Tag: finance

Washington D.C. has so far seen a tiny handful of cases but only in instances of people believed to have briefly visited the nation’s capital, prompting the first schools to be begin closure Monday, but numbers could be ready to explode after a D.C. area priest who distributed communion and shook hands with over 500 people has tested positive for the coronavirus as we reported earlier.

D.C. Mayor Muriel Bowser as of late Monday morning has ordered all attendees of Christ Church Episcopal in Georgetown to self-quarantine after possible exposure. Mayor Bowser further said in urgent televised statements assessing the situation that she is considering declaring a ‘state of emergency’, but will decide later in the day Monday.

Presumably this will be done in coordination with the governors of Maryland and Virginia. Maryland Governor Larry Hogan is due to make a statement at 3:30pm after meeting with Vice President Pence at the White House over the crisis.

Visitors to Christ Church, Georgetown Episcopal on Feb 24th, and between Feb 28th and Mar 3rd could’ve been exposed to COVID-19, and DC Health recommends that anyone who visited on those dates isolate themselves at home for 14 days from the last time they visited the church.

— Mayor Muriel Bowser (@MayorBowser) March 9, 2020

As recently as last week over 500 worshipers received communion from and greeted Rev. Timothy Cole, rector of the historic and popular church which has been active for over 200 years.

According to NBC Washington: 

Bowser is evaluating whether to declare a state of emergency in the District, a move that would empower her to order quarantines and closings, and expects to make a decision later today. Maryland declared a state of emergency upon confirming its first cases last week.

“This is a fluid situation,” Bowser said. “We continue to ask residents to stay home if they’re sick, and to call a health care provider if they’re sick with symptoms including fever, cough or shortness of breath.” The local NBC affiliate also reports of her statements:

Bowser and public health officials sought to reassure the public and said the District has adequate tests to evaluate patients. The mayor did not declare a state of emergency or cancel major events.

“There is still no widespread community transmission and the general level of risk for residents is low,” the D.C. Department of Health said in a statement.

The Mayor said specifically of the Christ Church priest that, “At this point, he appears to have no history of international travel and no close contacts with a confirmed case.” 

And local media reports further of the case that:

The rector returned from a conference in Louisville Feb. 22 and participated in church services Feb. 23, the church said. He started to feel sick the next day.

He felt better on Feb. 29 and participated in a church retreat and church services the next day.

On Tuesday, the rector went to a doctor and was diagnosed with the flu. On Thursday, he was diagnosed with pneumonia and admitted to a hospital, the church said. He was diagnosed with coronavirus on Saturday.

Health officials are attempting to track down where he may have contracted it, given he has not recently traveled outside of the country.

According to local ABC reporter Sam Sweeney, the situation is indeed very dire given it appears that Fr. Timothy Cole likely had the virus stretching back into February.

The ABC reporter described that “He offered communion and shook hands with more than 500 worshippers last week and on February 24th. All worshipers who visited the Christ Church in Georgetown must self-quarantine. Church is cancelled for the first time since the 1800’s.”

Hundreds of people are reported to have attended the large church between Feb. 24 and March 3. Public health officials are now telling any visitor to the parish within this window to immediately self-quarantine for 14 days and call their health care provider immediately.

Starting over the weekend DC Health officials had cautioned people to stay away from the church as potential cases were being tested, and recommended a pause in all services.

Here’s is the timeline of D.C. first positive COVID-19/Coronavirus case, the rector of Christ Church in Georgetown: pic.twitter.com/P54U8aFXcd

— Martin Austermuhle (@maustermuhle) March 8, 2020

“As DC Health conducts its review of the presumptive positives of COVID-19 and consults with the CDC, it has determined an individual’s visitation to Christ Church Georgetown warrants precautionary measures… DC Health will reach out to potentially impacted congregants and visitors as we continue to gather to more information to ensure the health and safety of the public,” the DC health statement previously said.

But that was probably the point at which not to just “warrant precautionary measures” but to shut down the church altogether. Now that this has happened, however, it appears too little too late.

Christ Church have now suspended all services, meetings and other activities, and doors were seen locked as of Monday.

In a world without the contrarian beacon that was Dennis Gartman, the head of the world’s largest hedge fund has valiantly stepped in to take his place.

Recall that during Davos 2018, Ray Dalio infamously told his CNBC interviewers on Jan 23 that “if you’re holding cash you’re going to feel pretty stupid.” Well, not only did the cash holder not feel stupid when just two weeks later the S&P suffered its first correction since the crisis, but by the end of 2018, cash ended up being the best performing asset of the year with stocks plunging in the 4th quarter.

Then, in a surreal repeat, exactly two years later Ray bizarrely double down, and once again speaking in Davos, told CNBC on Jan 21 of 2020 that “cash is trash.” Almost exactly one month later the market started a plunge that would quickly turn into the biggest and fastest market crash since the financial crisis.

In retrospect, one almost wonders if Dalio is now the editor of The Gartman Report, his every call meant to be faded with reckless abandon.

We may soon find out, because it now appears that the famous creator of workplace “principles” is tripling down on his recos, and in a tweet this morning the billionaire investor tweeted words of encouragement as markets crashed, saying “look for the opportunities” but only after protecting against “the risk of ruin”, and yet protecting the risk of ruin usually involves holding on to substantial amounts of cash, so… which is it?

Periods of turbulence provide both large risks and large opportunities, so after you make sure that you and your people are safe from the risk of ruin, look for the opportunities. It is because at such times most people pay the most attention to the risks than the opportunities. pic.twitter.com/gvkv4LLNJc

— Ray Dalio (@RayDalio) March 9, 2020

The tweet followed an even more bizarre tweet from Sunday in which Dalio cited a “work principle” according to which “if you’re not worried, you need to worry – and if you’re worried, you don’t need to worry” and which no matter how deeply one contemplates the zen imagery or the inherent philosophy in this principle, it simply makes absolutely no sense.

I urge you to consider this principle now as It pertains to your handling of the Coronavirus. pic.twitter.com/fXDzYYGJuY

— Ray Dalio (@RayDalio) March 7, 2020

Perhaps to protect Dalio from the humiliation of destroying the portfolios of mom and pop investors who place the Bridgewater founder on some investing pedestal, the former master of the universe, ex-Goldman CEO Lloyd Blankfein himself now retired, diluted today’s bullishit [sic] also urged investors to “expect a quick recovery when the health threat recedes.”

Fear can take mkt lower, but expect quick recovery when health threat recedes. Esp in US, underlying economy strong, banks well-capped, system not too leveraged. Unlike ‘08, will avoid systemic damage that cud take years to work thru. Obviously, not ignoring tragic human toll….

— Lloyd Blankfein (@lloydblankfein) March 9, 2020

It wasn’t clear if Lloyd missed the actual news from the weekend, and that the latest market crash had nothing to do with the coronavirus and everything to do with the carnage in the energy sector as oil plunged to levels that indicate not a global recession but depression.

In any case, we will reserve judgment on the proper course of action until we learn if it is also Gartman’s recommendation to buy stocks in dollar terms. If we indeed have a trifecta… well, we suggest you panic.

It looks as though the temperature “sweet spot” for Covid-19 to spread has been discovered by Chinese researchers, who pin the number at 8.72 degrees Celsius, or about 47.7 degrees Fahrenheit. 

But other experts are still warning that people shouldn’t “fall into the trap” of thinking that the warmer weather of the summer is going to cause the virus to react or slow, according to the South China Morning Post.

A team from Sun Yat-sen University in Guangzhou published their findings on the virus and temperature last month, and they are awaiting peer review. They did suggest that heat could play a “significant role” in how the virus behaves. 

The paper says: “Temperature could significantly change Covid-19 transmission. And there might be a best temperature for viral transmission.”

The “virus is highly sensitive to high temperature,” they concluded. This could help it from spreading in warmer countries, while the paper suggested that “countries and regions with a lower temperature adopt the strictest control measures”. 

Many countries are banking on the virus losing some of its steam in the summer, as happens with the traditional seasonal flu. 

But a second study, by Harvard’s T.H. Chan School of Public Health, shows that the virus could continue with “sustained transmission” even in a range of humidity environments. 

The Harvard study, published in February and also awaiting peer review, said: “Weather alone, [such as an] increase of temperature and humidity as the spring and summer months arrive in the Northern Hemisphere, will not necessarily lead to declines in case counts without the implementation of extensive public health interventions.”

“Temperature … has an impact on people’s living environments … [and] could play a significant role in public health in terms of epidemic development and control,” the Guangzhou study added, stating that climate could have played a part in why the virus broke out in Wuhan to begin with. 

Hassan Zaraket, an assistant director at the Centre for Infectious Diseases Research at the American University of Beirut, also says temperature can have an effect: “We are still learning about this virus, but based on what we know of other coronaviruses we can be hopeful. As temperatures are warming up, the stability of the virus could decrease … if the weather helps us reduce transmissibility and environmental stability of the virus, then maybe we can break the chain of transmission.”

But the World Health Organization, for possibly the first time ever since the outbreak took place, offered a realistic take: 

“We have to assume the virus will continue to have the capacity to spread. It’s a false hope to say, yes, it will disappear like the flu … we can’t make that assumption. And there is no evidence.”

Authored by Mac Slavo via SHTFplan.com,

Social media companies have made the decision to partner with “health authorities” (government officials like those who work for the CDC) to combat “misinformation” about the coronavirus. We all know what this means. Under the mainstream media’s seemingly innocent words lies a rash of new censorship coming down the pipes.

Only the official narrative from those in the World Health Organization and the Centers for Disease Control and Prevention will soon be allowed on social media. Last week, the social media app TikTok, popular with youths and young adults, announced it would be partnering with the WHO in an effort to spread veritable information on the novel coronavirus, or COVID-19, in addition to best public health practices.

we’ve teamed up with @WHO to get you the trusted health info you need pic.twitter.com/If0aqoj9VH

— TikTok (@tiktok_us) February 29, 2020

“COVID-19 outbreak has seen a massive ‘infodemic’ – an over-abundance of information – some accurate and some not – that makes it hard for people to find trustworthy sources and reliable guidance when they need it,” the WHO told ABC News.

“Therefore, WHO is working with various social media platforms, including TikTok, to help us reach the right audience (the right community, the right age group, etc.), as well as to detect the spread of misinformation on the new coronavirus. We understand that different platforms might have their specific audience, hence important to make trustworthy information available where people are looking for it.”

So in other words, WHO is asking TikTok to make sure their narrative infects the minds of the young adult and youth audience they are said to attract.  Only the information from the WHO will be deemed relevant to this outbreak.  The censorship surrounding this virus is ongoing, but it’s becoming obvious authorities are continuing to have problems completing the totalitarian squashing free speech.

The Chinese have taken to using force to prevent information from getting out. Facebook and Mark Zuckerberg are supporting the “authority” on health to and ramming the official narrative down people’s throats.

“We’re focused on making sure everyone can access credible and accurate information,” Facebook CEO Mark Zuckerberg said in a statement this week.

“If you search for coronavirus on Facebook, you’ll see a pop-up that directs you to the World Health Organization or your local health authority for the latest information.”

We all know this is elitist speak for “you’ll read and hear what we want you to read and hear.”

European stock markets just suffered their worst decline since Lehman… Oct 2008 as the crude and Covid chaos rolls around the world…

Europe is now down over 22.5% – a bear market – from highs just 3 weeks ago…

Source: Bloomberg

The selling was absolutely across the board…

Source: Bloomberg

European banks crashed to their lowest since March 2009… but judging by EU bank credit, there’s more to come…

Source: Bloomberg

And European credit is crashing…

Source: Bloomberg

German bonds were aggressively bid all day with two- and five-year yields dropping to -1%,

Source: Bloomberg

Gilt yields fall below 0% in two- and five-year segments, with BOE’s buyback seeing the institution buy at a sub-zero rate

Source: Bloomberg

But, Italian yields surged, rising 30bps in 2-year to 10-year segments.

Source: Bloomberg

Paging Christine Lagarde!!

The US stock market wasn’t the only one to suffer a historic meltdown overnight, when it hit and was locked limit-down in both futures (for several hours) and cash markets (for 15 minutes) on Monday: the credit market suffered a similar breakdown, with IHS Markit briefly suspending CDS marks amid a “huge move wider in credit spreads” according to IFR.

It all started when Markit’s European CDS index, the iTraxx Crossover – which tracks the 75 most liquid sub-investment grade entities – soared almost 160bps on Monday to a session high of 550bps, its highest level since 2013 and on track for its sharpest one-day gain on record, according to Refinitiv data.

The iTraxx Crossover index has now more than doubled in less than three weeks from just 219bp on Feb. 21, causing irreparable losses to anyone who was short. IHS Markit is the central source for data in the CDS market, collating and aggregating pricing information from trading desks for single-name and index CDS.

The record blow out came amid plunging oil prices on concerns over an escalating price war between Saudi Arabia and Russia, which hammered European energy names, adding fuel to the prolonged sell-off in credit markets over the past two weeks.

As IFR points out, “the massive move wider in credit spreads and enormous volatility in CDS prices led IHS Markit’s system to mark a lot of the pricing data it received from banks that trade these credit derivatives with a low confidence score“, effectively saying it was not sure if the market reflected price discovery or was,well, broken. Indeed, as an IFR source said, because of the volatility of prices “the system didn’t trust the data it received.”

In an email sent out by IHS Markit earlier in the day, the London-based information provider said that “IHS Markit is experiencing technical difficulties with the Intraday and Sameday services for CDS Single Name and Credit Indices as of 9 March 2020. Our technical and infrastructure teams are working to resolve the issue and will have an update in the next 2 hours.”

As IFR’s Christopher Whittall points out, “it is a highly unusual occurrence for it to report a temporary outage and underlines the extraordinary volatility in financial markets at present”, and yet that’s precisely the reality that traders had to grapple with today, not only in credit but across equity markets, which were locked up much of the time, and when they weren’t, there simply wasn’t any liquidity at indicated prices. Traders also confirmed – long after the fact – something we warned about last weekend, lamenting that liquidity has vaporized in recent sessions amid the prolonged selloff in credit and equity markets.

As we showed earlier on Monday, US high-yield debt markets have emerged as particularly vulnerable to a large drop in oil prices as many of the issuers in that market are energy companies.

“The weekend oil market developments could barely have come at a worse time for the US HY market,” Deutsche Bank credit strategists wrote in a note to clients. “Already starved of liquidity following the sell-off over the last two weeks, a near 20% plunge for oil overnight is likely to result in carnage in the market today.”

They were right.

Authored by Doug Kass via Seabreeze Partners,

The Panic of 2020

* These are uncertain times that require political, financial and economic leadership with experience, creativity and a steady hand

* Unfortunately the car has been driving without wheels, (thoughtful policy or without a foundation of value) and it has just crashed

* Equities (now, in pre-market trading, are at about 2800 as measured by the S&P Index) have slightly undercut my expected 2850-3300 trading range

* Disasters have a way of not happening and value almost always emerges out of panic
* I am buying Spyders at under $279 in pre-market trading and I plan to add to my equity holdings today

Last week I wrote “Panic Goes Viral“. I was premature in viewing investment opportunities as I had no idea that the panic over the last few days was simply a precursor to this weekend’s broader selloff.

Over the weekend one old Black Swan (coronavirus) and a new Black Swan (substantially lower energy prices) joined forces in the pond as the collapse in yields and energy prices are serving to crater global equity markets this morning.

In scope and rapidity, the accumulated declines in bond yields and stock prices are unprecedented.

Remarkably, it was less than four weeks ago that The Goldilocks market was in place. TINA (“there is no alternative“) was the watchword of market participants’ faith.

An evolving and vulnerable market structure has importantly contributed to these rapid price declines and the consequent fallout is unknown and worrisome.

The Administration, our political leadership and The Federal Reserve will be put to the test over the next few days and weeks.

Arguably (sadly and frankly), it remains my view that these bodies (which have not delivered a steady hand and assurance in time of current developing market and health crisis) may not be up to the current task. Unfortunately, I am not optimistic that they have the fortitude, experience, creativity and intellect to deal with the market and economic challenges that lie ahead. Stated simply, the captain, managers and the bench consists of a number of subpar players that seem more beholden to optics (and reelection) rather than policy – dangerous in a world that has grown flat, interconnected and networked.

An evolving market structure (dominated by products and strategies that know everything about price and nothing about value) will now be tested.

There will be enormous fallout where large bets have gone wrong – ranging from bond, equity, commodity and VIX positioning.

Fortunately, markets, over history, have a way of clearing price and returning to intrinsic value (even while the country’s leadership is foundering) – setting up for better times ahead even as those around the markets are losing their heads and may be ill equipped to respond responsibly and, again, without a steady and thoughtful hand. The same observation applies to the global economies – growth resets lower and, ultimately, resumes its trajectory of growth.

So, while our leadership lacks and structural market risks are being exposed, the market opportunities may soon become deafening. But, as fear and panic have so quickly replaced complacency, few will have the guts to capitalize on that opportunity.

At 6:15 am S&P futures were at about an equivalent of 2790 – which is approximately 60 handles, or approximately 2% below the low end of my projected 2850-3300 price range that I anticipated over the first half of 2020.

I am adding to my Spyders at below $279 now and I plan to use this panic (and slight undercut of my projected trading range) to selectively buy more equities.

With energy junk bonds crashing…

… amid a (long-overdue) investor revulsion to the highly levered energy sector, much of which is funded in the high yield market, as crashing oil prices bring front and center a doomsday scenario of mass defaults as shale companies are unable to meet their debt and interest payment obligations, investor focus is shifting up the funding chain, and after assessing which shale names are likely to be hit the hardest, with many filing for bankruptcy if oil remains at or below $30, the next question is which banks have the most exposure to the energy loans funding these same E&P companies.

Conveniently, in a note this morning looking at the impact of plunging interest rates on bank profitability, Morgan Stanley also lays out the US banks that have the highest exposure to energy in their Q4 loan books.

So without further ado, here are the US banks that stand to suffer the most if a wave of defaults his the shale patch:

Morgan Stanley was diplomatic enough to frame these banks only in the context of their loan exposure, suggesting (strongly) they would have to significantly boost their loan loss reserves, adversely impacting the bottom line:

Crude Oil collapsed 25% to ~$30 per barrel from Friday’s close post Friday’s OPEC+ meeting which ended without the anticipated production cut. This puts oil prices at much closer if not below breakeven for many US shale producers. Regions Financial, for example, underwrites to a stressed barrel of oil of $39.20. We assume that under the new accounting rule for CECL that banks will need to boost reserves for their oil and gas exposures during 1Q20 and 2Q20. We assume that the banks will increase their loan loss reserves against their energy portfolios to the levels reached in 1Q16 when oil prices were running at about $30. This lowers EPS in 1Q and 2Q 20, shown in Exhibit 19.

Assuming the shale situation is salvageable, Morgan Stanley then lays out the large and mid-cap banks that have the most loan exposure and will likely have to boost their reserves to the levels seen during the Q1 2016 energy crisis:

We pulled energy exposures for the Large Cap and Midcap banks to assess how much the lower oil prices could drive up provisions. We are using each bank’s most recent energy loan disclosure listed below. We assume that the banks today are holding a 1% reserve ratio against these exposures. We then looked at how much loan loss reserves banks held against energy loans in 1Q16,a time when oil prices were around $30 per barrel. We assume that the banks will need to increase their loan loss reserves against energy loans back to those 1Q16 levels in 1Q and 2Q this year,assuming oil holds at ~$30. This increase in loan loss reserves is a bit quicker than prior cycles, but since we are operating under the new Current Expected Credit Loss accounting model (CECL), banks will need to reflect life time losses for their oil exposures at an oil price today that is roughly half of what it was on December 31,2019 when it ended the year at ~$66

For the largest banks this means billions in incremental energy reserves, subtracting directly from the bottom line.

What other linkages are there from the US energy sector to the rest of the economy? In a word, countless. That said, one attempt to quantify the potential spillover from Nordea’s Martin Enlund suggests that the biggest risk is to already stagnant US CapEx (in addition to coming shortages and virus quarantines).

A key leading indicator to observe if a manufacturing collapse is materializing, is the weekly oil rig count where a plunge would telegraph much more economic pain:

And while lower prices were good news for the US economy – as they would boost real incomes thanks to lower gasoline prices – the emergence of the US as an oil producing powerhouse change the dynamics, and as the 2015/2016 manufacturing recession showed, plunging oil prices have a far more pronounced negative impact on US capex, coupled with fiscal austerity in oil exporters.

Finally, and as discussed earlier, sharply lower oil prices pose an imminent risk to the critical US credit market, which in recent years became the primary pillar propping up stocks (by funding trillions in buybacks). As Nordea’s Martin Enlund notes, “if “unforeseen losses” show up in the high yield sector (very energy-heavy), it might damage the credit cycle… and if the credit cycle cracks, forget about buybacks, M&A, and SPX’s current valuation.”

Authored by Paul Joseph Watson via Summit News,

A DC priest who shook the hands of 500 worshippers during communion has announced he’s contracted coronavirus.

“BREAKING: A D.C. priest has Coronavirus. He offered communion and shook hands with more than 500 worshippers last week and on February 24th,” tweeted ABC7’s Sam Sweeney.

“All worshippers who visited the Christ Church in Georgetown must self-quarantine. Church is cancelled for the first time since the 1800’s.”

BREAKING: A D.C. priest has Coronavirus. He offered communion and shook hands with more than 500 worshippers last week and on February 24th. All worshippers who visited the Christ Church in Georgetown must self-quarantine. Church is cancelled for the first time since the 1800’s

— Sam Sweeney (@SweeneyABC) March 9, 2020

The hand shaking took place despite many other Catholic churches changing their worshipping practices in an effort to stop the spread of the virus.

USA Today reports that at the Basilica of the National Shrine of the Immaculate Conception,

“Priests have started asking worshippers not to shake hands at the sign of peace, which occurs around midway through the Catholic service. Most Masses here normally don’t offer wine during communion, but those that do are suspending the use of the shared chalices for now.”

Such precautions are not being followed at other religious sites in regions impacted by the coronavirus.

Videos of two men licking holy shrines in Iran went viral last week, with one individual seen licking the Masumeh shrine in Qom, while saying, “I’m not scared of coronavirus.”

In another video, a man states he plans to lick the shrine “so the disease can go inside my body and others can visit it with no anxiety.”

The men face up to two years in jail in addition to 74 lashes.

*  * *

My voice is being silenced by free speech-hating Silicon Valley behemoths who want me disappeared forever. It is CRUCIAL that you support me.

Please sign up for the free newsletter here. Donate to me on SubscribeStar here.

Support my sponsor – Turbo Force – a supercharged boost of clean energy without the comedown.

Submitted by Michael Every of Rabobank

What do you say about a Friday where nobody but Larry Kudlow Donald Trump cares a jot about the strong US labour market; where equities tumble again; where the US credit markets start to show stress; and where the 30-year US Treasury declines nearly 30bp in one day? What do you say when OPEC and Russia can’t agree on oil price cuts to match collapsing global demand?

What do you say about a Saturday where Saudi Arabia decides to turn the taps on full and increase output massively, and to offer discounts of USD8-10 per barrel to key customers? What do you say when oil prices collapsed nearly 10% on Friday and then a further 31% this morning in the first few minutes of Asian trading, and Brent was at USD35.76 at time of writing? That’s the biggest drop since 1991! What do you say when even US shale, and all the high-yield credit attached, is going to be under huge stress – to say nothing of the Saudi and Russian budgets, and oil-related currency pegs?

What do you say when the 10-year US Treasury has fallen another 24bp today and is right now as type below 0.50% energy and commodity prices collapse? What do you say when the Aussie stock market has fallen 6.4%, the Hang Seng is -3.5%, the Nikkei -5.8%, even though Japan is a huge energy importer, and S&P futures are -4.5% again, close to limit down? What do you say when EUR/USD is over 1.14, and USD/JP at 102.5?

“Oil vey”

This is without even mentioning that Italy has locked down 25% of its population properly this time – though apparently the orders are being ignored, and the decree was leaked early, allowing many to flee the virus zone before the cordon sanitaire came down.

Without mentioning that Israel, very small but ahead of the virus policy curve in some respects, is about to insist all arrivals must go into 14-day quarantine, which will effectively close off all incoming flights.

Without mentioning that Chinese exports for January and February were -17.2% y/y, taking its trade into a deficit: with nobody to export to as things look like they may stand, might we be seeing more such deficits even if China can genuinely get production up, rather than just leaving the lights on, and without a new virus outbreak?

Without mentioning that the shoe has now finally dropped and major events like SXSW in the US have shown that, yes, this virus matters too and it is not just $X$W: it has been cancelled at short notice.

Anecdotally, I am seeing/hearing three groups around me in how people react to all this:

1. The ones fighting over toilet rolls in supermarket aisles, which shows that in times of crisis people will still stick with fiat money given they obviously see actual toilet paper as a form of currency.
2. The ones who keep saying this is all an over-reaction, largely because they want to differentiate themselves from those who are fighting over toilet paper; but also because they are clinging to comforting facts like “This is just flu”, “More people due from slipping in the shower”, and the classic “98% of people will be OK”. Generally that means THEY will be OK, as they aren’t in the high-risk health or age bracket: yet there are also lots of elderly folks I know who are also happily saying “Keep Calm and Carry On” while making no changes to their lifestyle at all. In markets, this group tends to work in the kind of analyst space where you are always “bullish 12 months out” – the kind of people Keynes was laughing at when he made his “In the long run, we are all dead” quip: today it’s been inverted to “In the long run, we are all alive”.    
3. The ones who aren’t buying toilet paper but who aren’t buying that this is just a flu that will go away when the sun comes out either. Those who can see this virus is extremely easy to spread and very dangerous to some demographics – and that if they will be OK personally, if everyone gets sick at once (40-80% of the population), and 20% of those sick need to be in hospital (8-16% of the population), healthcare systems will be overloaded, ensuring even moderately ill people can’t get normal treatment and can hence die: so we can indeed end up with mass casualties of at least 2% of that 40-80% in short order, Wuhan- and Italy-style, albeit centred on the elderly and sick. (Which tend to be called ‘family members’ for most people.) The ones who also see that aggressive lockdowns/quarantines, along with mass testing, have managed to reduce the R0 (or infectiousness) of the virus from 2-3 to around 0.3 where they have been implemented, and hence recognise that is the route that governments will all eventually go down, even if the economic hit will be massive.

Now briefly back to oil. The bull argument du jour from our group 2 above is that lower energy prices will juice the global economy. Perhaps – unless you are an energy exporter. They will also ensure central banks are confronted by deflation, not inflation; and, as already noted, by severe credit stress in the energy sector.

Yet will cheaper petrol/gas really encourage the group 1 people bunkered down at home to buy more of anything except toilet paper? Moreover, once this virus has passed which, yes, one day it will, even if it is perhaps not truly over until a vaccine is available in 2021 or 2022, then energy demand will go back up again and so will oil prices. In other words, cheap energy is a coincident and not a leading indicator for once, and it is not going to juice the economy right now any more than ultra-low (and about to get ultra-lower) interest rates are.

But what about fiscal stimulus, I hear group 2 people say? Well even that won’t do much beyond damage control. Don’t believe me again? Look at the share of household spending and business investment in GDP vs. public investment–it’s easy to do–and imagine how much the latter needs to rise to compensate for a coming collapse in the first two categories. An extension of paid sick leave, as proposed in the US, is better than nothing but also nothing much.

Like I already said, “Oil vey.”