Most Politicians Are Disingenuous Opportunists. The Coronavirus Outbreak Only Makes That More Obvious.

One month and one day ago, President Donald Trump took to Twitter to declare that the COVID-19 outbreak was “very much under control in the USA.”

“Stock market starting to look very good to me!” the president declared.

Since then, the Dow Jones Industrial Average has lost about 25 percent of its value—and that’s after a significant uptick on Tuesday. Also, the COVID-19 outbreak is very much not under control in the United States, as you’ve probably noticed.

A few weeks before the president sent that tweet, members of the Senate Intelligence Committee were given a classified briefing about the coronavirus. Sen. Richard Burr (R–N.C.), the chairman of the committee, immediately sold more than $1.7 million in stocks. Publicly, however, he downplayed the threat posed by the virus. “The United States today is better prepared than ever before to face emerging public health threats, like the coronavirus,” Burr wrote in an op-ed for Fox News on February 7—though he reportedly delivered a much more alarming message to a small circle of friends and campaign donors around the same time.

After weeks of dismissing the pandemic as no biggie, Trump was suddenly taking the outbreak more seriously by the first week of March. “There is no testing kit shortage, nor has there ever been,” the president assured Americans while he took a televised tour of the Centers for Disease Control and Prevention (CDC) on March 6. “Anybody that wants a test can get one.”

That wasn’t true. And when it became too obviously untrue for even Trump to deny, the president said, “I don’t take responsibility at all,” when asked about the very-obvious-and-quite-alarming lack of testing kits on March 13.

With millions of Americans out of work and the country facing the prospect of a recession unlike any in recorded history, Congress got to work on a stimulus package that was supposed to tide workers over until the virus passed and the economy reopened. Partisan disagreement sank a Senate coronavirus bailout bill on Monday, so Speaker of the House Nancy Pelosi (D–Calif.) rode to the rescue with a $2.5 trillion spending plan that included such pandemic essentials as $35 million in funding for a performing arts center in Washington, D.C., new rules requiring more diversity on corporate boards, and new emissions requirements for airplanes.

Pelosi withdrew that proposal on Tuesday afternoon. But the $2 trillion spending bill that appears ready to pass the Senate on Wednesday contains a few questionable provisions of its own, like codifying regulations that limit arbitration agreements, a huge giveaway to trial lawyers.

Having failed to predict the future at the beginning of the outbreak, Trump is now determined to rewrite the past. “I have always known this is a real pandemic,” he said on March 17. During an appearance on Fox News on Tuesday, the president said he took decisive action to slow the advance of the virus “very early” despite taking “a lot of heat” from unnamed others who disagreed with him.

The list goes on and on.

All of this is, on one hand, an extension of the thesis that politicians are merely using the coronavirus outbreak to push for policies they already wanted—or, more broadly, that they are behaving the way they always did. Congress has an incentive to do favors for friends and politically-connected industries. Individual members of Congress are self-interested human beings willing to profit off their positions. Trump wants the stock market to go up and doesn’t want to be held responsible for anything. None of this is new information.

Yet, at another level, this constellation of individual actions becomes a damning portrait of a system that is neither trustworthy nor trying to gain that trust. Libertarians should know better than to expect elected and appointed officials to be angels, of course, but the coronavirus outbreak has once again exposed the extent to which they are, with rare exception, little more than disingenuous opportunists.

“If you want to know why people are so vulnerable to conspiracy theories and to misinformation,” writes Kevin Williamson at National Review, “it is in part because they believe that they are being lied to by those with whom they have entrusted great power, that the truth is being kept from them by design.”

Consider merely the past 24 hours. On Tuesday, Trump declared his intention to have the country back to normal by Easter Sunday (April 12). Early Wednesday morning, however, Congress struck a deal with the White House to pass a $2 trillion spending bill that’s being pitched as a vital mix of stimulus and bailouts intended to keep the country from slipping into a prolonged recession. But if things are going to be back to normal in less than three weeks, why is a massive stimulus necessary? Someone isn’t telling the truth.

Add into the mix the various and sundry failures of the so-called fourth branch of government: the bad regulations at the Food and Drug Administration (FDA) that continue to slow the deployment of masks to places where they are needed, the CDC botching the COVID-19 testing rollout.

There will be heroes that emerge out of this. Doctors, nurses, medical students who are allowed to graduate early so they can join the fight against the coronavirus are leading contenders. Private businesses that are surging their operations to supply more medical gear deserve mention. But when all of this is over, we should also remember that government officials mostly did what they can always be counted on to do. They’re doing little but standing in the way, deflecting blame, and seeking to exploit human suffering for a political agenda, or merely to boost their own chances of re-election.

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FDIC asks Americans to keep their money in the banks

Yesterday the Chair of the FDIC released an astonishing video asking Americans to keep their money in the bank.

Accompanied by soft piano music playing in the background, the official said:

“Your money is safe at the banks. The last thing you should be doing is pulling your money out of the banks thinking it’s going to be safer somewhere else.”

Amazing. I was half expecting her to waive her hand and say, “These aren’t the droids you’re looking for…”

As I’ve written before, there’s $250 TRILLION worth of debt in the world right now: student debt, housing debt, credit card debt, government debt, corporate debt, etc.

And let’s be honest, some of that debt is simply not going to be paid.

Millions of people have already lost their jobs. Millions more (like the 10 million waiters and bartenders across America) are barely earning anything right now because their businesses are closed.

A lot of those folks have no emergency savings to fall back on during times of crisis, so they’re going to be forced to choose: pay the rent, or buy food.

The government has already suspended evictions and foreclosures, which is a green light for people to stop paying the rent or mortgage.

And that means banks will take it in the teeth.

This is what happened back in 2008– millions of people across the country stopped paying their mortgages, and the banking system nearly collapsed as a result.

Today it’s a similar situation; a lot of people are going to stop paying their mortgages, credit cards, auto loans, etc. And that directly impacts the banks.

Businesses are in deep financial trouble too.

According to the Wall Street Journal, the median small business in the United States has a cash balance that will last them just 27 days.

And many are operating with an even smaller safety net; the median restaurant, for example, has a cash balance of just 16 days.

These businesses have been told to close down due to the Corona Virus. And it’s likely that many of them will never re-open.

A lot of these companies also have debt. And if they close, those debts will never be repaid.

Even big businesses are susceptible to failure.

Every airline, cruise ship operator, hotel, retail chain, etc. is on the ropes, and each of these companies has borrowed billions of dollars.

This pandemic could easily push several big companies into bankruptcy.

You probably know that old saying– if you owe the bank a million dollars and can’t pay, you have a problem. If you owe the bank a billion dollars and can’t pay, the bank has a problem.

That’s what we’re seeing now.

Countless unemployed individuals, millions of shuttered small businesses, and bankrupt big companies collectively owe the banks trillions of dollars. And many of them can’t pay… which means the entire banking system has a problem.

How much money will the banks lose because of this pandemic?

It could easily end up being hundreds of billions of dollars, even several trillion dollars.

No one knows. But it’s not going to be zero. It’s silly to think that banks are immune to the Corona virus, or to assume that not a single bank is going to run into problems.

Don’t get me wrong– I’m not saying that the banking system is about to collapse. There are stronger banks and weaker banks. Many of them will survive, others will fail.

What I am saying is that there are enormous and obvious risks that threaten the banking system.

As I’ve written several times over the past few weeks: Anyone who says, “No, that’s impossible,” clearly doesn’t have a grasp of what’s happening right now. EVERY scenario is on the table, including severe problems in the banking system.

But the FDIC insists that there’s nothing to worry about.

That’s ridiculous. The FDIC only has $109 billion to insure the entire $13 trillion US banking system. That’s less than 1%!

The FDIC also insists that they’ve always been able to prevent depositors from losing money. “Not a single depositor has lost money since 1933.” And that’s true.

But they’ve never had to deal with this before. Neither the FDIC, nor any bank, has ever had to deal with a complete shutdown of the economy… or potential losses of this magnitude.

The Covid-19 impact on the banking system could be 10x bigger than the housing meltdown in 2008.

If the pandemic ends up causing trillions of dollars of loan losses, the FDIC won’t have enough ammunition to fix it… and that doesn’t even consider trillions of dollars more in potentially toxic derivatives exposure.

So to casually brush off these risks and claim that everything is 100% safe seems incomprehensible.

It also raises an interesting point: why is the FDIC asking us to NOT withdraw our savings?

If the financial system is so safe, it shouldn’t matter to them whether or not people keep their money in the banks.

Yet they still felt the need to specifically ask people to NOT withdraw their money… and tell us that we shouldn’t keep cash at home.

I’ll reiterate a point that we’ve made again and again at Sovereign Man over the years: it makes sense to have some physical cash in an at-home safe.

I’m not suggesting you keep your life’s savings in physical cash. But a month or two worth of expenses won’t hurt.

There’s very little downside– your bank probably only pays you 0.01% anyhow, so it’s not like you will be giving up a ton of interest income.

And given that the FDIC is specifically saying that you shouldn’t do this, a prudent person might wonder what’s really going on.

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CME Urged To Change Physical Gold Delivery Rules Amid Market “Breakdown”

CME Urged To Change Physical Gold Delivery Rules Amid Market “Breakdown”

Over the past decade, one of the most fascinating observations in the world of precious metals has been the bizarre decoupling in the supply/demand dynamics and thus pricing, between paper and physical gold.

And, as we detailed yesterday, that decoupling has become extreme.

A surge in demand for physical gold – that results in precious metal vendors and exchanges becoming sold out in very short notices – has created shortages in some geographical locations that is stressing gold markets drastically.

Don’t take our word for it. Even the venerable Financial Times reports that traders have reported and lamented a growing global shortage of gold bars, as the coronavirus outbreak both disrupts supply and stokes demand, “with one business comparing the frenzied buying of the yellow metal with the consumer rush for toilet roll.

Yesterday, Saxo Bank’s head of commodity strategy, Ole Hansen, observed that a lockdown is occurring in two biggest gold hubs in the world, New York and London,  so many traders are working from home. “This has caused a breakdown in the marketplace”, he said.

“There is no price discovery in the market right now,” he said Tuesday morning.

“If you need to borrow gold in the OTC [over-the-counter] markets right now, you are going to pay a king’s ransom.”

And that ‘broken’ market is no more evident than in the decoupling between spot and futures markets.

The gap between gold futures on the CME’s Comex exchange in New York widened above London spot prices by as much as $80 per ounce – or over 4% – on Tuesday. The two usually remain within a few dollars of one another, and the gap skewed trading in the London market, causing activity to fall as traders feared shutdowns of air travel and precious metal refineries due to the coronavirus outbreak will make it harder to ship bullion from London to the United States to meet contractual requirements.

And so, under pressure from the London Bullion Market Association (LBMA) and several major banks that trade gold, the CME Group has reportedly  changed its contract-delivery rules to allow gold bars in London to be used to settle its contracts to ease disruption to trading.

As Reuters reports, London is a key gold storage center, where thousands of tonnes of metal underpin trading, but it uses 400-ounce bars which must be melted down and recast as 100-ounce bars to be accepted by Comex in New York.

The LBMA and executives at major gold-trading banks asked CME to allow 400-ounce bars to be used to settle Comex contracts, said the two sources, both of whom were involved in the discussions.

“It’s totally logical,” said an executive at a gold-trading bank. “In London there’s no shortage of metal.”

Notably, Reuters admits the sources said the CME had not yet made a decision, and any change to its rules would likely take several days to implement and require regulatory approval.

No matter whether they approve it or not, there are serious cracks starting to appear in the paper gold markets as the world reaches for ‘money’ as The Fed explicitly admits to infinite dollar debasement capabilities.


Tyler Durden

Wed, 03/25/2020 – 11:15

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Why Did Hundreds Of CEOs Resign Just Before The World Started Going Absolutely Crazy?

Why Did Hundreds Of CEOs Resign Just Before The World Started Going Absolutely Crazy?

Authored by Michael Snyder via The End of The American Dream blog,

In the months prior to the most ferocious stock market crash in history and the eruption of the biggest public health crisis of our generation, we witnessed the biggest exodus of corporate CEOs that we have ever seen.  And as you will see below, corporate insiders also sold off billions of dollars worth of shares in their own companies just before the stock market imploded.  In life, timing can be everything, and sometimes people simply get lucky.  But it does seem odd that so many among the corporate elite would be so exceedingly “lucky” all at the same time.  In this article I am not claiming to know the motivations of any of these individuals, but I am pointing out certain patterns that I believe are worth investigating.

One financial publication is using the phrase “the great CEO exodus” to describe the phenomenon that we have been witnessing.  It all started last year when chief executives started resigning in numbers unlike anything that we have ever seen before.  The following was published by NBC News last November

Chief executives are leaving in record numbers this year, with more than 1,332 stepping aside in the period from January through the end of October, according to new data released on Wednesday. While it’s not unusual to see CEOs fleeing in the middle of a recession, it is noteworthy to see such a rash of executive exits amid robust corporate earnings and record stock market highs.

Last month, 172 chief executives left their jobs, according to executive placement firm Challenger, Gray & Christmas. It’s the highest monthly number on record, and the year-to-date total outpaces even the wave of executive exits during the financial crisis.

By the end of the year, an all-time record high 1,480 CEOs had left their posts.

But to most people it seemed like the good times were still rolling at the end of 2019.  Corporate profits were rising and the stock market was setting record high after record high.

Yes, there were lots of signs that the global economy was really slowing down, but most experts were not forecasting an imminent recession.

So why did so many chief executives suddenly decide that it was time to move on?

The following are just a few of the big name CEOs that chose to step down in 2019

  • Dennis Muilenburg — Boeing

  • United Airlines — Oscar Munoz

  • Alphabet — Larry Page

  • Gap — Art Peck

  • McDonald’s — Steve Easterbrook

  • Wells Fargo — Tim Sloan

  • Under Armour — Kevin Plank

  • PG&E — Geisha Williams

  • Kraft Heinz — Bernardo Hees

  • HP — Dion Weisler

  • Bed, Bath & Beyond — Steven Temares

  • Warner Bros. — Kevin Tsujihara

  • Best Buy — Hubert Joly

  • New York Post — Jesse Angelo

  • Colgate-Palmolive — Ian Cook

  • MetLife — Steven Kandarian

  • eBay — Devin Wenig

  • Nike — Mark Parker

Of course the mass exodus of chief executives did not end there.

In fact, a whopping 219 CEOs stepped down during the month of January 2020 alone.

By then, it was starting to become clear that the coronavirus that was ripping through China could potentially become a major global pandemic, and I certainly can understand why many among the corporate elite would choose to abandon ship at that moment.

Some of these CEOs have made absolutely absurd salaries for many years, and it is much easier to take the money and run than it is to stick around and steer a major corporation through the most difficult global crisis that any of us have ever experienced.

The following are just a few of the well known CEOs that have resigned so far in 2020

  • Bob Iger, CEO of Disney

  • Ginni Rometty, CEO of IBM

  • Harley-Davidson CEO Matt Levatich

  • T-Mobile’s CEO John Legere

  • LinkedIn CEO Jeff Weiner

  • Mastercard CEO Ajay Banga

  • Keith Block, co-CEO of Salesforce

  • Tidjane Thiam, CEO of Credit Suisse

  • Hulu CEO Randy Freer

It is important for me to say that I do not have any special insight into the personal motivations of any of these individuals, and every situation is different.

But I do think that it is quite strange that we have seen such an unprecedented corporate exodus at such a critical moment in our history.

Meanwhile, top corporate executives were dumping billions of dollars worth of shares in their own companies just before the market completely cratered.  The following comes from the Wall Street Journal

Top executives at U.S.-traded companies sold a total of roughly $9.2 billion in shares of their own companies between the start of February and the end of last week, a Wall Street Journal analysis shows.

The selling saved the executives—including many in the financial industry—potential losses totaling $1.9 billion, according to the analysis, as the S&P 500 stock index plunged about 30% from its peak on Feb. 19 through the close of trading March 20.

In the stock market, you only make money if you get out in time, and many among the corporate elite seem to have impeccable timing.

Perhaps they just got really lucky.  Or perhaps they were reading my articles and understood that COVID-19 was going to cause the global economy to shut down.  In any event, things worked out really well for those that were able to dump their stocks before it was too late.

And it turns out that several members of Congress were also selling stocks just before the market went nuts…

Sen. Dianne Feinstein of California and three of her Senate colleagues reported selling off stocks worth millions of dollars in the days before the coronavirus outbreak crashed the market, according to reports.

The data is listed on a U.S. Senate website containing financial disclosures from Senate members.

Of course most ordinary Americans were not so “lucky”, and the financial losses for the country as a whole have been absolutely staggering.

The good news is that there was a tremendous rally on Wall Street on Tuesday, and that will provide some temporary relief for investors.

But the number of confirmed coronavirus cases continues to escalate at an exponential rate all over the globe, and this crisis appears to be a long way from over.


Tyler Durden

Wed, 03/25/2020 – 11:00

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Putin Postpones Controversial National Referendum After COVID-19 Cases Leap Overnight

Putin Postpones Controversial National Referendum After COVID-19 Cases Leap Overnight

A day after Putin donned a hazmat suit for a ‘high risk’ photo op while visiting Covid-19 patients at a hospital outside Moscow, the Russian president gave an important address to the nation, updating the country on new drastic measures amid the pandemic, starting with urging the country to “stay at home” and a declaring a week-long work holiday toward that end.

Importantly, Putin declared the postponement of a national referendum on constitutional amendments originally scheduled for April 22 to “a later date”.

The proposed amendments came out of the major January shake-up which led to the resignation of the government. The measures were expected to pass easily, but the changes have been hugely controversial outside Russia as they could theoretically allow him to be president until 2036. 

Via Sputnik/AP

But more immediate pressing is Russia’s growing number of Covid-19 cases. Despite Russia’s confirmed cases being relatively low for a country of nearly 150 million people, as of Wednesday at 658 with at least one death, Putin warned citizens, “Don’t think that this can’t happen to you” in the televised address.

This after Russia’s biggest one day rise in reported cases – 163 overnight – with most in Moscow: 410. Media outlets in the West have been scratching their heads, asking: What Exactly Is Going On With Russia’s Low Coronavirus Numbers?

Officials within the country are increasingly posing the same question, with Moscow Mayor Sergei Sobyanin telling  President Putin in a meeting Tuesday that “the real number of those who are sick is much greater” than official numbers indicate.

It seems Putin took the dire warning to heart as he announced a series of drastic measures to combat the spread including declaring the entire next week a work holiday (with salaries preserved, he noted), or something akin to a national lockdown. “All the measures that have been and will be taken will work, produce a result as long as we show solidarity, understanding of the difficulty of the current situation,” Putin said.

Alarmingly, he took a pessimistic tone that belies the current low numbers, saying it will ultimately be “impossible” to completely stop the coronavirus spread in Russia due to the large size of the country.

Chart & data via The Moscow Times

“Now it is extremely important to prevent the threat of the rapid spread of the disease, therefore, I declare the next week non-working with salary preservation, that is, days off will last from Saturday March 28 to Sunday April 5,” he told the public.

According to Reuters, numbers are expected to climb dramatically given the expected ramp-up in testing, which thus far has been scarce

Moscow Mayor Sergei Sobyanin, a close Putin ally, told the Russian leader on Tuesday that a serious situation was unfolding in the capital and that the real number of cases was unclear but was increasing quickly.

Testing for the virus was scarce, said Sobyanin, and many Muscovites returning from abroad were self-isolating at home or in holiday cottages in the countryside, and not being tested.

He further announced in the speech the automatic extension of all social benefits, including a plan to give families an extra 5,000 rubles per month per young child.

Via The Moscow Times

Government payments will also be available for workers who must go on sick leave, or who lose their jobs during this time of national crisis.

Notably the Wednesday speech marks the most serious tone Russia’s leadership has struck yet concerning the pandemic, even though there’s likely been Covid-19 cases there significantly before the United States.


Tyler Durden

Wed, 03/25/2020 – 10:45

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WTI Erases Overnight Gains On Demand Fears, Crude Inventory Build

WTI Erases Overnight Gains On Demand Fears, Crude Inventory Build

Oil prices extended gains overnight, along with the rest of the markets, on hope The Fed’s buying will work and optimism that US Congress will agree a bigly Stimulus Bill and helped by a surprise crude draw reported by API.

But early on this morning that all started to fall apart and WTI plunged back to a $23 handle after the boss of Vitol Group said demand is down about 15 million to 20 million barrels a day and will shrink further with India’s decision to go into lockdown.

“The hope for more stimulus is giving a short-term boost,” said Josh Graves, market strategist at RJ O’Brien & Associates LLC.

“From a fundamentals standpoint, we’re still looking at two cataclysmic supply and demand shocks. Those need to be addressed before we see any sustained rally.”

So once again, all eyes are on the official inventory data…as road and airline traffic has collapsed.

Bloomberg Intelligence’s senior energy analyst Vince Piazza warns:

Near-term crude builds are likely with refining runs cut back as demand downstream demand weakens. The price war and downdraft in consumption from the virus is a double hit to domestic producers, as export volume will retract on narrower differentials and cash flow will degrade. Look for floating storage levels to rise across the globe as arbitrage is once again profitable.”

API

  • Crude -1.25mm (+2.5mm exp)

  • Cushing +1.066mm

  • Gasoline -2.622mm (-2.4mm exp)

  • Distillates -1.901mm (-1.6mm exp)

DOE

  • Crude +1.62mm (+2.5mm exp)

  • Cushing +858k

  • Gasoline -1.537mm (-2.4mm exp)

  • Distillates -678k (-1.6mm exp)

After last night’s surprise crude draw (reported by API), official government data showed a build (though smaller than expected). This is the 9th straight week of crude builds, 8th straight week of gasoline draws, and 10th straight week of distillate draws…

Source: Bloomberg

Production hovered at around 13mm b/d – a record high.

Source: Bloomberg

WTI plunged near a $22 handle ahead of the inventory data

 

As Bloomberg points out, the specter of collapsing demand and a rapidly expanding oil surplus have made recent price recoveries short-lived. Brent crude’s six-month timespread has sunk into the deepest contango in more than a decade, signaling oversupply

Source: Bloomberg

…and gauges of the physical market are also pointing to weakness…

“The physical market is in pain, and there is more pain to come,” said Torbjorn Tornqvist, the co-founder of Gunvor Group Ltd., a large trading house. “We will see the full weight of the oversupply in a couple of weeks.”

Examples abound from Africa to the Middle East to Latin America. Nigeria, the biggest oil producer in Africa, is selling its flagship Qua Iboe crude at a discount of $3.10 a barrel below the Dated Brent benchmark, the largest in at least two decades.

Source: Bloomberg

…with traders expecting the glut to worsen. “The physical oil market looks horrific,” said Kit Haines, an analyst at consultant Energy Aspects Ltd.

“Demand clearly is off, in some parts of the world, very dramatically,” Chevron CEO Mike Wirth told Bloomberg TV on Tuesday.

“Off” indeed.


Tyler Durden

Wed, 03/25/2020 – 10:35

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The Massive Fiscal Stimulus Deal Is Done – Now Comes The Hard Part

The Massive Fiscal Stimulus Deal Is Done – Now Comes The Hard Part

After the traditionally infuriating song and dance, early on Wednesday morning Congress agreed to a $2 trillion fiscal stimulus package (+4$ trillion in Fed buying power) that is so full of pork that there is no way it would not have passed. However, agreement on the bill was – as surprising as it sounds – the easy part, and now the discussion shifts to just how this biggest ever fiscal stimulus in US history will be implemented, and alongside that  it also shifts from “when will stocks bottom?’ to “has the floor finally been established?”

As BMO’s Ian Lyngen writes, the price action of the last three trading sessions led to this change in discourse, as did several key policy developments.

  • First, the Fed has continued its aggressive campaign to insulate the US economy from the worse of the outbreak.
  • Second, a dizzying array of emergency measures have been deployed to combat Covid-19 itself.
  • Third, Congress finally “agreed” (as if it would ever turn down) on a $2 trillion package stimulus package (full vote later today) which includes $500bn to be used to back loans/assistance for firms and $350 bn for small businesses – as well as direct payments to households of $1,200 per individual and $500 per child. Included in the bill will also be enhancements to the unemployment benefit as well as support for the domestic airline industry.

So now, we wait?

Well, not exactly. AS the BMO rates analyst writes, assuming Washington is able to translate the agreement into law in an expeditious manner, the next hurdle will be as great (if not greater) than the first and presents a significant degree of execution risk. There are several aspects of the proposed stimulus measures which have well-established distribution channels; unemployment benefits and the injection of cash directly to households. As for the corporate, small business, and state/local government allocations, this leg of the process presents a greater challenge.

Ensuring as many firms as possible remain operating in the wake of the outbreak is vital to preserving as much of the previously robust employment market as possible. To this end, a timely dispersal of funds with an emphasis on grants over loans will be the most effective way to deliver the objectives of the $2 trillion endeavor. As details on the rollout come into focus, investors will remain wary of bottlenecks which would detract from the economic upside.

Some of the Fed’s new monetary policy tools are facing a similar set of execution risks – namely the purchase of multi-family agency CMBS, new investment grade bonds, and existing corporate debt. We reported last night that the Fed has tapped Blackrock to manage these efforts – a very similar decision to that which was made during the last financial crisis. The move also elevates a large degree of the uncertainty about ‘how’ the new programs will be implemented; although clarity on their timing remains an important unknown as investors await the opportunity to witness the renewed central banking largess in action.

It’s notable, if intuitive, that the drivers of financial markets have shifted to domestic actions as opposed to those seen in Asia and Europe. The experience of nations from China to Italy have provided investors with some sense of what to expect in terms of timing and severity. As tragic a hit to the global population as Covid-19 is, the impact on other regions meaningfully informs investors’ expectations of the impact on the US. But, as Lyngen notes, this isn’t to imply that the case/fatality count is close to reaching an apex domestically; in fact, health officials have identified this week (and potentially next) as perhaps the most dire for incoming reports. Rather, the information and responsiveness of federal, state, and local government officials combined with glimpses of clarity on the length of the economic lockdown, have begun to alter the sentiment surrounding the outbreak – at least from the perspective of the market. Predictions about how draconian the US shutdown will become have been replaced by prognostications on what a post-coronavirus world will entail.


Tyler Durden

Wed, 03/25/2020 – 10:25

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“Sell The News”? Stocks Are Crashing After 2 Massive Pumps Overnight

“Sell The News”? Stocks Are Crashing After 2 Massive Pumps Overnight

Despite getting help from Boeing’s gains, The Dow has now crashed over 1000 points twice from the post-“we have a deal” highs… and is back in the red for the day…

This all has the stench of some major gamma pukes with VIX flying around right at the open…

Bonds had warned that yesterday’s record short-squeeze in stocks wasn’t to be trusted…

Just like the last time we saw a market move like that…

Fade accordingly.

 


Tyler Durden

Wed, 03/25/2020 – 10:12

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Is Wearing a Face Mask in Public To Ward Off COVID-19 a Crime?

Some experts say people who are not infected by the COVID-19 virus but wear face masks in public as a prophylactic measure are behaving irrationally and maybe even irresponsibly given the dearth of such protective gear. In some states, they may also be committing a crime—yet another illustration of questionable rules highlighted by the current pandemic.

More than a dozen states generally ban the wearing of masks in public, a policy driven largely by concerns about the Ku Klux Klan. Virginia, for example, prohibits anyone older than 16 from wearing “any mask, hood or other device whereby a substantial portion of the face is hidden or covered so as to conceal the identity of the wearer” in “any public place” with “the intent to conceal his identity.” That’s a Class 6 felony, punishable by one to five years in prison.

As relevant here, the Virginia ban exempts masks worn “for bona fide medical reasons,” but only if the wearer carries a physician’s affidavit that specifies “the medical necessity for wearing the device and the date on which the wearing of the device will no longer be necessary” or if the governor “expressly waives” the prohibition while declaring a public health emergency. Virginia Gov. Ralph Northam did declare a public health emergency in response to the COVID-19 epidemic on March 12. But the declaration says nothing about the mask ban.

Florida has a similar law. It does not specify any exceptions, and it does not require an intent to conceal one’s identity. Violating the ban is a second-degree misdemeanor, punishable by up to 60 days in jail. Georgia, which also treats public mask wearing as a misdemeanor, makes exceptions for theatrical productions, masquerade balls, Mardis Gras celebrations, “traditional holiday costume on the occasion of the holiday,” masks required for a particular occupation or sporting activity, and gas masks “prescribed in emergency management drills and exercises or emergencies.”

In New York, a masked person who “congregates” in a public place with “other persons so masked” is guilty of loitering, a violation punishable by up to 15 days in jail. That 1854 law, enacted in response to violent protests by tenant farmers, includes an exemption for a properly permitted “masquerade party or like entertainment” but not for disease protection. In 2011, the New York Police Department deployed the mask ban against Occupy Wall Street demonstrators.

Since protesters often wear masks, either as a statement or as a way of protecting themselves against retaliation, these laws have obvious First Amendment implications. Some courts have deemed mask bans unconstitutional, while others have upheld them.

Although it seems unlikely that cops will start busting people for wearing face masks because they are afraid of catching COVID-19, such vague and excessively broad criminal laws give police dangerously wide discretion. A few years ago in Winchester, Virginia, for instance, local cops found the time to arrest a 31-year-old man named Jeremy Putman for walking around while disguised as The Joker.

Since Virginia’s anti-mask law includes exceptions for people wearing “traditional holiday costumes” or “engaged in any bona fide theatrical production or masquerade ball,” Putnam would have been in the clear if had done the same thing on Halloween, Purim, or Mardi Gras, or if he had been shooting a movie or performing a play. But dressing like The Joker just for the hell of it—that was a felony. Winchester police said they “received several calls” about Putman and wanted to “remind the community of the seriousness of the crime.”

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Tech Companies Weren’t Hoarding Masks, They Were Protecting Employees From Wildfire Smoke

U.S. tech companies have been donating a massive number of N95 particulate-filtering face masks to hospitals and health care workers. Holding up the old adage about no good deed going unpunished, some Americans have been lashing out at these companies.

Some of this has come in the form of hostility toward tech giants that’s better suited for government officials here. And, sure, front-line workers in this pandemic shouldn’t have to “rely on Silicon Valley for face masks.” But the fact that Silicon Valley companies are stepping up to provide supplies we lack because of government mishandling of the COVID-19 outbreak response, excessive regulations surrounding who can manufacture medical supplies, and generally poor pandemic prep from federal authorities is hardly a knock against these technology companies.

Some of the hostility has come from folks accusing tech companies of having hoarded N95 masks previously, or implying that there’s something untoward about them having all these masks “just laying around.”

Again, this ire is misplaced. Mask donations are coming from the likes of Facebook, Apple, Salesforce, Tesla, Flexport, Intel, and IBM, all headquartered or with operations in the Bay Area. That’s an area wracked with wildfires, especially these days.

Last year, California amended health regulations to require employers in certain wildfire risk areas to provide voluntary N95 respirator masks for at-risk employees. The regulation, from California’s Occupational Safety and Health Standards Board, took effect in August 2019 and is set to sunset after one year.

The types of masks mandated in California are not surgical N95 masks but those that block particles of dust, smoke, and construction byproducts. Recently, the U.S. Food and Drug Administration relaxed its rules to say that the non-surgical N95 masks were allowed to be used by health care workers and medical facilities.

Facebook CEO Mark Zuckerberg said Facebook’s reserve of masks had been “bought in case the wildfires continued.” (He also said the company is trying to source “a lot more to donate.”)

Do these donations come even remotely near to solving all our mask problems? No. But they still may save a lot of lives and prevent even more infections.

We’re going to need private businesses big and small, state and federal authorities, charitable groups, and countless individuals to work together to get through this. Now isn’t the time for the kind of reactionary, anti-markets, anti-Big Tech bias that’s still too frequently coming from both the political left and right in the wake of COVID-19.


FREE MARKETS

A federal stimulus package was hashed out in Congress yesterday, calling for $2 trillion in direct aid spending. Sen. Chuck Schumer (D–N.Y.) said the package contained “unemployment compensation on steroids.”

White House economic adviser Larry Kudlow said the total price of the economic stimulus plan will be about $6 trillion, once you factor in $4 trillion in Federal Reserve loans–making it the largest economic stimulus plan approved in U.S. history.

Stay tuned for more Reason commentary on the package later today. For now, here are some thoughts from Rep. Justin Amash (I–Vt.):

And check out Billy Binion’s Tuesday interview with Amash about the idea of cutting direct checks to all Americans.


FREE MINDS

Prisons and jails are releasing people incarcerated for nonviolent crimes as facilities face COVID-19 outbreaks. New York City Mayor Bill de Blasio plans to release 300 people from Rikers Island and at least 1,700 jail inmates have already been released in Los Angeles County.

“Thousands of elderly federal inmates are incarcerated in prisons that could become hothouses for COVID-19, and advocates and members of Congress say the Trump administration needs to take rapid action to get them out of harm’s way,” Reason‘s C.J. Ciaramella noted yesterday. “On Tuesday criminal justice groups and lawmakers on both sides of the aisle—not to mention inmates themselves—urged the Trump administration to use existing compassionate release policies, as well as mass clemency or executive orders, to free at-risk federal inmates.”

Related:Why coronavirus in jails should concern us all.”


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