“The Number of Recoveries Continues to Rise Above Its Death Toll”

Newsweek writes: “While cases continue to soar in Italy, which has now reported more than 12,000 infections, the number of recoveries continues to rise above its death toll, with 1,045 recoveries versus around 800 deaths in the country.”

Does that mean something that I’m missing? Of course the number of recoveries should eventually rise above the death toll, so long as the mortality rate is under 50% (and the evidence seems to suggest it’s much lower than that).

Now at any particular time, the ratio may be sharply different, depending on factors such as how long it takes for those who recover to recover (and perhaps how one defines recovery), and how long it takes for those who die to die. But that right now in Italy the recoveries barely exceed the deaths strikes me as telling us very little; or am I mistaken?

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The US Navy Is Developing Autonomous Submarines That Can Kill On Their Own

The US Navy Is Developing Autonomous Submarines That Can Kill On Their Own

Authored by Aaron Kesel via The Mind Unleashed.com,

The U.S. Navy is secretly developing armed robot submarines that are controlled by onboard artificial intelligence (AI) which could potentially kill without explicit human control.

The Office of Naval Research is involved with the development of an AI system called CLAWS, which the agency describes in budget documents as an autonomous undersea weapon system for clandestine use. CLAWS will “increase mission areas into kinetic effects,” they write.

According to a report by New Scientist, details of the killer submersible were made available as part of the 2020 budget documents. However, not much more is known.

Very few details were publicly provided about the “top secret” project beyond the fact it will use sensors and algorithms to carry out complex missions on its own.

It is expected that CLAWS will be installed on the new Orca class robot submarines that have 12 torpedo tubes which are being developed for the Navy by Boeing. But that is simply speculation. What is known is that the system will be able to think and kill on its own. Although according to New Scientist there are hints by the Navy that this will be the case.

The Orca will have well-defined interfaces for the potential of implementing cost-effective upgrades in future increments to leverage advances in technology and respond to threat changes,” the Navy said.

The Orca will have a modular payload bay, with defined interfaces to support current and future payloads for employment from the vehicle.”

Autonomous submarines already exist today and can complete tasks without human involvement. However, they lack intelligence and have limited functionality. Anything more complex than a mere location task requires a human operator to work via a remote communications link.

The new submarines will have a much greater level of artificial intelligence and be able to perform a wider range of functions without a human controller.

CLAWS was first revealed in 2018 as part of a U.S. Navy bid to “improve the autonomy and survivability of large and extra-large unmanned underwater vehicles,” according to New Scientist.

When it was first revealed, there was no mention then of weapons being on the autonomous submarine, only a need for it to have sensors and to be able to make decisions.

Stuart Russell from the University of California Berkeley told New Scientist it was a “dangerous development” and use of AI. “Equipping a fully autonomous vehicle with lethal weapons is a significant step, and one that risks an accidental escalation in a way that does not apply to sea mines.”

In “Mind the Gap The Lack of Accountability for Killer Robots,” Human Rights Watch (HRW) poses and important question: what happens when a robot accidentally commits a war crime? The answer thus far is nothing, as there is no accountability.

No accountability means no deterrence of future crimes, no retribution for victims, no social condemnation of the responsible party,” said Bonnie Docherty, senior Arms Division researcher at the HRW and the report’s lead author at the time.

As TMU reported people like Brandon Bryant whom controlled drones for the U.S. military, have a conscience while robots will kill without remorse.  Since 2013, there has been a campaign to Stop Killer Robots encouraging countries to preemptively ban fully autonomous weapons.


Tyler Durden

Thu, 03/12/2020 – 22:05

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Global Liquidation Resumes: Japan Jolted, Crypto Collapses, China Crushed

Global Liquidation Resumes: Japan Jolted, Crypto Collapses, China Crushed

It is becoming clearer and clearer that the utter carnage going on in global markets appears to be some massive fund force-liquidating as every asset-class is getting destroyed despite jawboning from The Fed (as well as massive liquidity injections), ECB, Bank of Korea, Bank of Japan, and various politicians around the world.

After today’s carnage in US and Europe…

Things are getting worse…

Dow futures are down over 400 points… (down 2300 points from the fed spike highs)

Japan’s Nikkei 225 is down 10%, the biggest daily drop since the Tsunami almost exactly 9 years ago. This is Japan’s worst week since 2008

Chinese stocks are finally catching down to reality…

But are still massively outperforming US and Europe since the virus hit..

Elsewhere in Asia – total bloodbath:

  • *AUSTRALIA’S BENCHMARK ASX 200 INDEX FALLS 8%

  • *PHILIPPINES STOCK EXCHANGE INDEX EXTENDS DROP TO 10.4%

  • *HANG SENG INDEX FUTURES EXTEND DROP TO 8%

  • *SGX NIFTY INDEX FUTURES DROP AS MUCH AS 9.6% IN SINGAPORE

  • *KOREA 10-YEAR BOND FUTURES DROP BY MOST SINCE AT LEAST 2011

  • *S. KOREA KOSDAQ TRADING HALTED AFTER INDEX DROPS MORE THAN 8%

Asian FX markets are crashing…

Yuan continues to plummet…

Cryptos are utterly collapsing – this is the worst 2 day drop for Bitcoin since April 2013…and it’s crashing on the heaviest volume since Feb 2018

Crushing the cryptocurrency back to one-year lows…

Gold is also getting flushed…

And gold is getting dumped against yen too – BoJ in da house?

But bonds are bid. 10Y Yield are down 15bps – which looks like nothing on this chart after such a colossal week…

So much for that promise of trillions of dollars of liquidity?


Tyler Durden

Thu, 03/12/2020 – 21:50

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“The Number of Recoveries Continues to Rise Above Its Death Toll”

Newsweek writes: “While cases continue to soar in Italy, which has now reported more than 12,000 infections, the number of recoveries continues to rise above its death toll, with 1,045 recoveries versus around 800 deaths in the country.”

Does that mean something that I’m missing? Of course the number of recoveries should eventually rise above the death toll, so long as the mortality rate is under 50% (and the evidence seems to suggest it’s much lower than that).

Now at any particular time, the ratio may be sharply different, depending on factors such as how long it takes for those who recover to recover (and perhaps how one defines recovery), and how long it takes for those who die to die. But that right now in Italy the recoveries barely exceed the deaths strikes me as telling us very little; or am I mistaken?

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Iran Asks IMF For $5BN Emergency Loan As Death Toll Soars Near 500

Iran Asks IMF For $5BN Emergency Loan As Death Toll Soars Near 500

Citing vast shortages of medical supplies and pharmaceuticals due to US-led sanctions, Iran is urging IMF relief as it battles coronavirus to the tune of $5 billion

Days ago Iranian Foreign Minister Javad Zarif accused President Trump on Twitter of “maliciously tightening US’ illegal sanctions with aim of draining Iran’s resources needed in the fight against Covid-19 — while our citizens are dying from it.” Now he’s urging immediate emergency aid:

Iran has asked the International Monetary Fund (IMF) for emergency funding to help it fight the coronavirus outbreak, which has hit the Islamic Republic hard, Foreign Minister Mohammad Javad Zarif said in a tweet on Thursday.

Iranian cabinet members wearing face masks attend their meeting in Tehran, Iran. Source: Iranian Presidency via AP

As Reuters reports Thursday, Iran’s Central Bank chief Abdolnaser Hemmati revealed in a social media post that “in a letter addressed to the head of IMF, I have requested five billion U.S. dollar from the RFI emergency fund to help our fight against the coronavirus”.

And Zarif in a follow-up message noted that IMF managing director, Kristalina Georgieva, “has stated that countries affected by #COVID19 will be supported via Rapid Financial Instrument. Our Central Bank requested access to this facility immediately.”

Iran remains among the top outbreak epicenters outside China, as cases spike in the Middle East.

Per new reports confirmed cases in the region have pushed well past 10,000, with most in the Islamic Republic:

A slew of new coronavirus infections pushed the number of cases in the Middle East well past 10,000 on Thursday – and many of those infected are linked to Iran.

The Islamic Republic government, which said more than 360 people have died and about 9,000 are infected by the virus, has increasingly come under fire, accused of underrepresenting the impact of the virus on its people.

Per the AP, the death toll has reached 429 as of later in the day Thursday and is expected to climb further.

But at this point the true numbers of infected in Iran are widely believed to be well into the multiple tens of thousands, as the country’s ill-prepared and severely short-on-supplies health system is overwhelmed. 

Zarif concluded his latest appeal for emergency IMF aid by saying, “Viruses don’t discriminate. Nor should humankind.”


Tyler Durden

Thu, 03/12/2020 – 21:45

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Is South Korea About To Unleash A Neutron Bomb Across Global Stock Markets

Is South Korea About To Unleash A Neutron Bomb Across Global Stock Markets

Last June, when stocks were merrily grinding higher without a care in the world, and certainly oblivious of the crash that was about to slam global markets half a year later, we explained why South Korea’s massive autocallable issuance could be “ground zero” of the next vol catastrophe.

In retrospect it wasn’t: the proverbial “black swan” of the next crisis turned out to be a Chinese black bat, but that doesn’t mean that the world is now safe from what could be a potential volatility tsunami, triggered in South Korea and which sends global markets far lower than where they are now.

But before we go any further, put your hand up if you know what an autocallable is, and since there are barely any hands in the air, let’s back up.

As the “world’s most bearish hedge fund manager”, Horseman Global’s Russell Clark explained in January 2019, autocallables, which are fundmentally structured products that are extremely popular with South Korean traders, are best thought of as a service. A bank will offer to sell insurance on the stock market on your behalf, so that you can generate an income from the premiums received. So rather than buying an autocallable, it’s better to think of an investor as posting collateral for a bank to sell puts on their behalf. Typically, the bank will tell the investor what sort of yield they can generate, for a certain level of insurance. For example, a 5% return as long as the S&P 500 does not fall to 2000, from roughly 2900 today.

Typically, when markets fall, the price of insurance rises, and the bank does not need to sell that much insurance to meet a 5% yield target for an investor. Conversely, when markets rise, insurance prices fall, and banks would need to sell more insurance to meet the target yield. Hence, in normal markets, the risk to clients is balanced. More insurance is sold when market rise as insurance prices are low, and less insurance is sold when market fall as insurance prices rise.

However, when there are times when this process goes haywire: i) either when a negative gamma feedback loop emerges, similar to what happened in February 2018 with the VIX complex in the US that liquidated 3x levered inverse vol ETNs, or ii) when the market drop is so precipitous that there is a step function lower in the value of the collateral, and local banks flood clients with margin calls, which in turn prompt a forced liquidation of more risk assets, triggering a feedback loop cascade where selling begets more selling, and not just of South Korean assets, but global, as most of the risk assets collateralizing the autocallables universe are not domestic to South Korea.

We are now deep in scenario II, because shortly after the US suffered its biggest drop since Black Monday 1987, South Korea’s Kospi entered a bear market Friday, while the Kosdaq was halted limit down after tumbling 8%. Furthermore, the Kospi broke below its 200-month average near 1,750 – that’, according to Bloomberg, is a marker that served as a support level during the global financial crisis.

The drop was so big that the Bank of Korea reportedly was discussing the need for a special meeting, and would consider “appropriate steps” to stabilize markets, including open-market operations if needed, while closely monitoring bond markets, according to a Bloomberg update.

However, if Horseman is right, the pain may just be getting started for both retail and institution linvestors facing massive margin calls. Worse, if the long awaited autocallable liquidation cascade is finally triggered, the shockwave that is unleashed in Seoul could rattles global stock markets, resulting in another – potentially even more dire – selling avalanche.

In a note published today, Horseman’s resurgent CIO, Russell Clarke, also known as the world’s biggest bear whose fund returned a whopping 20% during February’s rout warns that “the continued issuance from Korea suggests that autocallables have not yet been knocked in, and in fact investors are taking advantage of higher volatility to get higher yields.”

However, there is a limit to everything, and today violent liquidation in South Korea may be just the trigger.

Below we lay out the latest thoughts and observations from Clark, who waited patiently for years to be proven right on his doomsday predictions, and which are now being validated courtesy of the biggest weekly crash in global stocks since the financial crisis.

* * *

Korea and the KOSPI 200 are the spiritual home of autocallables. Historically, the KOSPI 200 was a highly volatile market but the long bull market in semiconductors, combined with rampant volatility selling, caused market volatility in the KOSPI 200 to collapse. Even the collapse in memory prices had little effect on KOSPI 200 volatility in 2019. However, the KOSPI volatility has recently broken out to levels not seen since 2011. (Price as at 10.00 GMT – 12 March 2020)

Despite the breakout in volatility there has been no reduction in the issuance of autocallables. In 2015, HSCEI based autocallables were knocked in causing issuance to collapse. The continued issuance from Korea suggests that autocallables have not yet been knocked in, and in fact investors are taking advantage of higher volatility to get higher yields.

Meanwhile, the KOSPI 200 is still above levels that have held since 2011. It is likely the most KOSPI 200 strike prices are set somewhere below the 230 price that has held since 2011.

Autocallables issued in Korea will often include Euro Stoxx 50 in a “worst-of structures” market. A good proxy for the performance of this strategy is the Euro Stoxx 50 PutWrite Strategy. This has recently deteriorated sharply.

The spike in volatility has coincided with a steep decline in the share prices of French banks that structure many of the autocallable products.

If autocallables are triggered, then implied volatility should move even higher from current levels. For clearinghouses, the high level of both implied and realised volatility should lead to increased in margins. As a reminder, LCH as per its Q3 2019 disclosures was still running at initial margins at very low levels to variation margins, although both rose significantly. During the strains of Brexit initial margin rose to be multiples of variation margin.

One more timely way to monitor margins is to look at initial margins for large index futures. With rising volatility, margins have been increasing even as the S&P falls. To normalise over time we divide the amount of margin for trading the future by contract value. Cost of trading has recently risen to 6.4%, the highest level since 2011.

For OTC options, we can use BIS data to get an idea of initial margins. Taking the gross value of margins and dividing it by outstanding notional we can see that values were at a level seen before the global financial crisis and the dot com bubble.

Clark’s ominous conclusion: “Market volatility has risen significantly, but margin and collateral in the system still looks too low. Should autocallables break barriers in the KOSPI 200 or the Euro Stoxx 50, then the structurers will turn into volatility buyers, not sellers. Higher volatility leading to margin calls look likely, which could drive the market lower.

For much more on autocallables, please read “As Autocallable Issuance Explodes, Is This “Ground Zero” Of The Next Vol Catastrophe


Tyler Durden

Thu, 03/12/2020 – 21:24

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Now There’s a Real Royal Family Dispute for You

A quick summary from the AP (Jill Lawless & Danica Kirka):

The ruler of Dubai conducted a campaign of fear and intimidation against his estranged wife and ordered the abduction of two of his daughters, a British judge ruled in documents that were unsealed [last week].

A judge at the High Court in London found that Sheikh Mohammed bin Rashid Al Maktoum, 70, “acted in a manner from the end of 2018 which has been aimed at intimidating and frightening” his ex-wife Princess Haya, 45.

Judge Andrew McFarlane also said the Sheikh “ordered and orchestrated” the abductions and forced return to Dubai of two of his adult daughters from another marriage: Sheikha Shamsa in August 2000, and Sheikha Latifa in 2002 and again in 2018.

The judge made rulings in December and January after a battle between the estranged spouses over the welfare of their two children, but the Sheikh fought to prevent them from being made public. The U.K Supreme Court quashed that attempt ….

Some court documents, which gives much more detail:

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Now There’s a Real Royal Family Dispute for You

A quick summary from the AP (Jill Lawless & Danica Kirka):

The ruler of Dubai conducted a campaign of fear and intimidation against his estranged wife and ordered the abduction of two of his daughters, a British judge ruled in documents that were unsealed [last week].

A judge at the High Court in London found that Sheikh Mohammed bin Rashid Al Maktoum, 70, “acted in a manner from the end of 2018 which has been aimed at intimidating and frightening” his ex-wife Princess Haya, 45.

Judge Andrew McFarlane also said the Sheikh “ordered and orchestrated” the abductions and forced return to Dubai of two of his adult daughters from another marriage: Sheikha Shamsa in August 2000, and Sheikha Latifa in 2002 and again in 2018.

The judge made rulings in December and January after a battle between the estranged spouses over the welfare of their two children, but the Sheikh fought to prevent them from being made public. The U.K Supreme Court quashed that attempt ….

Some court documents, which gives much more detail:

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Goodbye To All That: The Demise Of Globalization And Imperial Pretensions

Goodbye To All That: The Demise Of Globalization And Imperial Pretensions

Authored by Charles Hugh Smith via OfTwoMinds blog,

The decline phase of the S-Curve is just beginning…

Globalization and Imperial Pretensions have been decaying for years; now the tide has turned definitively against them. The Covid-19 pandemic didn’t cause the demise of globalization and Imperial Pretensions; it merely pushed the rickety structures over the edge.

It’s human nature to reckon the current trend will continue running more or less forever, and that temporal, contingent structures are permanent. Globalization flourished because a unique set of conditions created fertile ground for the transfer of production to China and other emerging economies and the global expansion of the magic elixir of skyrocketing consumption, credit.

Credit-starved economies which are suddenly flooded with credit (for example, China) experience an explosion of investment in production, infrastructure and in business and household consumption.

In this boost phase of globalization, capital flows from stagnant developed economies to emerging economies to earn higher returns, and production moves to these low-cost economies to take advantage of low labor costs and lax environmental standards.

It’s a win-win dynamic for credit-starved emerging economies and stagnant developed economies, as the emerging economies get investment capital, jobs and technology transfers while the developed economies get higher profits due to the lower production costs and lower-priced goods and services.

Put another way: globalization is simply one manifestation of the financialization of the global economy. Developed-world central and private banks create trillions of dollars in fiat currencies that then slosh around the world, seeking the highest return. Whatever can be exploited in the short-term is exploited and then capital moves on, leaving environmental destruction and distorted economies in its wake.

Alas, the virtuous-cycle boost phase financialization soon burns through all the easy gains and then speculative gains replace productive gains: since over-investment in production has led to over-capacity and near-zero profits, capital flows into speculative gambles and money-pit bridges to nowhere that do little to actually boost the productivity of the real-world economy.

This transition from investing in higher productivity to pouring money into speculative bets is so gradual that few even recognize the transition until it’s too late. All too quickly the economy becomes dependent not on gains in productivity–the only enduring source of wealth creation– but on speculative gambles paying off.

Once the economy becomes dependent on speculative bets paying off, central banks and governments rig the roulette wheel to insure the big gamblers always win. This rigging of speculative markets further distorts the economy and society by destroying price discovery and exacerbating soaring wealth inequality.

As the financial elites become accustomed to “winning” the rigged games, they increase their high-risk gambling, confident that even the highest-risk bets will always pay off. In this universe of moral hazard, it makes sense to borrow as much as possible to plow into the highest-risk bets. Why not maximize one’s gains at the rigged tables?

This institutionalization of financial folly created an extremely risky structure that is now breaking down. Bets placed with borrowed money are no longer paying off, and so whatever collateral remains must be liquidated to meet margin calls and pay down debt.

In the boost phase of globalization, it made sense to maximize profits by optimizing the global supply chain for the lowest cost of production and shipping via distant production and just-in-time delivery. The risks of this extreme optimization for profits above all else is now apparent as dependence on production in distant lands is not within our control.

The apparently risk-free paradise of globalization is actually riddled with potentially catastrophic risks. Every node in this complex network is a potential point of failure, and since redundancy and less tightly bound systems were sacrificed to maximize profits, there is no way to restore the supply chain with a few nips and tucks.

As for the Imperial Pretensions of both China and the U.S.–these were as dependent on financialization and globalization as global supply chains. China’s Belt and Road Initiative (BRI) exemplifies an era that has already turned to dust, and American pretensions of being able to afford large-scale global meddling are equally embedded in a zeitgeist that has lost its coherence and relevancy.

The decline phase of the S-Curve is just beginning. Much of what we’ve taken as permanent will melt into air, and that’s far from a negative development.

My COVID-19 Pandemic Posts

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Tyler Durden

Thu, 03/12/2020 – 21:05

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Nightmare Scenario: Iraq Detects Suspected Covid-19 Cases In Overcrowded Refugee Camp

Nightmare Scenario: Iraq Detects Suspected Covid-19 Cases In Overcrowded Refugee Camp

War-torn regions of the Middle East remain hugely vulnerable for the spread of Covid-19 due to hundreds of thousands of families packed into often filthy temporary settlements already running low on basic staples for survival. 

And now a nightmare scenario is unfolding in Iraq as the United Nations has recorded the first suspected coronavirus cases inside an Internally Displaced Persons (IDP) camp.

Refugee camp in northern Iraq, file image via The Telegraph.

The UN Office for the Coordination of Humanitarian Affairs (OCHA) issued an alert in its latest humanitarian report this week, noting also the World Health Organization (WHO) has dispatched additional supplies and medical devices to Iraq amid broader closures of public spaces after at least 71 confirmed cases nationwide.

But with millions of refugees in the region, especially along the Turkish-Syrian border, and after Erdogan has effectively ‘opened the gates’ on waves of migrants headed to Europe, the spark that could erupt an explosion of outbreaks in camps across the Middle East may have started. 

The alarming new OCHA report reads

The first suspected cases of COVID-19 were documented in an IDP camp in Ninewa; the affected persons were transported to hospital, and a makeshift isolation unit was put in place. Sterilization activities are under way.

Crucially, this region lies along the Syrian border in Iraq’s northwest, and is near Turkey in a broader border area which has over the past years witnessed entire ‘refugee cities’ erected. 

Surrounding countries like Kuwait have taken proactive measures for heightened testing along their borders and points of entry, but other regional governments have lagged behind: 

The WHO previously said it’s especially concerned of an outbreak among refugee populations in war-torn regions of Iraq and Syria. 

“Refugees and internally displaced populations across Iraq and Syria have been identified as the most vulnerable groups in the region, should the spread of the virus become a pandemic,” The Guardian reported of recent statements. 

“Health officials in both countries remain under-equipped to deal with such a a reality that seems more possible with each passing day,” the report added.

And as Turkey continues to allow and even actively facilitate the passage of refugees and migrants into Greece and other EU states, the Covid-19 crisis currently shutting down entire countries in Europe is set to explode further.


Tyler Durden

Thu, 03/12/2020 – 20:45

via ZeroHedge News https://ift.tt/2TP0lJb Tyler Durden