with a grain of salt.

But gold’s price could also follow the script from 2008-2011, when dropped initially but then rose sharply.

Let’s zoom in on that part of the chart above:

You can see how, after dropping between March and September of 2008, gold’s price rebounded to reach over $1,900 in 2011.

A recap article from Kitco explained why prices staged this rally:

In an October 2009 research note from Dundee Precious Metals, there were several reasons why gold prices were expected to go up in the coming years, including fiscal and monetary reflation, investment demand, the bullish price cycle in gold and geopolitical worries.

Jim Rickards explained why he thinks that happened, and why it could happen again in the near future:

If weak hands are selling, won’t the strong hands jump in to buy? The answer is yes, but not right away. The strong hands see what’s going on and are prepared to buy, but not until the last distressed party has closed out his last gold futures contract. Then the strong hands pounce like a lynx looking for breakfast. That’s when the price of gold soars and the bull market in gold gets back on track.

Rickards also explained gold’s recent drop in price, claiming it is “not unusual”:

When viewed against the background of a global pandemic from coronavirus, some of the worst single-day drops in stock prices in history, a spreading liquidity crisis and a potential worldwide recession… a decline in the price of gold is not only not unusual, but entirely to be expected.

So once you consider that the Dow has been whipsawing for the last three weeks, the recent decline in gold’s price may not last long.

That, and the “strong hands” that Rickards references may already be making a move towards physical gold.

The Demand for Physical Gold and Silver is Increasing

According to Kitco, silver sales are skyrocketing: “Data from the U.S. Mint shows that it has sold 2.32 million one-ounce silver coins so far this month, up significantly from February sales of 650,000 coins.”

And based on wholesale cost over spot price for 1 oz bullion American Eagles, premiums for physical products are soaring higher. Gold is selling at about a 6% premium and silver is selling at an 86% premium. Both of these figures are well over their averages from earlier in the year.

So even as the spot price of precious metals has dipped in recent weeks, demand for physical products has been skyrocketing.

Brandon Smith of Alt-Market.com argues, “Crash conditions will likely inspire more and more people to demand physical delivery on precious metals over the course of 2020, as fears of paper market shutdowns due to the pandemic grow.”

If that comes to fruition, we may likely see a complete decoupling of paper and physical gold prices.

Now is the Time

Having a diversified portfolio with assets known for their protection during uncertain times is a strategic way to diversify your retirement.

Holding assets such as physical gold and silver could prevent your retirement savings from suffering the consequences of being overexposed to equities.

Earlier today we reported that amid a growing investor panic that the Wu Flu will be the final nail in the malls’ coffin, resulting in countless retail outlet closures and a collapse in rental payments crushing the commercial real estate space, the “Big Short 2.0” trade, shorting the CMBX 6 series which has an outlier exposure to malls, finally crashed vindicating long-term bears such as Carl Icahn and a handful of other hedge funds who were not stopped out over the past three years.

This collapse in broader CMBX indexes as “the big short 2.0” gradually comes to fruition, has led to spillover effects across the entire Commercial Mortgage-Backed space, resulting in the first hung deal.

Bloomberg reports that Citigroup and Deutsche Bank – both of which somehow tend to always be involved any time bad debt emerges – are among the bank lenders stuck with billions of dollars of debt backed by MGM Grand and Mandalay Bay properties in Las Vegas, as the coronavirus pandemic shutters casinos across the nation, hampering the banks’ ability to syndicate the loan amid a plunge in investor demand.

To help stem the spread of the coronavirus, MGM Resorts International, which continues to operate the MGM Grand and Mandalay Bay, has shuttered operations in Nevada and New Jersey.

A JV of MGM Growth Properties and Blackstone REIT used $3 billion of financing to purchase the casinos last month, and Citigroup, Deutsche Bank, Barclays Plc and Societe Generale had planned to syndicate $1.9 billion of the total as commercial mortgage-backed securities, or CMBS, according to Bloomberg. However, as gambling along with any other activity that involves social interactions has ground to a halt and it is unclear just when it will restart, the efforts to sell the CMBS were met with “tepid demand” and the sale was put on hold, leaving the banks stuck holding on to the billions in debt, although it was not clear now much of the loan each bank holds.

The CMBS facility has a 12 year maturity, with an anticipated repayment date in March 2030, and came to market with an interest rate of 3.308% per year. In light of the recent surge in CMBS yields and spread, that number will have to go sharply higher to spark investor interest unless somehow Jamie Dimon convinces the NY Fed to buy the whole piece.

Pricing of the CMBS was expected during the week of March 9, but obvious those plans collapsed.

When syndication deals are unsuccessful, banks typically retain loans on their balance sheets until market conditions improve and the deal can be brought back. During the financial crisis, banks ended up stuck with hudnreds of billions in LBO and M&A bridge loans which they were unable to offload for years. It remains to be seen just how bad the hit will be during the Global Coronavirus/Crude Crusus.

As President Trump and VP Pence have both raised the issue of limiting the lockdown’s economic fallout, both have promised thatthe White House will ‘reevaluate’ its stay-at-home recommendation when the 15-day-period ends on March 30.

The battle over the critical second economic stimulus package is ongoing as well as House Dems introduce their counter-proposal.

Watch Live below:

 

 

 

Authored by James Howard Kunstler via Kunstler.com,

I never subscribed to the nostrums of Marxism, but old Karl sure had a point when he said,

“All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions of life, and his relations with his kind.”

Is that exactly where we’re at, or what?

The hologram of capital that was not really there dissolves before our eyes. That capital, you understand, was our notion of how wealthy we used to be, like, five minutes ago. And now the capital, the money, the mojo of modern life is going-going-gone. The hologram was projected by a fantastically hypercomplex hologram machine jerry-rigged with frauds, swindles, and false promises to pay tomorrow for that proverbial hamburger today. The people running it left the robots in charge and went off to frolic with the likes of Jeffrey Epstein, speaking of the profane. Then, the hologram machine broke and the iridescent image just plumb flickered out.

Now, under the shadow of COVID-19, everybody has been sent home to wait and see what happens next, hostages to the flat-screen, where the cable networks show little besides a non-stop real-time horror movie called The End of Your Future. It’s hard to keep morale up when you realize that all the usual conveyer belts of stuff you need to keep going are breaking down. It’s not hard to imagine fights, sure to come, over that dwindling stuff, which we will struggle heroically to allocate because we are really not all bad. Goodness abides, even in that America we managed to so deeply profane. Let’s hope there’s enough of it.

When these convulsions are over, we’ll have to reorganize those real conditions of life very differently in North America. There will still be considerable capital, but not the hocus-pocus Wall Street kind. There will be a lot of places with good-enough soil left ­­­­­– or at least soil that can be nursed back to health – to grow food. There are plenty of well-watered places. We have a marvelous system of navigable rivers, all outfitted with canals connecting them. (The Erie and Champlain Canals that connect the Hudson River estuary to the Great Lakes and the St. Lawrence have been kept in immaculate condition, by some miracle of forethought.) Our ancestors moved most of their stuff that way, and so can we.

We have plenty of human capital: strong backs and agile minds. They just have to be reconditioned off their addictions to canned entertainments, drugs, and the Faustian raptures of techno-narcissism – in other words, we need to get real. Real means recognizing that we’ve crossed over into a new chapter of the human project and that it requires different behavior (the relations with our kind old Karl Marx spoke of.) Mostly that means readjusting our attention back to the people and the place around us, while expecting a whole lot less from distant institutions far away. Gawd knows there is enough to do, if we can get our minds right.

I doubt that the federal government as we know it can survive its own desperate measures to re-ignite the hologram of rehypothecated promises to pay back all the debt gone bad. Its adjunct, the Federal Reserve, is desperately trying to do just that this morning by promising to buy everything and anything that the markets are puking up before the open. If that seems to do the trick, the ecstatic rush may not last very long.

I can say no more about that for the moment because I discovered about five minutes ago that the Internet is down here and I’m going to have to go looking for it now somewhere else nearby to put this blog up.

When I realized the web was down, and the phone wasn’t working, I turned on the TV to see if that was out too. It was. The real-time horror movie I mentioned above (the cable news) wasn’t even available, which rather darkened my outlook instantly. Did something blow up out there? I confess, I’ve had intimations lately that I am suddenly living in the prequel to my own World Made by Hand novels, which, for those unacquainted with them, are about the collapse of our economy and modern life with it. Believe me, it’s not especially comforting or satisfying, even to me, who anticipated the now-unfolding situation in great detail. As it happened, the cell phone was working, at least. I made some calls and learned that the world was still up-and-running. In the immortal words of Leon Spinks, the morning has been a bit “freaky-deaky.”

Guggenheim CIO Scott Minerd hasn’t been exactly bullish in recent weeks. In fact, the weightlifting asset manager, best known perhaps for repeatedly warning about the corporate bond bubble and the threat of fallen angels, last month prudently cautioned that “we’ve reached the tipping point“, and that the coronavirus will deflate the everything bubble. Four weeks later he has been proven correct.

So with stocks down 35% from their all time highs set around the time Minerd made his warning, is the CIO ready to flip and start buying stocks as some of his more vocal hedge fund peers such as Jeff Gundlach and David Tepper?

The, as two of his latest tweets reveal, is a resounding now. Warning that “Bottom fishing is still the most expensive sport in the world”…

Bottom fishing is still the most expensive sport in the world.

— Scott Minerd (@ScottMinerd) March 23, 2020

… and that we will not reach a bottom as long as the talking heads on CNBC are buying…

How do we know when we have not reached the bottom? When the talking heads on CNBC are buying.

— Scott Minerd (@ScottMinerd) March 23, 2020

… overnight Minerd published another report to clients titled “The Great Leverage Unwind”, in which he warns that “funding and trading markets are not functioning well due to excessive leverage needing to be unwound in the financial system” and summarizes what lies ahead by sayng that “we will likely experience something that is just as severe as, if not worse than, the financial crisis.” How to invest? As we said late last night, “I expect corporate bonds and other fixed income assets would give higher returns than equities on an absolute basis, not just a risk adjusted basis.” In light of today’s blistering outperformance of corporate bonds now that the Fed is backstopping investment grade, his trade reco is already quite profitable.

His full note is below, highlights ours:

The Great Leverage Unwind

We entered into the current crisis with a whole financial system that had been incentivized by policymakers to take on excessive levels of debt and leverage. The turmoil we are seeing right now is the result of the unwinding of this leverage. The primary catalyst of the turmoil is the collapse in economic activity due to the COVID-19 shutdown, but the fact that funding and trading markets are not functioning well is due to excessive leverage needing to be unwound in the financial system.

The first order of that unwind is what we have been seeing over the last week or two, where hedge funds and mutual funds are in a mad dash to get to cash.

While I think the Federal Reserve (Fed) is doing a pretty good job at helping to keep the financial system functioning as smoothly as possible, I don’t think we are out of the woods. There will likely continue to be announcements of additional programs and changes in operating procedures at the Fed. I also expect further announcements out of the White House on policy implementations. In order to get a foundation under the markets, we’re going to need something very large, something in the $2 trillion range in the form of a pool of liquidity that can be made quickly available to businesses and corporations that need it, along with the financing facilities of $2 trillion–$4 trillion from the Fed. A structure like this will be much more efficient than a targeted approach of trying to engineer bailouts industry by industry, which would just take too long.

In addition to Troubled Asset Relief Program (TARP)-like programs to assist companies and industries, there is no other choice but for the Fed to step up to keep markets functioning. That’s why I’ve been saying that we would need to see about $4.5 trillion of quantitative easing (QE) before everything was resolved. This is in addition to emergency lending through the discount window, dealer repo operations, central bank liquidity swaps, and the Commercial Paper Funding Facility, Primary Dealer Credit Facility, and Money Market Mutual Fund Liquidity Facility. That would take the Fed’s balance sheet to at least $9 trillion, or about 40 percent of last year’s gross domestic product (GDP). That might sound like an alarmingly big number, but to put it in perspective the Bank of Japan’s balance sheet is the equivalent of 105 percent of GDP. So, the United States is a piker on QE.

I see a number of trouble spots in the markets. There are many highly leveraged firms that are in the crosshairs of the economic shutdown, including airlines, lodging, retailers, and energy. These vulnerable industries are in the midst of a massive dislocation.

BBB-rated corporate bonds, which make up a majority of the investment-grade corporate universe, are also a major concern. Many of these BBB-rated companies don’t pass the criteria to be rated BBB by the rating agencies. The rating agencies, however, have shown forbearance by adopting a more liberal interpretation of either cashflow coverage or asset coverage, and accepting promises that these companies will de-lever. Kraft-Heinz is a good example of what happens when the rating agencies, confronted with the fact that Kraft-Heinz wasn’t making the progress it promised, downgraded the company to BB.

There are approximately $1 trillion worth of investment-grade corporate bonds that are in danger of being downgraded like Kraft-Heinz. Currently, the high-yield market has approximately $1 trillion outstanding, meaning the size of these possible downgrades would double its size. I do not believe that the current concessions on high yield in terms of their spread to Treasurys or absolute yields is sufficient to clear that supply.

Who are the marginal buyers that can pick up that much supply? There might be some investors who, like Guggenheim, have been conservative and have some capacity to add risk. But the real capacity, I believe, is going to reside in the land of private equity (PE), where firms have raised commitments of over $1 trillion for their funds. When PE firms are able to step in and buy high-yield bonds at 15–20 percent, and then they have the ability to lever those positions, that becomes an attractive alternative to private equity.

On a more sector-specific level, the asset securitization market is essentially not functioning. During the mini-recession of 2015–2016, when oil traded down to a low of $26 a barrel, the BB tranches of collateralized loan obligations (CLOs) were trading around 40 cents on the dollar, and BBB tranches around 60 cents. Today, there are a lot of sellers in this asset category, but they are offering 80 cents on the dollar for BBB and 70 cents on the dollar for BB. We are headed to a more severe downturn than we experienced in 2015–2016. Capitulation has not occurred in the CLO market.

This reluctance to capitulate is not an uncommon phenomenon. A lot of investors hang on to positions and hope. Occasionally a blind squirrel will arrive and buy at a non-market price, but as the supply of CLO assets that need to be sold continues to increase, the prices are slowly (or rapidly) going to start coming down.

Many sellers today are what I call securitization tourists. These are the hedge funds, insurance companies, pension funds, and others who, in their great search for yield over the last two to three years, kept reaching for it in securitizations. They didn’t have the real expertise that is needed to invest in the sector, they were kind of just visiting. A lot of the people who have jumped into securitization as a way to enhance their yields are now finding themselves having to unload positions. They will have to capitulate soon.

Aircraft securitizations, which are secured by airplane leases from airlines, are in trouble. Airlines are going to face the reality that they either default on their lease payments or ask for forbearance as air travel grinds to a halt. Lessors are already getting a lot of requests for forbearance, but as business conditions continue to deteriorate some carriers will file for bankruptcy or liquidation and have to sell aircraft. Today, the price for a used commercial aircraft is close to zero. That is lower than the price at which airplanes were selling post-9/11. The 9/11 event was mostly a U.S. event and foreign carriers were not dramatically affected. This is the first time that we have a global incident where carriers all over the world are basically shutting down their air travel at a level even lower than the great recession of 2008–2009.

Interestingly, aircraft securitizations have not moved into the realm of pricing that would be appropriate. Investors are offering securitizations at 85 or 90 cents on the dollar, when many securitizations reasonably should be worth 50 or 65 cents on the dollar, or maybe lower.

As these and other markets are not clearing, we have not seen capitulation in the credit markets, even though we have already had massive spread widening in investment-grade and high-yield bonds. To put this spread widening in context, corporate credit spreads relative to U.S. Treasurys have been wider than where they are today just 2 percent of the time. This is good value, but value is a poor timing tool. Things that are cheap can get cheaper. The 2008 wides in investment-grade corporate spreads were 618 basis points, about 250 basis points wider than where we are right now.

Since we haven’t seen capitulation yet, it would be premature to step in and buy aggressively at current levels, whether it is stocks or credit assets.

In terms of the economy, any policy program is good if it can help prop up households that need help to make mortgage payments, pay utility bills, or make car payments. More than 50 percent of Americans have less than $500 in savings, so it is going to be difficult for low wage earners who are living hand-to-mouth, earning maybe $2,000 or $3,000 a month, to stay current on all of their commitments even if they are handed a check for $1,000 from the U.S. Treasury.

Rather than speculate about which emergency economic rescue programs are good or bad, let’s just put it this way: In the financial crisis, Congress passed TARP in October 2008, well before the market bottomed. After the ensuing turmoil, we didn’t really hit bottom until March of the following year. Even if Congress passes all of the necessary legislation, we should be expecting that the market will be vulnerable for another six months. This means that “buying the dip” on the expectation that Congress is going to pass something soon is probably not a prudent investment strategy.

Since we haven’t seen capitulation yet, it would be premature to step in and buy aggressively at current levels, whether it is stocks or credit assets.

Finally, I’m not an epidemiologist, but I have a few observations on the virus. I’m going to make a great leap of faith here and assume the Chinese government is releasing accurate data: In Wuhan the number of active cases peaked about 4 weeks after the lockdown after increasing roughly one hundred-fold. Pick whatever day you want for the starting point of the American version of the lockdown—pick St. Patrick’s Day or lockdown day in California—but I expect that the epidemic will continue to worsen over the course of the next three or four weeks if we follow the Wuhan pattern of the growth in cases, which virtually every country in the world has followed. This means we would have 100 times as many cases in the United States as we had from lockdown date. That means there could be 2 million identified cases in the United States in a month. That tells us our living patterns are not going to return to normal in the next 30 days, especially since we have not locked the entire country down yet.

If there is a risk to what I’m saying, the risk is that it will be worse, not better. That is why I made the statement that if the policymakers don’t handle this crisis appropriately and swiftly there is a 10–20 percent chance that we face a global depression. Now that means there is also an 80–90 percent chance that we are not going to have global depression. If you’re an investor, the odds are in your favor. I’m not betting on a global depression, but I’m saying that for the first time in the post-war era we are really getting too close for comfort.

In 2006–2007, I talked about the possibility of an imminent financial crisis, but at the same time I also talked about the solution. The solution was that the Fed floods the system with cash, the government does a bunch of prop-up programs, and we come out of it. Here, I don’t know the solution. I can’t tell you how to fix the virus problem, or how long it will last, but this means that the unknown in the investment community and for the populace at large is a lot larger than it was during the financial crisis. And so, in all likelihood we will experience something that is just as severe as, if not worse than, the financial crisis.

I am an optimist at heart. When we finally get to a bottom, a lot of the distressed assets in fixed income will be really attractive. One of the observations I made during the financial crisis was that, for the first time in my career, I actually thought that corporate bonds and other fixed-income assets would give higher returns than equities on an absolute basis, not just a risk-adjusted basis. I expect we will see this in the current situation as well.

Fundamentally, we will change the way the economy works. Consider how people and companies are adapting to the work-from-home operating standard. It’s a lot cheaper to have employees work at home instead of in an office. At some point companies will choose to not have certain employees commute to the office, sometimes an hour and a half in each direction. Having employees work from home allows for a couple of extra hours to work and more time for families. This will impact demand for commercial office space in a dramatic way, and obviously the knock-on effects will be to retailers, restaurants, and other ancillary industries while the virtual world will do very well.

We will eventually get out of this in the next three to four years—and I’m not suggesting we will be in a recession for three or four years. I expect that the recession will last somewhere between six and 18 months. This is a big time gap, but until we get the economy running on all cylinders again, where the lodging, airline, and energy industries, along with other affected industries, are back to the level where we were just a few months ago, it’s probably going to take about four years. In the meantime, a lot of debt has to be unwound or restructured. This will result in the Fed having to keep the liquidity spigots open for a long time.

So sad.

Moments ago Twitter, which in recent months has taken upon itself to become the supreme arbiter of all that is politically correct, noble and just (or at least is not frowned upon by the Chinese Communist Party) in this cruel world where readers are completely unable to make up their minds on their own without a blue bird telling them what they should or should not read, and what, in its eyes, is arbitrary fake news, which is ironic for a company whose Associate General Counsel and Senior Legal Director Jeff Rich recently incited the “culling” of a standing president in clear violation of the company’s terms of service…

YES!! Again, this 👇 Excise the Trump cancer, then deliberate over policy differences. He is the single most destructive force against our system of government, way of life and American values EVER! He must be culled from the herd. ASAP! https://t.co/MVfdAylV2H

— Jeff Rich (@jeffrich) February 1, 2020

… and which until recently was caught in an activist investor spat with Elliott’s Paul Singer who demanded the ouster of Africa-bound CEO, Jack Dorsey, before reaching some behind the scenes agreement that allowed @Jack to remain at the company and at the colon cleansing safari lodge at the same time, announced it is withdrawing its Q1 revenue and operating income guidance for the first quarter amid a plunge in ad revenue, while also withdrawing its outlook for expenses, stock-based compensation, headcount, and capital expenditures for the full year due to coronavirus pandemic.

Blaming the covid pandemic, which is bizarre as virtually every American is now stuck in front of their computers blasting meaningless text message into the ether in hopes of impressing their echo chamber, Twitter said that “based on current visibility, the company expects Q1 revenue to be down slightly on a year-over-year basis. Twitter also expects to incur a GAAP operating loss, as reduced expenses resulting from COVID-19 disruption are unlikely to fully offset the revenue impact of the pandemic in Q1.”

“Twitter’s purpose is to serve the public conversation, and in these trying times our work has never been more critical. We’re seeing a meaningful increase in people using Twitter, and our teams are demonstrating incredible resilience adapting to this unprecedented environment,” said Jack Dorsey, Twitter’s Chief Executive Officer. “We’ll continue to navigate this environment focusing on supporting our employees, customers, and partners, while strengthening our service for everyone around the world and adjusting to a new operating and economic environment.”

“Twitter had a strong start to the year before the effects of COVID-19 began spreading more broadly, including a successful Super Bowl and overall strength in the US. The COVID-19 impact began in Asia, and as it unfolded into a global pandemic, it has impacted Twitter’s advertising revenue globally more significantly in the last few weeks,” said Ned Segal, Twitter’s Chief Financial Officer. “We have made solid progress on our consumer and revenue product priorities and we remain confident in our opportunity and strategy. We hope everyone stays healthy and safe.”

Of course, the culprit is not a drop in traffic: indeed, Twitter like everyone else online is benefiting from the surge in online conversations, and the company admits as much saying that “global conversation about COVID-19 as well as ongoing product improvements are driving strength in total monetizable DAU (mDAU), with quarter-to-date average total mDAU reaching approximately 164 million, up 23% from 134 million in Q1 2019 and up 8% from 152 million in Q4 2019. “

Instead, what this means is that Twitter’s ad revenue – as all other online portals – is in freefall, as the coronavirus emerges as the catalyst that cripples not only Twitter but all other ad-supported tech giants, such as Facebook and Google.

Who knows maybe once this is all over, Twitter will be forced to lay off its pro-establishment content nazis and the platform that started off as an experiment in free speech will finally return to its roots.