The Foreign Intelligence Surveillance Court (FISC) on March 5 effectively barred FBI and Justice Department officials involved in the infamous application to surveil former Trump campaign associate Carter Page.
Carter Page
The chief justice of the secret court, James Boasberg, ordered the ban in a 19-page opinion, the latest in a series of developments triggered by the release of the condemning report by the Office of Inspector General (OIG), which examined the four Foreign Intelligence Surveillance Act (FISA) applications the FBI used to spy on Page.
Boasberg wrote, “No DOJ or FBI personnel under disciplinary or criminal review relating to their work on FISA applications shall participate in drafting, verifying, reviewing, or submitting such applications to the court.”
Boasberg also accepted a detailed plan put forth by the FBI to prevent the kinds of significant omissions and misstatements that made their way into the Page FISA applications despite significant vetting by top officials at the bureau and the Department of Justice (DOJ).
“The court is encouraged by the government’s responses to the OIG report and its orders, as the FBI and DOJ have each indicated that the flaws identified in the OIG Report require significant and systemic remedial action,” Boasberg wrote.
The DOJ inspector general released a report in December that found a number of serious omissions and misstatements in the FISA applications on Page. For example, the FBI failed to disclose that Page had a relationship with the CIA, that the agency had approved Page as an operational contact from 2008 to 2013, that Page notified the agency about his contacts with Russians, and that the CIA had assessed that Page was truthful about describing his contacts.
Exacerbating the omission, an FBI attorney altered an email to say that Page was “not a source.”
Boasberg ordered the FBI and DOJ to include in future applications to the court a statement saying that they contain “all information that might reasonably call into question the accuracy of the information or the reasonableness of any F.B.I. assessment in the application, or otherwise raise doubts about the requested findings.”
On the heels of the release of the OIG report, the FISC issued a scathing order, calling on the FBI to explain what is being done to rectify the malpractice flagged by the inspector general. Boasberg also appointed an independent monitor to assess the FBI’s response. The bureau responded with a menu of procedural, training, and oversight reforms, some of which are already being implemented. Boasberg’s order calls for information and status updates on several of the items.
Boasberg filed his order as lawmakers are considering reforming the FISA act. President Donald Trump told Republican lawmakers in a private meeting on March 3 that he would not sign an extension of the surveillance law without reforms, Sen. Rand Paul (R-Ky.) told reporters.
In addition to the issues identified in the wiretap applications, some of the key officials involved in the investigation of the Trump campaign were found to have expressed intense bias against Trump and in favor of his 2016 opponent, Hillary Clinton. The inspector general found no evidence to suggest that the bias motivated the malpractice.
“MILFs In Quarantine” – Coronavirus Porn Sweeps America
The next big trend in porn is Coronavirus-themed videos. Porn sites across the internet have seen an influx of uploads with amateurs banging in bio hazmat suits and or just simply in masks.
Over the last month, Pornhub has seen 115 Coronavirus-themed videos uploaded by wannabe porn stars, otherwise known as amateurs.
There’s a perfectly reasonable explanation for the surge of Coronavirus-themed porn videos, that is, because these amateurs depend on ad revenue to make money, and the only way to survive and generate clicks is to stay super relevant with current events, such as making porn videos about a pandemic that could wipe out the human race.
One of the oddest videos Vice ran across is titled “Bodycam Footage (CDC Agent) Investigates Deserted Wuhan,” features a first-person point of view of a hospital worker stumbling around in the dark, uncovers a creepy hospital patient, and that’s the moment where we will stop describing what happens next…
Here’s a PG-rated version of the creepy Coronavirus-themed porn video:
xHamster spokesperson Alex Hawkin told Vice that Coronavirus-themed porn videos have been surging after it provided free premium accounts to regions affected by the virus.
Another video Vice viewed is titled “COVID-19 Coronavirus: Horny Slut Has to Use Protection During Outbreak!” where amateur pornstar “Chase Poundher” emerges from the hallway wearing a face mask and tells a female performer entering the house, “Wait, don’t you move a foot closer. Haven’t you heard of COVID-19?” Mr. Poundher then lectures her for one minute about the virus, the outbreak in China, and mask safety.
“I think people are attracted to COVID-19 themed porn the same way people who are scared of their shadow are attached to horror movies: We are all searching for things that make us come alive,” Mr. Poundher, told Vice. “COVID-19 is something that brings fear and mystery to pretty much everyone in the world right now… You need to be able to feel something, and what better way to make you feel something than the global crisis we are all in right now.”
Other COVID-19 themed porn videos have surfaced on the internet in the last week, including “MILFs in quarantine,” “Face Sitting Corona Virus – No Mask,” and “TSA Agent Detains Woman Suspected of Coronavirus.”
“We knew that the corona event was ‘good viral material,’ but we also knew it was affecting people in tragic ways,” Mr. Poundher said. “We didn’t want to insult them by making it too real. We personally know people actually stuck in Wuhan and made it with them in mind.” They asked themselves: Would they be offended by this? Or would this take their minds off their situation? “We want the latter.”
The search term “Coronavirus porn” is in a breakout pattern across the US.
Americans are increasingly embracing pandemic doom porn as confirmed cases and deaths surge across the country. Seriously, WTF.
An associate professor and researcher at the University of Tennessee at Knoxville has been arrested for allegedly concealing ties to a Chinese university while receiving federal funding,according to a recent Justice Department press release.
Amning Hu was charged with three counts of wire fraud and three counts of making false statements following a grand jury indictment for “concealing his affiliation with Beijing University of Technology (BJUT) in China” in order to receive a research grant from NASA.
According to the Justice Department, NASA is prohibited from using federal dollars to collaborate with China or Chinese universities. Hu allegedly made “false representations and omissions to UTK about his affiliation with BJUT caused UTK to falsely certify to NASA that UTK was in compliance with federal law.”
The nature of the particular research at issue is currently unclear. AsThe Hill reported, the university has since removed from its website information about the professor’s work. The Beijing University of Technology could not be reached for comment.
“The University of Tennessee has suspended Associate Professor Anming Hu, who was indicted by federal authorities on felony charges. UT officials have cooperated with federal authorities during the investigation. University leadership is fully committed to adherence to grant procedures and the protection of intellectual property.”
U.S. law enforcement officials also took a strong stance.
“The United States Attorney’s Office takes seriously fraudulent conduct that is devised to undermine federally-mandated funding restrictions related to China and Chinese universities,” said U.S. Attorney J. Douglas Overbey for the Eastern District of Tennessee.
“The University of Tennessee has cooperated with the investigation, and the U.S. Attorney’s Office values the university’s assistance in this matter.”
“Hu allegedly committed fraud by hiding his relationship with a Chinese university while receiving funding from NASA,” said Assistant Attorney General for National Security John C. Demers.
“This is just the latest case involving professors or researchers concealing their affiliations with China from their American employers and the U.S. government. We will not tolerate it.”
A ResearchGate profile for Hu stated that his work focused on nanomanufacturing and 3D printing. Hu’s Google Scholar page lists many papers relating to nanoparticles.
According to the Justice Department press release, Hu faces 20 years in prison and a $250,000 fine for each wire fraud charge and as many as five years in prison for each false statement charge. The case is currently under investigation by the FBI and Inspectors General from NASA and the Department of Energy, along with investigators from the Department of Homeland Security.
Hu could not be reached for comment in time for publication.
Iran Hawks Pressuring White House To Halt ‘Humanitarian’ Medicine To Iran Amid Outbreak
An influential US lobbying group tied to Republican hawks is attempting convince the Trump administration to block all medicine sales to Iran after the US Treasury recently opened up humanitarian channels due to Iran’s devastating coronavirus outbreak.
Despite the daily soaring infection rate and death toll, with Iran on Friday confirming 124 deaths amid 4747 confirmed cases — though true numbers are believed much higher — the hawkish pressure group, United Against Nuclear Iran, wants to ensure all medical trade dries up.
Last month the US administration came under fire based on the allegation that aggressive and tightening US-led sanctions of the past two years have actually exacerbated the new Covid-19 crisis in Iran, not only setting the conditions for rapid spread but weakening the medical response for lack of equipment, medicines, and ability to test.
Coronavirus testing in Iran, file image.
However, the White House responded to the criticism by easing sanctions and ensuring humanitarian channels were opened up, specifically to fight the coronavirus, which threatened to spread further through the Middle East.
“The Trump administration is partially reversing course on economic sanctions that have slowed down Iran from importing coronavirus test kits as the country faces down the most deadly COVID-19 outbreak outside of East Asia,” according to a report in The National Interestlast month. This included expanding special financial channels for humanitarian goods and medicine to the Islamic Republic.
An investigative report in The Intercept describes United Against Nuclear Iran (UANI) and its mounting a well-funded “name and shame” operation targeting medical industry companies still doing business with Iran:
UANI says it aims to persuade “the regime in Tehran to desist from its quest for nuclear weapons, while striving not to punish the Iranian people.” (The U.S. intelligence community does not believe that Iran has any desire or plans to build nuclear weapons.) UANI’s efforts, however, have extended beyond sanctions into pressuring companies that do legal trade with Iran, often under the Treasury Department’s humanitarian exemptions to sanctions — including medical-related trades that would presumably aid in combating a massive public health crisis like this coronavirus outbreak.
The pressure group has ties to John Bolton, the Israeli lobby, as well as Republican Party mega-donors and (surprise, surprise) Saudi Arabia and the UAE.
UANI claims its actions continue to be motivated by ensuring Iran cannot pursue over ever acquire a nuclear weapon.
The group is specifically going after companies with humanitarian exemption waivers to conduct limited business with Iran, focused on essential pharmaceutical supplies. The report continues:
UANI operates an “Iran Business Registry” that provides an online database of companies it believes are conducting business in or with Iran — a name-and-shame strategy to increase Iran’s economic isolation. The pressure campaign has targeted multiple medical companies with Treasury Department licenses to conduct trade with Iran. Nine pharmaceutical, biotechnology, and medical-device corporations, all with special licenses, are listed on UANI’s business registry. Companies urged by UANI to “end their Iran business” include Bayer, Merck, Pfizer, Genzyme, AirSep, Medrad, Becton, Dickinson & Company, Eli Lilly, and Abbott Laboratories.
To the surprise of many, the administration last week momentarily put aside the fact that it’s essentially at war with Iran and actually offered to “help” Iran combat the rapidly spreading and deadly coronavirus according to Secretary of State Mike Pompeo’s prior testimony before the House Foreign Affairs Committee on Feb. 28.
But Iran’s foreign ministry slammed America’s offer as “ridiculous”and derided it as propaganda after Washington had already “closed the paths for buying medicine and medical equipment,” according to official statements. As Covid-19 infections continue going global, the blame game is likely only to continue ratcheting up.
Iranian leaders have blamed Washington for the worsening crisis, given the limited ability to import virus testing kits and equipment and medicines. But the State Department under Pompeo has tended to blame countries that have become central to the virus’ spread for deepening the crisis through a severe lack of transparency.
As the coronavirus is spreading around the world, its ramifications on the economy will boost the price of gold.
The coronavirus is swallowing the world. What started in January as a local issue in Wuhan, China, is now a global problem. Although there remains uncertainty around the health hazards of the virus, its impact on the world economy is clear. Early on, we witnessed large segments of the Chinese economy grinding to a halt and supply chains collapsing. As the virus is spreading, major economies will likely suffer the same fate as the Chinese. Across the globe, schools and companies are closed. Events are canceled, and traveling is brought to a minimum. People that can work from home are asked to do so.
Government officials are taking precautions as well and for a good reason. In Iran, 23 Members of Parliament have been infected, and one of Ayatollah Khamenei’s top advisers died of the virus. On Wednesday, the first case of corona in an EU institution was confirmed.
The European Central Bank called off a meeting on Tuesday out of fear for contamination, and the International Monetary Fund decided to change the spring meetings to a virtual format (video conference). In France, President Macron ordered to confiscate all stockpiles of face masks and to nationalize production, just before the news came out by the World Health Organization, that “the mortality rate for COVID-19 [coronavirus] is 3.4% …, higher than previous estimates of about 2%.”
My concern is that the virus has set in motion a domino effect in a brittle world economy. After the Great Financial Crisis, central banks have over-stimulated the economy through quantitative easing (“printing money”) and extremely low interest rates. Unconventional monetary policy has spawned asset bubbles, zombie companies and banks, decreased productivity growth, and global debt to GDP is at a historical high of 322%. Although unconventional monetary policy has worked counterproductive, any subsequent economic downturns will make central banks double down on their previous policy: more stimulus.
Powell says the Fed will aggressively print money to fight next recession.
1) This promise won’t make the government spend less.
2) This is as good as a guarantee the current debt burden will be alleviated through significant inflation.
The first macroeconomic indicators coming in from China are disastrous. The headline Caixin Business Activity Index fell over 25 index points from 51.8 in January to 26.5 in February.
Courtesy Caixin.
The economic shock made Chinese banks—which were already suffering from non-performing loans (NPLs) on their balance sheet before the virus erupted—to take extraordinary measures in not recognizing bad loans, with the explicit approval of regulators in Beijing. More from Bloomberg:
Some of the measures, … include rolling over loans to companies at risk of missing payment deadlines and relaxing guidelines on how to categorize overdue debt
lenders are also … allowing borrowers to skip interest payments for as long as six months
The four biggest state-owned banks are trading at an average 0.5 times their estimated book value for this year, near a record low.
Courtesy Bloomberg.
These are signs of a double-edged problem: companies aren’t making ends meet and banks face insolvency.
The value at which banking stocks are traded relative to their book value is called the “price to book ratio.” As stated by Bloomberg, this ratio is near a record low for Chinese banks (at an average of 0.5). If we simplify the price to book ratio, then it can be said to reveal how the market values a bank’s balance sheet, versus how the bank itself values its balance sheet. When the price to book ratio is below 1 (alternatively below 100%) the market thinks the bank is in bad shape. If the ratio is 0.5, the market thinks the bank is in very bad shape.
European banks are in no better condition. A few months ago, Dutch independent journalist Arno Wellens computed the price to book ratio for Europe’s largest banks. Some banks appeared to be healthy—mainly the ones in countries that are not in the eurozone. But many other Systemically Important Banks, such as Deutsche Bank, Commerzbank, BNP Paribas, Crédit Agricole, Société Générale, UniCredit, Banco Popolare, Banca Monte dei Paschi, and Banco Santander have price to book ratios far below 100%. Insiders know these banks are not healthy (no matter what stresstest they pass).
The coronavirus will cause the economy in Europe to suffer a significant setback (as in China). It will hurt businesses and, in my view, will push the economy into a recession. On Wednesday, European Union officials publicly stated they are “starting the internal reflection” on their methodology for dealing with failing banks. Banks, once again, will face bankruptcy.
Belgian Finance Minister in 2008 says, after he resigned, that the deposit guarantee schemes are fictional. ‘Impossible to pay everybody at the same time €100,000…’ pic.twitter.com/aZJClAJjI9
Gold has been a safe haven for thousands of years. And still, when economies contract, stock markets plummet, and banks fail, gold offers the best protection, as it’s the only financial asset that is no one’s liability. Gold has no counterparty risk and can’t be printed.
Other traditional safe havens are sovereign bonds. In the past years, the gold price in U.S. dollars has been correlated with long term real interest rates. Whenever real interest rates decline, the gold price rises. Real interest rates are calculated by subtracting inflation from, in this case, the nominal interest rate on a 10-year U.S. sovereign bond (UST). On Tuesday, the nominal interest rate on a 10-year UST fell below 1% for the first time ever. I expect nominal rates in the U.S. to further decline (possibly to enter negative territory, as in Europe and Japan). This would be bullish for the price of gold.
The decline in UST yields came after the Federal Reserve cut its baseline interest rate on Tuesday by 0.5% in an attempt to calm markets. Last week the U.S. stock market experienced its fastest correction in history.
Investors are in the process of running down Exter’s inverse pyramid: selling stocks, buying government bonds, and to a certain extent, gold.
I say to a certain extent, as currently gold makes up a small fraction of all financial assets. When I asked Jeffrey Christian from CPM Group how much he estimates gold now represents, he replied over email:
Gold accounted for 0.52% of global financial assets in 2019, up from 0.51% in 2018.
In my view, this means there is still much more upside for gold.
Conclusion
Although I think gold has a lot more upside, it can be a bumpy road. When the economy contracts, deflationary forces can hold back gold. Central banks will not tolerate deflation, though, certainly not with sky-high debt to GDP levels. Deflation causes nominal income to decline, which makes debt unserviceable. This would trigger a chain reaction of defaults. Central banks stand ready to avoid this scenario and will continue to pursue inflation to alleviate the debt burden.
When the economy contracts, or deflation looms, I wouldn’t be surprised if central banks either hand out cash financed by new money creation (helicopter money) or directly devalue their currencies against gold as they did in the 1930s. Both scenarios could significantly increase the price of gold.
NIMBY Seattle-Area Residents Resist Coronavirus Quarantine Plan For Local Motel
Seattle residents are pushing back against officials in King County, Washington, who plan to use emergency powers to buy and renovate an Econo Lodge located south of the city to house coronavirus patients, according to Bloomberg.
The mayor of Kent, Washington – a Seattle suburb near the airport where the 85-bed motel is located, was livid over the plan. While local workers and residents are staunchly opposed as well.
“We’re one of the largest cities in the county, and we know we have a role to play in preventing the spread of the virus,” said Kent Mayor Dana Ralph in a phone interview. “But we were not included in the conversation or decision making.”
This type of consternation is common when a community pushes back against an unwanted project — inspiring the term Nimby for “not in my backyard.” This time, the backlash comes as health officials try to contain a spreading public health crisis, revealing a challenge that many communities across the U.S. may face as they try to slow the outbreak.
“Washington state counties are not the only places where that is going to be discussed,” said Irwin Redlener, a disaster preparedness expert and public health professor at Columbia University in New York. “We might have to adopt procedures and protocols that would be unacceptable in the absence of a true national emergency. In other words, our standards might have to get much more lax.” –Bloomberg
Residents of Kent aren’t the only ones resisting quarantine plans. Last month, federal officials were forced to scrap a plan to house coronavirus evacuees from a cruise ship to a FEMA facility in Anniston, Alabama, after locals and the city council opposed the move.
In Orange County, California, residents are also up in arms over a proposal to place some patients in a state-owned facility.
The Econo Lodge plan would include $4 million for the purchase of the motel and an additional $1.5 million in emergency funds to renovate it, as well as hire as many as 11 existing employees to run the facility. It would be used to house coronavirus patients who are infected but not seriously ill, as part of an effort to keep hospital beds available for those who need them, according to Bloomberg. According to county officials, it was the only property on the market that met their criteria of separate heating and cooling systems for each room, and doors which open to the outside, rather than a hallway.
“From that perspective, a motel is a very good solution,” said NYU School of Public Health professor David Abramson. “They’re almost entirely private spaces.”
On Thursday morning, cars raced by on the highway behind the motel, where a room with a single bed was going for $78.68 a night. Trucks were parked at the edge of the property, which sits near a Denny’s, a bowling alley and a Ford dealership.
Inside, confusion and anger reigned. The front-desk worker at the motel, who asked to not be identified by name, said that she had learned about the plan to quarantine coronavirus patients from news reports and was strongly opposed. She had yet to hear from her manager whether she would still have a job. And, even if she did, she wasn’t sure she wanted it for fear of infecting her family. –Bloomberg
Without interference, the facility could open within two weeks. According to the report, King County officials are also looking at other quarantine locations, including in Seattle.
That is, if the locals don’t stand in the way.
“I’m sorry for the people who are going through this,” said 35-year-old Rupali Handa, who said that officials should quarantine people “somewhere else.”
Are you ready for this week’s absurdity? Here’s our Friday roll-up of the most ridiculous stories from around the world that are threats to your liberty, your finances, and your prosperity… and on occasion, poetic justice.
* * *
Hillary Clinton’s Email Scandal Just Rose From the Dead
Ignorance of the law is no excuse for you or me.
But somehow when Hillary Clinton broke the law while Secretary of State, it was her intentions that mattered.
As everyone knows by now, Clinton stored confidential, top secret emails on a personal, unsecured email server while she was Secretary of State.
She got off the hook because she claimed that she didn’t intend to violate the law… she didn’t realize that what she was doing was totally illegal.
That’s why she’s not rotting in a prison cell, even though you or I would be turning big rocks into little rocks in a DayGlo Orange jumpsuit if we had committed an equivalent crime.
But a group called Judicial Watch wasn’t as quick to let it go.
Using Freedom of Information Act requests, they continued to uncover more and more details of the case and bringing it all to court. And as the judge in the case commented, “With each passing round of discovery, the Court is left with more questions than answers.”
Therefore a federal judge has permitted another round of discovery. This means Hillary Clinton will be forced to sit for an interview with government officials to answer “significant questions” about her violation of the law.
Police in Scotland have a list of people who tell offensive jokes
Scottish Internet users better be careful of the jokes they tell online– you might end up on a government watchlist.
A Freedom of Information request revealed that 3,300 “non-crime hate incidents” have been logged in a police database.
Hundreds of people were added to the list last year for making offensive jokes or rude comments online.
Police say they track these individuals just in case their humor crosses the line into illegal territory.
For example, a couple years ago a Scottish YouTuber was arrested and convicted for teaching his pug a Nazi salute.
They guy may have been way too sophomoric… but when did it become a crime to be immature and offensive?
And now free speech is being monitored for signs of criminality.
Plus, with certain types of background checks, potential employers could see that these innocent people have been logged social media posts deemed to be offensive by the government.
School forbade kids from saying no when asked to dance
I just love it when wokeness contradicts itself.
A middle school in Utah was gearing up to host its Valentine’s Day dance. And in an effort to make sure that all students felt “welcome, comfortable, safe, and included,” the school adopted a policy forcing the kids to dance with anyone who asked them.
And sure enough, when an 11-year old girl was asked to dance by a boy who creeped her out, the principal forced them to dance together.
This is pretty much the opposite of #MeToo.
And in their ridiculous effort to make sure that no student was upset or offended, they violated one of the most basic consent rules in our society.
This is the paradox of wokeness: it’s absolutely impossible to prevent people from feeling upset, offended, excluded, or rejected.
Update: woman pleads guilty to being topless in her own home
We’ve been following the case of Tilli Buchanan who was charged with sex crimes for being topless in her own home.
She and her husband had removed their shirts after installing insulation. Because her step-children saw her barechested, Tilli was charged with “child sex abuse” under Utah criminal code 76-9-702.5(2)(a)(ii)(B) for exposing “the female breast below the top of the areola. . .”
That left her facing the possibility of having to register as a child sex offender.
Originally she tried to challenge the law itself under equal protection grounds, since it treated male and female nipples differently.
But when she lost that case, she opted to take a plea deal. The charges were downgraded so she won’t be considered a sex offender.
Tilli will pay $600 and the case will be dismissed in a year if she doesn’t commit any crimes.
It’s pretty pathetic that she was ever charged in the first place, and sad that this is what the justice system wastes resources on.
Massacre In Kabul Targeted Politicians, Leaves 27 Dead – Presidential Candidate Barely Escapes
At a crucial moment at which the historic US-Taliban peace deal appears hanging by a thread – if not already dead altogether – and as Pompeo is dubiously pledging to keep it alive and push forward, gunmen have carried out a massacre in Kabul which nearly killed top Afghan political leader, Abdullah Abdullah.
At a moment top national leaders were attending a Shia commemoration ceremony in the Afghan capital, gunmen unleashed a hail of bullets in a major coordinated attack, killing at least 27 people, according to a health ministry statement.
British soldiers responded to the massive Friday attack, via AP/CNN.
“Twenty-seven bodies and 29 wounded transported by … ambulance so far,” a health ministry spokesman told Reuters in the aftermath. The number of wounded was later updated to at least 55 injured in the attack.
Crucially, the country’s Chief Executive and presidential candidate Abdullah Abdullah escaped unharmed, as well as the chairman of the Afghan High Peace Council Karim Khalili — who was giving a speech at the very moment the attack started, said to include rockets fired toward the crowd.
Khalili is seen in video frantically leaving the stage mid-speech as gunfire rings out, fleeing for his life:
“The attack started with a boom, apparently a rocket landed in the area, Abdullah and some other politicians … escaped the attack unhurt,” Abdullah’s spokesman, Fraidoon Kwazoon, told Reuters.
CNN describes that armed men began firing down on the crowd from a nearby high-rise building, and in the hours after security forces were described as still pursuing the attackers.
Afghanistan’s Chief Executive under President Ashraf Ghani, Abdullah Abdullah, via DW.
Abdullah Abdullah said after escaping: “I will not blame anybody for this because I don’t have a full picture from our security forces, but we need to know who is, or who were, behind it,” according to CNN.
Crucially, the Taliban denied any involvement in the attack, and it’s as yet unclear just who was behind it, though the same commemoration event of a prior Shia national unity figure has in past been subject of armed attack.
The present disconnect between the science of Covid-19 and the status quo’s complacency is truly crazy-making, as we face a binary situation: either the science is correct and all the complacent are wrong, or the science is false and all the complacent are correct that the virus is no big deal and nothing to fret about.
Complacency is ubiquitous: readers on Facebook leave comments on my posts “this is silly.” Correspondents report that people don’t even cover their mouths when coughing, much less use a tissue. People keep repeating like a mantra that a bad flu season kills 35,000 in the U.S. alone, and so why worry about a couple thousand deaths globally?
Another common trope is “hepatitis kills far more people in the U.S., so why worry about the coronavirus?”
So let’s look at some data and consider what science can tell us about the potential consequences of the Covid-19 virus spreading as widely as conventional flu viruses.
The fallacy made by the complacent is that the number of cases will remain small (in the dozens or hundreds) and so the number of deaths will also remain small.
Since the evidence suggests the Covid-19 virus is more contagious than conventional flu viruses, a reasonable assumption is that it will eventually infect more people than a conventional flu, which according to the CDC infects up to 45 million Americans annually.
According to the CDC, viral hepatitis B caused 5,600 deaths in the U.S. in 2017, and hepatitis C caused 19,000 deaths, for a total of 24,600. That certainly exceeds reported deaths of Covid-19, but since the statistics presented by the Chinese government are unreliable, we have no idea how many people have the virus and how many have died.
According to the CDC, influenza and pneumonia together caused 55,000 deaths in the U.S. in 2017.
Given the scientific evidence that Covid-19 is highly contagious, let’s do a Pareto Distribution (80/20 rule) projection and estimate that 20% of the the U.S. population gets Covid-19. That’s 66 million people, roughly 50% higher than the 45 million who catch a flu virus in a “bad flu” season.
Data suggests between 2% and 3.4% of all Covid-19 cases end in death, but the deaths are concentrated in the 20% of cases that become severe, and in the vulnerable populations within the 20% severe cases that require hospitalization.
Using the lower CFR (case-fatality rate) rate, 2% of 66 million is 1.3 million, so if Covid-19 infects only 20% of the U.S. populace, current data suggests 1.3 million people will die. This is considerably more than 24,600,or 55,000. (Total annual deaths in the U.S. are around 2.8 million.)
But these mortality data are drawn from small numbers of patients who have had access to intensive care. Anecdotal evidence from places where the healthcare system has been overwhelmed (Wuhan) so intensive care is unavailable to the majority of severely ill patients suggest much higher death rates around 15%, with worst-case scenarios going as high as 80% mortality for untreated severe cases in vulnerable populations (elderly and chronically ill).
If 20% of all cases can be expected to be severe and require hospitalization/intensive care (20% of 66 million is 13 million people), then intensive care will quickly become unavailable due to the low number of intensive care beds in the U.S. (94,000). The total number of all hospital beds in the U.S. is around 931,000. (Recall that the majority of these beds are already in use, so the number available to those severely ill with Covid-19 is a fraction of the total.)
If 15% of untreated severely ill patients die, that is 13 million X 15% = 1.95 million.
So let’s cut all these numbers in half: let’s assume only 10% of the U.S. populace gets the Covid-19 virus (33 million), so only 6.6 million people become severely ill. If 15% of untreated severely ill patients eventually die, that’s 1 million deaths in the U.S. alone.
In other words, the death rate is only low if the number of severely ill patients remains very low. Once the number of patients needing hospitalization exceeds the number of ICU beds, the death rate leaps dramatically.
Authorities are well aware of the potential for the Covid-19 to spread rapidly and cause a great many deaths. But they’re also concerned about the consequences of an economic crash as people avoid public places (i.e. “social distancing”) as the most effective preventative measure to reduce the chances of contracting the virus.
The resulting layoffs and business closures will trigger financial and economic consequences that may not be recoverable if these trends self-reinforce (more layoffs cause consumption to decline, triggering more layoffs, etc.).
If authorities downplay the Covid-19 pandemic and encourage people to continue flying, gathering in public, etc. in order to keep the economy humming, that will accelerate the spread of the virus.
When people awaken to the dangers of the pandemic (for example, when ICU beds are all filled and severely ill patients are being turned away), they will panic and pursue “social distancing” regardless of what officials say. When complacency gives way to panic (yes, it can happen here and yes, it can happen to you), the economy will crash.
In other words, the economy will crash either way: if authorities force “social distancing” to limit the spread of the virus or if they downplay the pandemic and let the virus spread to the point that people panic and “socially distance” themselves regardless of official entreaties to get out there and buy, buy, buy.
Forcing “social distancing” won’t stop the eventual spread of the virus, because as soon as restrictions are eased the virus will enter the newly open cities via asymptomatic carriers and a second wave of infections will spread. Forcing “social distancing” while thousands of airline flights and railway travel continue to spread asymptomatic carriers to every transportation node on the planet is not going to stop the spread of the virus.
The science suggests a significant percentage of the human populace will eventually get the Covid-19 virus. Estimates run from 40% to 70%; You’re Likely to Get the Coronavirus (The Atlantic).
Common sense suggests complacency is misplaced, and efforts should be made to minimize the risk of getting the virus until a reliable vaccine is available, which those with experience in the field suggest might be a year or 18 months away.
The science is telling us that the global economy will experience a depression as these realities sink in. Authorities pushing complacency as a short-term financial panacea are doing an enormous disservice to the people who entrusted them with power. The more effective strategy would be to prepare to deal with a global depression while limiting the spread of the virus by whatever means are available, which at present boils down to social distancing and increased hygiene.
Here is an example of status quo complacency in the U.S.: the person returns from Japan with symptoms of Covid-19, tests negative for conventional flu and other viruses, CDC refuses to test for Covid-19, no special protocols despite the obvious risk of Covid-19, staff tells the patient to go home by whatever transport he/she normally uses. My COVID-19 Story. Brooklyn. (via Maoxian)
So either the science is wrong and the complacent will be proven correct, or the science is correct and the complacent will be wrong.
Carnage Crushes Credit, Crude, & The Yield Curve As Fed Admits “Credibility Eroding”
The global equity market cap collapsed by a record $9tn – or two-thirds of China’s GDP – in 9 days, while global; sovereign 10-year bond yields crashed below 1.00% for the first time ever…
Source: Bloomberg
Even the veteran-ist of veteran traders were shocked by this week’s moves…
“Panic moved up a few notches from already extremely high levels,”said one trader today,
“I thought last Friday was the blow off top and then a few times this week before today but now its beyond belief,” he said, noting the rally in 30-yr to all- time lows.
The flip from Extreme-est Greed to Extreme-est Fear was unprecedented…
Or put another way…
But the real shock was from Federal Reserve Bank of St. Louis President James Bullard, who admitted central banks are losing their credibility rapidly: “Many central banks have consistently missed their stated inflation targets to the low side for many years… Critically, the central bank has to be able to actually deliver the required.” Which means…
“Credibility of central banks, instead of improving over time based on the achievement of stated goals, seems to be eroding instead.”
That’s quite an admission but 100% correct and this week’s carnage after an emergency 50bps rate-cut did nothing to calm fears is a perfect example…
And despite a huge resurgence in the Fed’s balance sheet, stocks were not playing along at all…
Source: Bloomberg
Today was quite a day across every asset class. We gathered some of the most shocking market move headlines of the day for some perspective:
GLOBAL CONFIRMED CORONAVIRUS CASES SURPASS 100,000
EUROPE DEBT RISK GAUGE EXTENDS RISE TO HIGHEST SINCE JUNE 2016
GERMANY’S 10-YEAR BOND YIELD FALLS TO RECORD LOW
GERMANY’S 30-YEAR BOND YIELDS FALL TO ALL-TIME LOW
EUROPE SENIOR FINANCIAL DEBT-RISK JUMPS MOST SINCE 2018
JPMORGAN EMBIG DIVERSIFIED SOVEREIGN SPREAD RISES ABOVE 400 BPS
EMERGING-MARKET USD SOV.-BOND PREMIUM JUMPS MOST SINCE 2011
U.S. TREASURY 5-YEAR YIELD FALLS BELOW 0.50%
U.S. 30-YEAR YIELD FELL AS MUCH AS 30BP ON INTRADAY BASIS
U.S. 30-YEAR YIELD SET FOR BIGGEST ONE-DAY DROP SINCE 2009
U.S. CREDIT MARKET FEAR GAUGE SURGES MOST SINCE AT LEAST 2011
VIX’S 3-WEEK CHANGE IS BIGGEST EVER – BIGGER THAN LEHMAN
WTI CRUDE FUTURES DOWN 10.% – BIGGEST FALL SINCE 2014
For some context – the recent bond market collapse has never, ever happened before…
If you can tell from my tone, this troubles me, so I went back and looked into this, we have never had a 50% change in 10y yield levels in either direction over a 2-wk window. We have had larger rallies (yup in 4Q08) but nothing comes close to cutting rates in half this fast… https://t.co/tP2fJAdbvfpic.twitter.com/8308IzVmwW
And as The Fed cut rates, the 30Y Yield chased it down, along with the rest of the curve…
Source: Bloomberg
As Nomura’s Charlie McElligott details, panic moves in US Rates as Duration / Convexity goes “offer-less,” with 10Y yields hitting a fresh record low of 0.6932%, multiple “limit-UP” halts in UST Ultra bond futures and 30Y UST yields crashing down -22bps at the extremes (5s30s was flatter by -14bps at one point) in an investor climate that is fixated on “imminent global recession” via pandemic “lock-down”-NYT piece stating that over 2700 people have quarantined themselves in New York City, while new cases in S Korea frighteningly re-accelerate
This obviously has the look of a Rates “convexity-event”(forced hedging / buying at the highs from mortgage investors, insurance companies and those who are “short options”—i.e. all the Vol dealer desks selling low-strike receivers for the past few years, or the market makers short those 350k ED$ “Par Calls” for Jun expiry!)…
…but this is also a simple function of OIS markets now pricing-in a full ADDITIONAL 50bps rate cut on March 18th from the Fed already, as well as the obvious dynamic where “Rates are your everything hedge” from cross-asset investors (i.e. Equity L/S investors buying ED$ upside).
China is still massively outperforming US and Europe since the start of the Covid-19 crisis…
Source: Bloomberg
Today’s US equity market carnage sent all the majors into the red for the week, but the last 30 minutes saw the machines work ultra-hard to get the Dow, S&P, and Nasdaq green…
Was The PPT in the house again?
Somebody do something!
Another late-Friday panic-buy?
The Elon Musk Ramp? “The coronavirus panic is dumb”
So are we due for a bounce now?
Source: Bloomberg
US Banks have now crashed over 27% from their early Jan highs…
Source: Bloomberg
The biggest US banks have been bloodbath’d…
Source: Bloomberg
But, more worryingly, Global Systemically Important Banks stocks have crashed to their lowest since 2016…
Source: Bloomberg
While energy stocks were already getting clubbed like baby seals, the last two weeks have seen them collapse 22%…
Source: Bloomberg
MAGA Stocks have now lost over $750 billion in market cap (Note that the Q4 2018 collapse wiped just over $1 trillion)…
Source: Bloomberg
The week saw defensives dominate as cyclicals were hammered…
Source: Bloomberg
VIX topped 54 intraday for the first time since 2009…
This is the biggest 3-week surge in VIX… ever…
Source: Bloomberg
The VIX term structure is in massive backwardation…
Source: Bloomberg
The VIX Term structure hasn’t been this inverted since Lehman…
Source: Bloomberg
Europe’s VIX exploded this week, closing at its highest since the 2011 crisis…
Source: Bloomberg
Treasury ‘VIX’ surged today to its highest since 2011…
Source: Bloomberg
Credit markets were a bloodbath this week, with both HY and IG blowing out in US and EU…
Source: Bloomberg
And if you thought that credit’s biggest blowout ion a decade was notable, it’s nothing if it starts to catch up to its capital structure colleague on risk…
Source: Bloomberg
US Treasury yields collapse this week was nothing short of stunning with the entire curve down 40-50bps!!
Source: Bloomberg
10Y Yields crashed to a stunning 65bps overnight…
Source: Bloomberg
The 30Y Yield accelerated lower in the last hour, crashing below the Fed Funds Rate!
Source: Bloomberg
The yield curve flattened drastically,,,
Source: Bloomberg
Some perspective to where were just over a month ago…
Source: Bloomberg
The Dollar Index fell for the 2nd straight week (down 6 of the last 7 weeks)…
Source: Bloomberg
On a broad trade-weighted basis, the dollar has been gaining against the rest of its fist peers, but crashing relative to hard money…
Source: Bloomberg
Cryptos rallied on the week led by Bitcoin Cash…
Source: Bloomberg
Crude was obviously the week’s biggest commodity loser , copper went nowhere as PMs were bid…
Source: Bloomberg
WTI crashed over 10% today after the collapse of OPEC+ talks, its biggest drop since 2014…
Source: Bloomberg
Brent was worse, with its biggest drop since Jan 2009…
Source: Bloomberg
Oil ‘VIX’ has exploded higher…
Source: Bloomberg
This is the worst start to a year for crude since 1986…
Spot Gold soared up to $1690 – the highest since Jan 2013
And here is the stunning punchline: out of the five historical instances of this week’s pattern of trading (leaving out the present case for obvious reasons), Nomura finds that the only instance that was followed by a sustained market rally was that of April 1933, when the US abandoned the gold standard in the midst of the Great Depression.
And while it would be next to impossible to confiscate gold, a massive dollar devaluation against the yellow metal may be just what the Fed is planning next (as Harley Bassman suggested in 2016)
As Sven Henrich tweeted into the close:
“A world without central banks in control is a scary world indeed. People actually have to actively think about their investments.”
