Tag: finance

Authored by Ben Hunt via EpsilonTheory.com,

The World Health Organisation will lead a mission to China this weekend to start investigating the COVID-19 outbreak.

Sky News, FEBRUARY 15, 2020

“start investigating” … AYFKM?

There’s this pleasing mythology out there that the World Health Organization is like some international version of the Center for Disease Control, that it’s staffed by scientists and doctors flying all over the world and racing against the clock to battle infectious diseases and – against all odds – find The Cure.

I mean, that’s an actual subplot of Contagion, where an intrepid WHO scientist tracks down the disease origin in Hong Kong, goes to the remote Chinese village where all of the children are sick (the children!), is taken prisoner, and works heroically (if ultimately unsuccessfully) to get vaccines to the children (the children!).

This is a crock.

The World Health Organization is a political organization, bought and paid for by its sponsor countries (China foremost among them), with a single, dominant mandate: maintain the party line.

Literally.

The truth is that WHO has done nothing more than parrot the official Chinese Communist Party line since the day the world learned of COVID-19.

The truth is that only now – TWO MONTHS INTO THE EPIDEMIC – is WHO sending a “team” to “start investigating” the virus.

To be sure, WHO’s Director General, Dr. Tedros, has been to China several times since the disease broke out, glad-handing (again, literally) President Xi and all the other CCP mandarins.

So … I’m not going to get into the way China lobbied and pressured the UN to get Dr. Tedros appointed as WHO Director General, succeeding their hand-picked (again, literally) Director General, Margaret Chan, despite credible accusations that Tedros had covered up cholera outbreaks in his home country of Ethiopia. If you want to get into that, you can read this New York Times article: Candidate to Lead the W.H.O. Accused of Covering Up Epidemics.

And … I’m not going to get into the way Dr. Tedros appointed freakin’ Robert Mugabe as a Good-Will Ambassador for the World Health Organization, a toady move that was greeted by healthcare professionals (and anyone with a soul) as “a sick joke”. If you want to get into that, you can read this New York Times article: After Making Mugabe a ‘Good-Will Ambassador,’ W.H.O. Chief Is ‘Rethinking’ It.

No, no … I’m just going to highlight what Dr. Tedros said at the WHO Executive Board meeting in Geneva on February 4, a week after meeting with Xi in Beijing and a few days after senior Chinese diplomats started talking about the “racism” inherent in other countries stopping flights to China and denying visas to people with Chinese passports issued in Hubei province.

Tedros said there was no need for measures that “unnecessarily interfere with international travel and trade,” and he specifically said that stopping flights and restricting Chinese travel abroad was “counter-productive” to fighting the global spread of the virus.

This is the Director General of the World Health Organization. On February 4th.

“We call on all countries to implement decisions that are evidence-based and consistent,” said Tedros. Roger that.

There’s just one problem.

The “evidence” here – taken without adjustment or question from the CCP – was a baldfaced lie.

And everyone at WHO knew it.

How do I know that everyone at WHO knew that the official Chinese numbers were a crock on Feb. 4?

Because WHO-sponsored doctors in Hong Kong published independent studies on Jan. 31 showing that the official Chinese numbers were a crock.

https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)30260-9/fulltext

Money quotes:

In our baseline scenario, we estimated that the basic reproductive number for 2019-nCoV was 2.68 (95% CrI 2.47–2.86) and that 75,815 individuals (95% CrI 37,304–130,330) have been infected in Wuhan as of Jan 25, 2020.

If the transmissibility of 2019-nCoV were similar everywhere domestically and over time, we inferred that epidemics are already growing exponentially in multiple major cities of China with a lag time behind the Wuhan outbreak of about 1–2 weeks.

I’ve attached a PDF of the full report here: Lancet nCov2019 Model.

This is what it looks like when the narrative tail of personal and professional corruption (must support my Chinese benefactors!) wags the public policy dog (sure, I’ll recommend that flights and visas should continue, based on evidence I know is false!).

Will this disease spread farther and faster … will more people DIE … because WHO Director General Tedros recommended as best practice on February 4th that flights and visa issuance in and out of China continue without significant disruption?

Yes. I think so.

And yet … and yet … we are told that the REAL DANGER for public health is questioning the official Chinese line and these Stepin Fetchit policy recommendations of Dr. Tedros.

Here’s what Tedros wrote in a South China Morning Post op-ed piece THREE DAYS AGO:

In addition, a wider strategy is needed to debunk pseudoscience and strengthen trust in everything from vaccination to public institutions. Misinformation thrives where trust in the authorities is weak.

In a fast-evolving disease outbreak, there is a fine line between the deliberate spread of misinformation and the well-intentioned but potentially still damaging redistribution of false claims.

And here’s a Reuters article, also from three days ago:

The rise of “fake news” – including misinformation and inaccurate advice on social media – could make disease outbreaks such as the COVID-19 coronavirus epidemic currently spreading in China worse, according to research published on Friday.

In an analysis of how the spread of misinformation affects the spread of disease, scientists at Britain’s East Anglia University (UEA) said any successful efforts to stop people sharing fake news could help save lives.

And what is this “fake news”?

Fake news is now defined as anything that disputes WHO data, which means that fake news is now defined as anything that disputes the official China party line.

Why did China spend so much money to buy off the World Health Organization? This:

The World Health Organization is working with Google to ensure that people get facts from WHO first when they search for information about the new virus that recently emerged in China.

Since the outbreak began, a number of misleading claims and hoaxes about the virus have circulated online. They include false conspiracy theories that the virus was created in a lab and that vaccines have already been manufactured, exaggerations about the number of sick and dead, and claims about bogus cures.

Associated Press, Feb. 3, 2020

It’s not just Google. It’s also TenCent. It’s also Facebook. It’s also Twitter.

And no, you’re not misreading the clear narrative intent of these articles.

Where possible, China wants to criminalize any speech … any social media … that does not follow the official party line. Where it’s not possible to criminalize that speech, China wants to ban it through the cooperative censorship of global tech and media platforms. Where it’s not possible to ban that speech, China wants to shame it into the shadows by getting us to reject it as “fake news”.

And if you don’t see that the United States is about two minutes behind China in doing the same damn thing, then you’re just not paying attention.

I am certain that there are plenty of good people at WHO, and I am certain that they do good and important work, particularly in funneling money and resources to actual researchers and actual clinical programs.

But what is happening at the most senior levels of the World Health Organization is not just a disgrace. It is not just a humiliation for the people who are doing good and important work.

It is a betrayal of the entire world.

What’s to be done?

Getting Tedros the man out of the World Health Organization will feel good, and he deserves all the ignominy that’s coming his way, but it will accomplish nothing.

No, to accomplish anything here, we need to get rid of The Industrially Necessary Doctor Tedros.

See, the actual human being named Tedros Adhanom Ghebreyesusis is not The Industrially Necessary Doctor Tedros. The human Tedros is just another on-the-make politician, one of a zillion Renfields who sell their soul on the daily. Sure, he was tapped by his Chinese patrons to play the role of The Industrially Necessary Doctor Tedros, but if it hadn’t been him, there were plenty of other guys and gals to take his place.

We must look through Tedros the man to see the Nudging Oligarchy and the Nudging State that created The Industrially Necessary Doctor Tedros.

We must look through so many of the ideas we take to be immutable truths of safety or goodness – whether those truths concern the food we eat or the stocks we buy or the health we seek to preserve – and recognize that they are not truths at all!

They are conveniences, and not conveniences for us, but for the sellers of the food we eat or the stocks we buy or the health we seek to preserve.

THAT’S what it means to be Industrially Necessary – a constructed social practice in service to those who would subvert our autonomy of mind and will, presented to us as Truth-with-a-capital-T by Missionaries who shake their finger at us and tell us HOW to think about the world.

Once you start looking for The Industrially Necessary Doctor Tedros, you will see him everywhere.

And that’s when your world starts to change.

Michael Bloomberg isn’t making any friends in the agriculture industry, after video of the former NYC Mayor surfaced of him describing farmers as having simple jobs that don’t require much intelligence, according to the Washington Times.

“I could teach anybody, even the people in this room” to be a farmer, said Bloomberg during a 2016 talk at Oxford University in a now-viral clip in which he called agriculture a “process”

“You dig a hole, you put a seed in, you put dirt on top, add water, up comes the corn, he added.

Bloomberg then described metalworkers similarly.

“You put the piece of metal in the lathe, you turn the crank in the direction of the arrow, and you can have a job,” he continued.

Mr. Bloomberg then said working in the information economy is “fundamentally different, because it’s built around replacing people with technology and the skill sets that you have to learn are how to think and analyze. And that is a whole degree level different. You have to have a different skill set, you have to have a lot more gray matter,” he said. –Washington Times

Billionaire Bloomberg claims he “could teach anybody to be a farmer,” even implying that farmers don’t have the same level of “skillset” or “grey matter” as folks in tech jobs.

So demeaning, elitist, and out-of-touch it’s appalling. pic.twitter.com/Auplmdq56m

— Anna Kelly (@AnnaKellyWI) February 17, 2020

Bloomberg is also making strides with elderly voters with his casual ‘death panel’ banter.

Bloomberg explaining how healthcare will “bankrupt us,” unless we deny care to the elderly.

“If you show up with cancer & you’re 95 years old, we should say…there’s no cure, we can’t do anything.

A young person, we should do something. Society’s not willing to do that, yet.” pic.twitter.com/7E5UFHXLue

— Samuel D. Finkelstein II (@CANCEL_SAM) February 16, 2020

Not to be outdone by his efforts to appeal to… well, we’re not quite sure:

What the fuck is going on pic.twitter.com/VzQrIqLaei

— Cassandra Fairbanks 🕊 (@CassandraRules) February 16, 2020

Submitted by Michael Every of Rabobank

There is a grim familiarity this morning in the news that the number of Chinese coronavirus cases has continued to rise. The number of cases in the country is now above 70,000 with the death toll standing at 1,770. Despite the headlines, the country’s stock market took encouragement from another round of stimulus. The PBoC cut interest rates for 1 year loans in an effort to support the baking sector while the Finance Minister promised that Beijing would roll out targeted tax and fee cuts.

The economic impact of the stimulus, however, will struggle in the face of the measures needed to contain the spread of the virus. According to Reuters, restrictions in the Hubei province were tightened further yesterday with most vehicles banned from the roads and companies ordered to stay shut until further notice. Headlines this morning also suggest that the Chinese government is considering delaying its high profile annual meeting of its full parliament in an effort to contain the virus. Around 3,000 members of the National People’s Congress have been expected to meet in Beijing from March 5 for around two weeks of meetings attended by President Xi and other top officials.

As the impact of the economic slowdown spreads out from China, both Singapore and Thailand cut their growth outlook. In Japan, criticism over PM Abe’s handling of the crisis resulted in a hit to his popularity in three separate opinion polls. It appears that the broad population may favour a blanket ban on arrivals from China rather than the softer policy currently adopted by the government. That said, the cost of the coronavirus on tourism in Japan is already marked. Japanese press report that regional economies have seen the number of visitors from China and Southeast Asia plummet. This is in line with UN estimates that Japan could lose USD1.29 bln in tourism revenue due to international flight restrictions related to the coronavirus outbreak. This won’t help fears that the country is in danger of falling into recession in the current quarter. Japanese GDP shrank at an annualised 6.3% q/q in the final three months of last year following the October increase in the sales tax. This was the biggest contraction in the economy since the last time the tax was hiked in Q2 2014. The market consensus had pointed to a fall of -3.8% q/q saar. Even though growth was also impacted by extreme weather conditions towards the end of last year, it appears that the government’s steps to limit the impact of the sales tax on certain parts of society may have fallen flat. Speculation that PM Abe may have to consider another round of spending, just two months or so after the last round of stimulus, will inevitably grow.

On Friday, reports circulated that the US government may already be considering further stimulus. One of the measures in a forthcoming package may be an incentive for US household to invest in stocks. Ahead of the November election President Trump is seeking to distinguish himself from Democrat rivals whom he has accused of following ‘socialist’ policies. Several market strategists,, however, are also stressing the risks that such a policy could stoke a stock market bubble.

Week ahead

The closure of US markets for President’s Day will ensure a slow start to the week. News of further stimulus from China has lent a little support to risk appetite this morning and helped currencies such as the AUD in addition to the CNY. Softer US economic data on Friday had encouraged profit-taking in US stock markets. However, buying on dips re-surfaced towards the close and Treasury yields moved lower. This week brings updates on US housing and PPI inflation data in addition to the latest PMI and Philly Fed surveys. In addition, Wednesday brings the release of the minutes of the January 28-29 FOMC meeting. Although this is unlikely to bring many fresh insights into the ‘steady as she goes’ policy, it could bring an update in the Fed’s current policy review. Various Fed officials will have the opportunity to air their views this week, including Kashkari, Mester, Kaplan, Brainard and Clarida. In addition, investors will be keeping one eye on a Las Vegas Democratic Primary debate. This could see Bloomberg taking to the stage for the first time in the season.

In Brussels the debate over the EU budget is expected to be difficult with richer countries such as Austria and the Netherlands expected to push back against proposed contributions. The forthcoming future relationship talks between the EU and the UK are also likely to remain in the headlines. Over the weekend France’s foreign minister Le Drian warned that the UK and the EU will ‘rip each other apart’ in the trade talks which are due to start next month. Meanwhile, the British Retail Consortium warned that UK consumers face higher costs and reduced availability on food imports from the EU mostly as a consequence of border friction next year. UK economic data due this week includes December labour figures and CPI inflation data, both of which could be key in assessing the actions of the BoE in the coming months. That said, the market has assessed that resignation of Javid as Chancellor last week has opened the door for Downing St to oversee an increase in fiscal spending in the budget, which could make further rate cuts less likely. While GBP/USD is holding above 1.300 on the back of this expectation, a rise in EU/UK political tensions could undermine the pound.

German data releases this week include the February ZEW survey and consumer confidence numbers, which may incorporate an initial reaction to coronavirus fears.

On February 21, Iran goes to the polls in an election which is expected to see hardliners tighten control after more pragmatic politicians were weakened by Washington’s decision to abandon the 2015 nuclear deal. A win for hardliners this week would increase their chances in the 2021 presidential contest.

Topless animal activists stormed the stage at a Bernie Sanders rally in Carson City, Nevada on Sunday, shortly after NYC Mayor Bill de Blasio introduced the Democratic Socialist, according to the New York Post.

De Blasio had just introduced Sanders to the crowd in Carson City as the “next president of the United States,” when Sanders entered the stage with his wife as the song “Power to the People” played.

That’s when a fully clothed woman jumped up and tried to wrest the microphone out of the Vermont senator’s hand, before grabbing another one from the lectern, and started speaking about the candidate’s support for dairy farmers.

“Bernie, I’m your biggest supporter, and I’m here to ask you to stop pumping up the dairy industry and to stop pumping up animal agriculture,” she said. “I believe in you…” she continued, before the mic suddenly went dead and security moved toward her.

Sanders moved to the edge of the stage as a string of women then paraded across holding images of cows — followed by a topless woman, who gestured to Sanders as members of his security detail positioned themselves between the two. –New York Post

WATCH: Bernie Sanders interrupted by topless protesters in Nevada pic.twitter.com/1z1fOVQxhJ

— Jon Levine (@LevineJonathan) February 17, 2020

“This is Nevada. There’s always a little excitement — at no extra cost. Except we have a lot of water on the stage,” Sanders said as he returned to the mic.

The women were motivated by Sanders’ support for 2018 legislation which supplied emergency financial support to dairy farmers across the country after the price of milk fell precipitously.

This isn’t the first time women have bared their breasts when it comes to Sanders (sort of) – though the last time this happened it was simply in support of the Vermont Senator during his 2016 bid for the White House.

Tiernan Hebron and
Anni Ma “Feel the Bern” @BernieSanders rally at the Wiltern Theatre in Los Angeles. pic.twitter.com/aXwSwU56qJ

— Genaro Molina (@GenaroMolina47) March 24, 2016

Authored by Lance Roberts via RealInvestmentAdvice.com,

I recently discussed putting market corrections into perspective, in which we looked at the financial impact of a 10-60% correction. But what happens afterward?

During strongly advancing, and very long bull markets, investors become overly complacent about the potential risks of investing. This “complacency” shows up in the resurgence of “couch potato,” “buy and hold,” and “passive indexing” portfolios. While such ideas work as long as markets are relentlessly rising, when the inevitable reversion occurs, things go “sideways” very quickly.

“While the current belief is that such declines are no longer a possibility, due to Central Bank interventions, we had two 50% declines just since the turn of the century. The cause was different, but the result was the same. The next major market decline will be fueled by the massive levels of corporate debt, underfunded pensions, and evaporation of ‘stock buybacks,’ which have accounted for almost 100% of net purchases since 2018.

Market downturns are a historical constant for the financial markets. Whether they are minor or major, the impacts go beyond just the price decline when it comes to investors.”

It is the last sentence I want to focus on today, as it is one of the most important and overlooked consequences of market corrections as it relates to long-term investment goals.

There are a litany of articles touting the massive bull market advance from the 2009 lows, and that if investors had just held onto the portfolios during the 2008 decline, or better yet, bought the March 2009 low, you would have hit the “bull market jackpot.” 

Unfortunately, a vast majority of investors sold out of the markets during the tail end of the financial crisis, and then compounded their financial problems by not reinvesting until years later. It is still not uncommon to find individuals who are still out of the market entirely, even after a decade long advance.

This is what brutal bear markets due to investors psychologically.

“Bear markets” push investors into making critical mistakes:

1. They paid premium prices, or rather excessive prices, for the companies they are investing in during the “bull market.” Ultimately, overpaying for value has a cost of lower future returns, as “buying high” inevitably turns into “selling low.” 

2. Investors Panic as market values decline. It is easy to forget during sharply rising markets the money we invest is the “savings” we are dependent on for our family’s future. Many investors who claim to be “buy and hold” change their mind after large losses. There is a point, for every investors, where they are willing to “get out at any price.”

3. Volatility is ignored. Volatility is not always a bad word, but rising volatility coupled with large declines, eventually feeds into investor “fear and panic.”

4. Ignoring Market Analysis. When markets are trending strongly upwards, investors start to “rationalize” why they are overpaying for value in the market. By looking for “confirmation bias,” they tend to ignore any “market analysis” which contradicts their “hope” for higher prices. The phrase “this time is different” is typically a hallmark.

“The underlying theory of buy and hold investing denies that stocks are ever expensive, or inexpensive for that matter, investors are encouraged to always buy stocks, no matter what the value characteristics of the stock market happen to be at the time.” – Ken Solow

The primary problem with “buy and hold” investing is ultimately, YOU!

The Pension Problem

During raging bull markets, individuals do two things which ultimately lead to their financial distress.

1. Start treating the market like a casino in hopes to “getting rich quick,” and

2. Reduce their “contributions” given expectations that high returns will “fill the gap.” 

Unfortunately, this is the same problem that plagues pension funds all across America today.

As I discussed in “Pension Crisis Is Worse Than You Think,”  it has been unrealistic return assumptions used by pension managers over the last 30-years, which has become problematic.

“Pension computations are performed by actuaries using assumptions regarding current and future demographics, life expectancy, investment returns, levels of contributions or taxation, and payouts to beneficiaries, among other variables. The biggest problem, following two major bear markets, and sub-par annualized returns since the turn of the century, is the expected investment return rate.

Using faulty assumptions is the linchpin to the inability to meet future obligations. By over-estimating returns, it has artificially inflated future pension values and reduced the required contribution amounts by individuals and governments paying into the pension system

Pensions STILL have annual investment return assumptions ranging between 7–8% even after years of underperformance.”

However, why do pension funds continue to have high investment return assumptions despite years of underperformance? It is only for one reason:

To reduce the contribution (savings) requirement by their members.

This is the same problem for the average American faces when planning for 6-8% average annual returns on their investment strategy. Why should you save money if the market can do the work for you? Right?

This is a common theme in much of the mainstream advice. To wit:

“Suze Orman explained that if a 25-year-old puts $100 into a Roth IRA each month, they could have $1 million by retirement.” 

The problem with Ms. Orman’s statement is that it requires the 25-year old to achieve an 11.25% annual rate of return (adjusting for inflation) every single year for the next 40-years.

That certainly isn’t very realistic.

However, under-saving is one of the primary problems which leaves investors well short of their financial goals by retirement.

The other problem, as noted above, is the most important part of the analysis overlooked by promoters of “buy and hold” investing.

Let me explain.

Getting Back To Even, Isn’t Even

Here is the common mainstream advice.

“If you had invested $100,000 at the market at the peak of the market in 2000, or in 2007, your portfolio would have gotten back to even in 2013. Since then, your portfolio would have grown to more than $200,000.

Here is the relative chart proving that statement is correct. (Real, inflation-adjusted, total return of a $100,000 investment.)

No one talks much about investors who have been in the market since the turn of the century, but it is one of the problems why so many Americans are underfunded for retirement. While Wall Street claims the market delivers 6% annual returns, or more, the annual rate of return since 2000, on an inflation-adjusted, total return basis, is just shy of 4%.

However, since most analysis used to support the “buy and hold” thesis starts with the peak of the market in 2007, that average return does indeed come in at 6.64%.

Here is the problem.

While your portfolio got back to even, on a total return basis, 6 or 13-years after your initial investment, depending on your start date, you DID NOT get back to even.

Remember your investment plan? Yes, that plan touted by the mainstream media, which says to assume a return of 6% annually?

The chart below shows $100,000 invested at 6% annually from 2000 or 2007.

So, what’s wrong with that?

An investor tripled their money from 2000 and doubled it from 2007.

Unfortunately, you didn’t get that.

Let’s overlay our two charts.

If your financial plan was based on reduced saving rates, and high rates of return, you are well short of you goals for retirement if you started in 2000. Fortunately, for investors who started in 2007, congratulations, you are now back to even.

Unfortunately, there are few investors who actually saw market returns over the last 12-years. As noted, a vast majority of investors who were fully invested into the market in 2007, were out of the market by the end of 2008. After such a brutal beating, it took years before they returned to the markets. Their returns are vastly different than what the mainstream media claims.

While there is a case to be made for “buy and hold” investing during rising markets, the opposite is true in falling markets. The destruction of capital eventually pushes all investors into making critical investment mistakes, which impairs the ability to obtain long-term financial goals. 

You may think you have the fortitude to ride it out. You probably don’t.

But even if you do, getting back to even isn’t really an investment strategy to reach your retirement goals.

Unfortunately, for many investors today who have now reached their financial goals, it may be worth revisiting what happened in 2000 and 2007. We are exceedingly in the current bull market, valuations are elevated, and there is a rising belief “this time is different.” 

It may be worth analyzing the risk you are taking today, and the cost it may have on “your tomorrow.” 

The global supply chain Armageddon is happening. The economies of the world are more interconnected than ever. There are many ‘single points of failure’ in these complex and global operations, of which many of them originate in China. 

A new poll via Shanghai’s American Chamber of Commerce (AmCham) discovered that 50% of US firms operating in China say shutdowns of factories have impacted their global operations due to the Covid-19 outbreak, reported Reuters.

About 78% of these firms warn that their staffing is currently short at the moment, which would prevent the resumption of full production, leading to massive shortages of products in the next several months for Western markets. 

Many of these companies, about 109 in total, have operations in Shanghai, Suzhou, Nanjing, and across the Yangtze River Delta, are regions currently experiencing mass quarantine of citizens, industrial hubs shuttered, and transportation networks halted. 

“The biggest problem is the lack of workers as they are subjected to travel restrictions and quarantines, the number one and number two problems identified in the survey. Anyone coming from outside the immediate area undergoes a 14-day quarantine,” said AmCham President Ker Gibbs.

“Therefore, most factories have a severe shortage of workers, even after they are allowed to open. This is going to have a severe impact on global supply chains that are only beginning to show up.”

As we noted earlier this month, many companies were slated for last Monday to resume production, with full production expected by the end of this month. However, that’s likely not going to happen, throwing much of the world’s complex supply chains into chaos. 

The economic impact of shutting down major industrial hubs in China with more than 400 million people in quarantine, some reports actually indicate the total could be 700 million, is generating a massive shock that could tilt the global economy into recession. These disruptions will cause world trade growth to plunge. Already, recession bells are ringing in Japan and Singapore, as it appears, these two countries are on the brink of disaster. 

It has also been reported that supply chain woes are expanding outwards from China, moving from East to West. 

Last month, several car factory plants in South Korea were crippled because they could no longer source parts from China. 

Several days ago, it was reported that a Fiat Chrysler Automobiles plant in Serbia was halted because it ran out of parts sourced from China. 

It was also reported that General Motors could halt some operations in the US because it soon might not be able to receive parts from China. 

As we noted on Sunday night, the world is witnessing the “ugly end of globalization.” Trade war and virus impacts on global supply chains have sent de-globalization into hyperdrive and could trigger the next worldwide recession. 

US firms with severed operations in China are already working on contingency plans to rework their operations out of Asia and bring a more localized approach to sourcing parts. 

The AmCham survey also said US firms with operations in China are expected to cut revenue for the year because of the disruption.

To sum up, severing a complex supply chain with international exposure will only lead to lower world trade growth and increased de-globalization that could very well trigger the next financial crisis.

Authored by Jonathan Turley,

I have written for years on the effort of European countries to expand their crackdown on free speech globally through restrictions on social media and Internet speech. It appears that Facebook chief executive Mark Zuckerberg has relented in what may prove the death knell for free speech in the West.

Zuckerberg seems to relent in asking governments for regulations stipulating what speech will be permitted on Facebook and other platforms. It is the ultimate victory of France, Germany, and England in their continuing attack on free expression though hate speech laws and speech regulation.

Zuckerberg told an assembly of Western leaders Saturday at the Munich Security Conference that:

“There should be more guidance and regulation from the states on basically – take political advertising as an example – what discourse should be allowed?”

He did add:

“Or, on the balance of free expression and some things that people call harmful expression, where do you draw the line?”

The problem is that his comments were received as accepting that government will now dictate the range of free speech. What is missing is the bright line rule long maintained by the free speech community.

As tragically demonstrated in France, Germany, and the United Kingdom, speech regulations inevitably expand with time. The desire to silence one’s critics becomes insatiable for both governments and individuals.

Zuckerberg is facing great pressure, including from Democratic leaders in the United States, to regulate political speech and he seems to be moving away from the bright-line position against such regulation as a principle:

“There are a lot of decisions in these areas that are really just balances between different social values. It’s about coming up with an answer that society feels is legitimate and that they can get behind and understand that you drew the line here on the balance of free expression and safety. It’s not just that there’s one right answer. People need to feel like, ‘OK, enough people weighed in, and that’s why the answer should be this, and we can get behind that.’”

Instead, as the above exposes, he is accepting the fluid concept of “balanced” regulations that has always preceded expanding speech codes and criminalization.

Remember when Larry Kudlow said that President Xi had pledged to “meet [China’s] obligations” under the ‘Phase 1’ trade pact, outbreak be damned, and that negotiations for ‘Phase 2’ were “completely separate” from the outbreak?

Unsurprisingly, the SCMP confirmed on Monday that this probably isn’t going to happen. Odds are, China will need to delay its commitment to purchase an additional $200 billion in American goods and services, even as Beijing ends restrictions on importing American agricultural products like poultry and soybeans. Two weeks ago, rumors that China would seek “flexibility” were the earliest indication that the regime was already weighing what to do.

Now, in an obvious trial balloon, a state-backed economist is urging Beijing to invoke ‘force majeur’.

Fortunately for Beijing, the two sides included a ‘force majeur’ clause in the deal that read: “In the event that a natural disaster or other unforeseeable event outside the control of the parties delays a party from timely complying with its obligations under this agreement, the parties shall consult with each other.”

However, few expect the US to accept the delay without some kind of negotiation:  Xu Qiyuan, a researcher at the China Finance 40 Forum (and a state-backed economist in Beijing), said he believes China should request to postpone the implementation of the purchase plan “in an appropriate manner” right away.

According to the SCMP, Xu’s comments about missing the deal quotas were part of a mounting consensus among international trade economists that the outbreak has made meeting the quotas impossible.

One week after the nation was supposed to get “back to work”, most of China’s economy remains shuttered. Even the factories that have reopened are operating well below capacity. A survey by the American Chamber of Commerce in Shanghai released on Monday saying that almost 80% of American-owned factories in China haven’t been able to staff production lines.

Though the details of what exactly would be purchased remain opaque, the media claimed back in January that China had agreed to an $80 billion increase of manufactured goods includes purchases of autos, auto parts, aircraft, agricultural machinery, medical devices, and semiconductors.

Whether or not this ends up being a ‘dealbreaker’ for the US and China, some have pointed out that the deal was never all that realistic.  One Rabobank economist recently pointed out that for Beijing to reach its goal by end-2021, a chart of US exports to China would need to look like this for the next two years…

…it just doesn’t seem feasible.

Of course, any signs of trade-deal skepticism should be anathema to the equity rally that has so far remained largely on track even as the virus spread to more than 70,000 people.

Authored by Paul Joseph Watson via Summit News,

Senator Tom Cotton says that China is refusing to hand over evidence concerning the bio-safety level 4 research lab in Wuhan despite a new report from biological scientists at the South China University of Technology saying it may have been the source of the coronavirus outbreak.

During an appearance on Fox News, Cotton told Maria Bartiromo that new evidence confirmed the source of the virus was not the meat market in Wuhan.

“Here is what we do know. This virus did not originate in the Wuhan animal market,” said Cotton.

“Epidemiologists who are widely respected from China published a study in the international journal Lancet have demonstrated that several of the original cases did NOT have any contact with that food market. The virus went into that food market before it came out of that food market. So we don’t know where it originated… We also know that only a few miles away from that market is China’s only bio-safety Level Four Super Laboratory that researches human infectious diseases.”

Cotton said that China’s “duplicity and dishonesty” meant that questions needed to be asked about the lab but that “China right now is not giving any evidence on that question at all” and Beijing was being “very secretive” on what happens at the lab.

Cotton also accused China of consistently blocking American scientists from traveling to Wuhan to assist in discovering the origins of the virus.

A new report by scientists at the South China University of Technology in Guangzhou, China concludes that “the killer coronavirus probably originated from a laboratory in Wuhan.”

One of the laboratories named in the report which was conducting research on bat coronavirus was located just 280 meters from the site of the Wuhan meat market.

For weeks, the media has demonized anyone who suggested the lab could have been responsible for the coronavirus outbreak as a dangerous conspiracy theorist peddling fake news.

However, now that CNN/NY Times journalist Ezra Cheung tweeted precisely that yesterday, one wonders whether they will begin to change their tune.

#BREAKING: South China University of Technology biologist Xiao Botao exposed that the #COVID19 might have originated from an animal research lab 280m away from the epicentre of the outbreak. The scientists were reportedly bitten by bats used for a test on louse. H/T: @mantaichow pic.twitter.com/uZEXHmvbTU

— Ezra Cheung (@ezracheungtoto) February 15, 2020

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European stocks rose on Monday, Chinese shares surged, recovering all their post-coronavirus losses and S&P and Nasdaq futures jumped to new all time highs as investors took encouragement from the Asian country’s monetary (if not fiscal) pledges to support the world’s second-biggest economy in the face of the coronavirus outbreak. The yen and gold both slipped.

Gains in Europe’s Stoxx 600 Index were led by the China-heavy sectors of automakers and miners. US futures climbed, though Wall Street is shut for a holiday, and Treasuries weren’t trading. European bonds were mixed, while the euro ticked higher after closing on Friday at its lowest since early 2017.

With the US closed for president’s day, the attention was on China, where both cases and deaths linked to the Coronavirus hit a new all time high. The Chinese yuan climbed after China cut rates and added medium-term funding to banks to cushion the impact of a virus outbreak; specifically, the People’s Bank of China offered 200 billion yuan ($29 billion) of one-year medium-term loans on Monday. The rate was lowered by 10 basis points to 3.15%

As a result of the latest burst of monetary stimulus (which came at a time when the finance ministry warned that China would pursue austerity on the fiscal stimulus side), the Shanghai Composite soared almost 2.3% while gains in China’s CSI 300 Index have recouped all losses since trading resumed after the Lunar New Year break, after the central bank unveiled plans to reduce corporate taxes and fees.

The momentum failed to buoy most Asian markets, however. Stocks dipped in Seoul and Sydney, while Japan’s Topix Index dropped after data showed the country’s GDP cratered shrank the most in five years in the last quarter.

Hurt by a sales-tax hike, Japan’s gross domestic product shrank at an annualized pace of 6.3% from the previous quarter in the three months through December, the worst slide in more than five years. That left the economy on the verge of a technical recession as the virus outbreak hit activity in Q1 2020.

So it’s all back to central bank stimulus. As Saxo Bank’s Eleanor Creagh writes, the S&P 500 and the Nasdaq on Friday closed at an all-time high, but although equities remain resilient, doubts remain about the impact of the virus outbreak on global growth and treasury yields edged lower. Across equities, investors are banking that ample global liquidity and supportive central banks will backstop equity prices even in the face of weaker economic growth. The prospect of weaker inflation via a weaker commodity complex, strong USD and disinflationary pressures arising impact of the coronavirus outbreak underpin an already ongoing recalibration of long term interest rate expectations. This is turn drives large amounts of capital up the risk spectrum into equity markets.

Asian stocks have started the week on a mixed footing, Chinese equities are in the green as investors are heeding the impending monetary and fiscal stimulus and influx of liquidity from the PBOC. Pledges from officials that vow to meet China’s 2020 growth targets underscores the sentiment that authorities will prioritise short term growth over financial stability and deleveraging goals. With this in mind markets expect enough policy support to mitigate downside risks and mainland equities have now recovered all of the losses seen following the Lunar New Year holidays.

In line with those expectations to support the economy, the PBOC today cut interest rates on its one year medium-term lending facility (MLF) by 10 basis points to 3.15% in a bid to reduce funding costs. This along with offering 200 billion yuan of one-year medium-term loans. The move all but guarantees a similar reduction in the loan prime rate (LPR – the new benchmark loan rate) come Feb 20. The pledges of additional fiscal stimulus that came over the weekend, in the form of corporate tax cuts are also lending support to mainland equities today and fuelling risk sentiment.

Continued policy support, both fiscal and monetary, will be required in China to mitigate downside risks from the coronavirus outbreak and promote a self-sustaining trajectory for growth. On that basis we expect more RRR cuts, along with further cuts in the MLF/LPR and more support for private firms as this sector continues to drive job creation, accounting for 80% of jobs and more than 90% of new jobs, according to the National Development and Reform Commission of the People’s Republic of China. Limiting job losses is as ever a key focus as employment remains key for social stability.

Elsewhere in Asia a big miss on Japan 4Q GDP (-6.3% vs. -3.8% estimate) is souring sentiment in Japanese equities. Although the buoyant sentiment across mainland markets has softened the blow.

As Creagh notes, “It is our sense that the Japan 4Q GDP data, which is pre virus outbreak, is just a taste of what is to come in terms of downside surprises to growth. The irony is that as we outlined above, in the current investment paradigm, this bad news is good news as investors anticipate more liquidity. Allowing equities to diverge further from economic fundamentals. Although 2019 saw multiple downwards revision to global growth and earnings forecasts, the S&P 500 returned 30% as the Fed and a raft of other central banks across the globe pivoted their policy stance early in the year. This served as a costly reminder for many not to fight liquidity. As the PBOC pledge ongoing support for the Chinese economy and fiscal stimulus efforts are ramped up, investors do not want to make the same mistake in 2020.”

The caveat – fat tails! There are still many unknowns as it relates to the ultimate impact of the coronavirus outbreak. There is a huge question mark over the reliability of all data relating to COVID-19 cases. This means that within any forecast outcomes should be embedded an enormous degree of variability. As is often case, garbage in, garbage out – incorrect or poor-quality input will produce faulty output, which is likely the case here given the lack of reliable data. And the current virus outbreak may represent an example of a devastating real world event for which a normally distributed model will understate various outcomes potentially leading to large mispricing of risk. Given the complete lack of reliable data we must balance complacent markets with elevated tail risks, participating in the upside momentum and maintaining optionality/tail risk hedging with respect to potentially much more negative outcomes.