Month: April 2020

Two powerful Democratic women are calling Joe Biden’s sexual assault accuser a liar, in sharp contrast to the #MeToo movement’s mantra of ‘believe all women.’

Stacey Abrams, who hopes to become Biden’s vice presidential pick, and Sen. Kirsten Gillibrand (D-NY) – whose father was involved with the NXIVM sex cult which exploited countless women, have both rushed to Biden’s defense. Now, instead of ‘believe all women,’ they’re saying that women have the ‘right to be heard,’ but that they don’t believe former Biden staffer Tara Reade’s claims that he sexually assaulted her in 1993, according to The Hill.

“I know Joe Biden and I think he’s telling the truth and this did not happen,” said Abrams in an appearance on CNN.

Possible VP pick, Stacey Abrams: “The New York Times did a deep investigation and they found that the accusation was not credible. I believe Joe Biden.”

She had come out in support of Christine Blasey Ford against Brett Kavanaugh, but not for Tara Reade

pic.twitter.com/mSe7TxR9kr

— Kennedy Review (@Kennedy_Review_) April 29, 2020

Abrams rattled off the Biden campaign’s bullet points – referring to a New York Times story they say proves the incident “did not happen.” The Times, however, said that the Biden camp is lying about their report – and that they did not conclude that the 1993 incident never occurred.

“Our investigation made no conclusion either way,” the Times told the Washington Free Beacon.

Stacey Abrams: I believe Joe Biden.
Everyone: #IBelieveTaraReade
Joe Biden: pic.twitter.com/8UzzyOgKT5

— L❤️VE 4NIMALS (@LOVE_4NIMALS) April 29, 2020

Gillibrand, meanwhile, says she believes Biden is telling the truth.

“I stand by Vice President Biden,” she said, adding “He has devoted his life to supporting women, and he has vehemently denied this allegation.”

Also defending Biden are Sens. Amy Klobuchar (D-MN) and Kamala Harris (D-CA), along with Michigan Gov. Gretchen Whitmer (D) – all of whom are potential vice presidential picks.

Reade is one of several women who accused Biden last year of inappropriate touching. Biden apologized to the women and said he would adjust his behavior.

Last month, Reade said for the first time in public that Biden had also sexually assaulted her in a secluded place on Capitol Hill in 1993. She is the only woman to accuse Biden of assault. –The Hill

According to Democratic strategist Basil Smikle, who served as the executive director of the New York state Democratic Party, Biden “should address it now since we can assume that Republicans will call us on it until Election Day.”

Sanders campaign national organizing director, Claire Sandberg, told The Hill “Now is the time to deal with the ramifications of Tara Reade’s accusations, not this fall,” adding “There is simply no moral justification for Biden to continue as the presumptive nominee. Out of respect for survivors and for the good of the country, he should withdraw from the race.“

A total of four witnesses have come forward to support Reade’s claims that Biden forced himself upon her and penetrated her against her will with his fingers – including a former neighbor who describes herself as a “very strong Democrat,” and a former co-worker who recalls Reade complaining that her former boss had sexually harassed her, and that she’d been fired after raising concerns.

Added to the four witnesses involved in this ‘credible accusation’ is a 1993 clip of a CNN episode of “Larry King Live” in which Reade’s mother called the network to ask how to resolve a complaint against a ‘prominent senator,’ as nobody in Washington D.C. would help her.

Republicans, meanwhile, are livid over the unequal treatment the media has given to Republicans vs. Democrats accused of sexual misconduct.

“I think these things ought to be dealt with symmetrically,” said Senate Majority Leader Mitch McConnell (R-KY) on Monday, claiming a double standard in the way the media has been slow to respond to Reade’s allegations in comparison to the feeding frenzy surrounding claims against Donald Trump and Supreme Court Justice Brett Kavanaugh.

That said, Robyn Swirling – founder of survivor advocate group Works in Progress thinks that nothing is more important than unseating Trump regardless of what Biden has done.

“Despite any silence from Democrats, or whatever we feel about Joe Biden, there is only one moral choice in this election, and that is to work to get Trump out of office,” said Swirrling, adding “I would never tell survivors they need to vote for someone that they’re uncomfortable voting for, but electing the Democratic nominee is imperative as a matter of harm reduction.“

And there you have it.

Submitted by Rabobank’s Michael Every

Warp Speed, Mr Scott!

Apologies in advance, but readers who have never watched any Star Trek might find some of the analogies used today rather confusing: then again, the classic original series is out there on Netflix and we are all mostly locked-down, so…

Markets are currently accelerating in risk off mode, with USD reeling. Part of that is end-month positioning and momentum, but it’s happening even against traditionally wobbly FX like Indonesia’s IDR, and even when Indonesia is outright monetising public debt and running out of food staples in some areas. Like TV science-fiction, just press the buttons, go with the ride, and don’t ask too many questions(?)

The other major reason for the swing in sentiment is the Fed, which as Philip Marey notes, while making no major changes yesterday also underlined it is committed to using its full range of tools forcefully, proactively, and aggressively. Chair Powell said it may very well be the case that the economy needs more support from “all of us” (so monetary and fiscal policy). The engines are in in fine fettle, says Scotty.

Yes, there was the wrinkle that Powell also said that the law (Section 13-3 of the Federal Reserve Act) gives the Fed lending powers, not spending powers, so the Fed cannot lend to insolvent companies, and therefore the special lending facilities will remain (mostly) aimed at companies that can repay their loans. This suggests dangerous cracked dilithium crystals. Yet will the Fed really be asking too deeply if companies can pay their loans or not in a collapsing economy, or will it just use optimistic projections to assume that they will be able to? After all, that’s what the IMF does in many key cases, so it’s hardly changing the ‘laws’ of market ‘physics’.

And then there was virus news. First, Dr Fauci, the health expert who the world is listening to daily (the same Dr Fauci who in February said Covid-19 risks to the US were very low) announced that as far as he is concerned, the experimental new drug Remdesivir presents “quite good news” and could get emergency FDA approval in days. This is the same drug a Lancet report says failed recently in another location.

Then President Trump announced “Operation Warp Speed”. No, this is not related to Spaaaaace Foooorce (which I politely remind readers must only be said into one’s cupped hand). Rather we will see a Manhattan Project-style US effort to develop a vaccine at the fastest possible pace, uniting pharma companies, government agencies, and the military. Together this will see multiple vaccines developed at once, with the least successful dropped at each stage. Risk will be underwritten by the government not the companies to encourage them to go all in. The aim? To have 100 million doses of virus vaccine ready by year-end.

This is undoubtedly positive given the clear logic that until we get a vaccine we cannot emerge from this crisis. Markets are right to see it as great that the US is pushing ahead with the kind of war-time all-of-government approach that so far has only been hinted at via limited flirtation with the Defence Production Act. We need the president to play Captain Kirk and shout “Warp speed!” (or Jean-Luc Picard and say “Make it so.” – but the questionable hair and hammy acting says Kirk to me). It’s certainly far preferable to the President acting like Harry Mudd and dragging us into the mud of who said what about ingesting disinfectant and why. However, two major caveats:

• One – this still does not mean Operation Warp Speed is going to work. The more money thrown at a problem does not always mean the quicker a solution is found, if at all. That said, what I hear from scientists–who traditionally live on crumbs as the money usually flows into tech companies designed to destroy employment and wages while losing money–is that we can at least now give it a real try. Yet in the interim the economic damage continues to pile up.

• Two – is it a coincidence that the good virus news from the White House came at the same time as Q1 US GDP was -4.8% q/q annualised, even weaker than the -4.0% expected? Indeed, given January, February, and parts of March were business as usual in much of the US, one can now start to project how horrendous Q2 damage is going to be. Let’s just say that the risks are the Fed will have to make some true science-fiction forecasts to keep lending to only solvent companies. Notably, despite the surge in stocks and sell-off in USD, 10-year US Treasury yields are not even moving on impulse engines, let alone warp speed.

Meanwhile, if the White House is now the bridge of the (State-Owned) Enterprise, some of the crew are looking for ‘Klingons’ to rumble with. Secretary of State Pompeo continues to single out China for criticism, stating Beijing has not been forthright on the virus and that the Chinese Communist Party will be held accountable by the US; Captain Trump, largely unreported by the financial press, last week said China may have to pay reparations of USD160bn. The two attacks have obviously sparked a furious Chinese response – and their shields are well and truly up. Yet the US may be about to fire photon torpedo: a group of bipartisan US lawmakers are urging Pompeo to address China’s recent actions in Hong Kong in the upcoming certification of the Special Autonomous Region’s status, which must be done by 25 May. Nobody is sure what that means, but the backdrop points towards a bridge-hit on US-China relations. So risk off? Or does this no longer matter now Fed Funds are at zero, and that was the whole point of trade-war market wobbles in recent years?

As the US and China circle each other in space, Beijing is still trying to show that is has sustained only minor damage. Today’s PMIs for April showed manufacturing at 50.8, down from 52 but growing again, despite stories reporting mass unemployment and restrained consumer demand. Services were at 53.2, up from 52.3, despite cinemas being shut, gyms in Beijing being closed, and life existing under a new normal. The Caixin PMI, which covers smaller businesses, was 49.4, down from 50.1, and paints a less flattering picture of an economy in what would in normal times be called a slump.

Australia likewise saw private credit leap 1.1% m/m in March vs. 0.3% expected, but this was firms drawing down loans for the lockdown period. We aren’t back to Aussie borrowing at warp speed yet – although the powers that be would like it to happen. New Zealand, however, saw an uptick in final April business confidence to the ominous -66.6 from -73.1. Again, better, from a staggeringly-low base.

Despite the issues of months past, including shutting down Fremont for the coronavirus, laying off hundreds of contractors and staff and putting himself on the hook for his own board’s D&O insurance, Elon Musk still seems set to cash in on a ~$845 million payday in the form of 1.69 million stock options at $350 per share.

If the company can hold its 6 month market cap average over $100 billion this week, Musk will qualify for the payout in Tesla stock, which came as a result of a March 2018 compensation package that could pay Musk a total of $56 billion in stock options over the course of 10 years, should he meet certain milestones. 

As you can see from these two charts, many of these milestones have nothing to do with GAAP net income, profit or cashflow.

Instead, they focus on revenue, adjusted EBITDA and market cap – all targets that can be met without the company necessarily having to show any type of tangible and consistent cash generation or GAAP profit.

The compensation package could wind up totaling nearly $56 billion if Musk meets all of his targets. Given the current share structure, it means that Tesla stock would be approaching nearly $4,000 per share. It also means that Musk will have been awarded compensation equating to about 8% of the company’s total market cap, assuming he hits the $650 billion market cap target.

What has been driving Tesla’s stock to where it is today remains to be seen. Those reporting on Musk’s compensation package, like The Observer, can only call it “two rounds of wild stock rally”. 

The $100 billion market cap goal, which needs to be held for 90 days, looks like it has been met. That will award Musk options to buy 1.69 million shares at $350 which, at today’s priced, could be exercised and valued at around $845 million almost instantly. 

When Tesla plunged with the rest of the world as a result of the coronavirus, it looked as though Musk may have had lost his chance at his bonus. But, Tesla stock magically sprung back to life and its 6 month average market cap stood at $96 billion as of the beginning of this week. 

Given the stock’s rise after yesterday’s earnings report, despite Musk’s insane behavior on the company’s conference call, it looks as though the $100 billion threshold has been met and Musk will get his payday. 

Maybe he’ll hire back some of the hundreds of people he’s fired with that money. Or payback some of the money he’s taken from the U.S. taxpayer. Of course, we’re just joking. He’ll spend it on private jet fuel. 

Authored by David Robertson via RealInvestmentAdvice.com,

How to survive the market’s ups and downs. This is what everyone wants.

In normal circumstances it is common to do a lot of things with little conscious thought or effort — almost as if on autopilot. When something disturbs that normalcy, however, we need to start paying attention in order to navigate the new situation successfully.

The recent turbulence in the market, then, creates an excellent opportunity for investors to start paying attention and freshly assess the situation. That effort can certainly be advanced by learning more about the investment landscape, but it also helps to incorporate some principles for managing adversity in general.

While the path for stocks since 2009 can be characterized as a fairly smooth recovery, that path has included considerably more volatile swings over the last year and a half. A dismal fourth quarter in 2018 led to a rapid and persistent recovery through 2019 and then a punishing selloff in the first quarter of 2020.

It’s Only Natural

It’s only natural that investors might try to understand what is going on. Indeed, John Authers reports in his “Points of Return” note for Bloomberg Opinion from April 27, 2020 that interest in the keyword “investment book” rocketed higher over the last couple of months to a level that is double that of last year.

While it is certainly healthy to want to learn about investing, it takes a lot of time and experience to develop meaningful expertise.  Alternatively, investors can learn some extremely useful principles from Laurence Gonzales in his book, Deep Survival. I have had it on my shelf for years and regularly refer to it. Further, Michael Mauboussin recently highlighted it on Twitter as “an awesome book” and one that is “especially relevant in these times.”

Gonzales wrote the book because he was fascinated by cases of “otherwise rational people doing inexplicable things to get themselves killed — against all advice, against all reason.” After a great deal of research, he found a number of principles that “apply to wilderness survival,” but that also “apply to any stressful, demanding situation …” As a result, his lessons are also extremely useful for investors as well.

Gonzales introduces us to his research with an interesting notion. He declares, “What we call ‘accidents’ do not just happen. There is not some vector of pain that causes them.” In other words, not only do we often play a key role in facilitating our accidents, such situations often have identifiable signatures that mark them as dangerous situations to be avoided.

Iffy Environments

Much of this starts with how we try to make sense of the complicated world around us. One of the key strategies is that we construct mental models. Gonzales describes these as “stripped down schematics of the world.”

While mental models help us manage complexity, we also routinely make mistakes with them. A common mistake is to falsely attribute success to skill. Gonzales describes:

“If you’ve tallied a lot of experience in dangerous, iffy environments without significant calamity, the mental path of least resistance is to assume it was your skill and savvy that told the tale.”

Many investors today have succeeded in the stock market by ignoring or downplaying evident risks. Not only have they avoided significant calamity, but they have been rewarded by impressively appreciating stocks. Such an extremely benign investment environment conditions investors and makes it easy to attribute skill as the primary cause of success.

Lack of experience also presents its own set of hazards for constructing appropriate mental maps. If we have no experiences with bear markets or avalanches or whatever the hazard may be, we don’t know what markers to keep an eye out for. Gonzales points out, “for most people who are raised in modern civilization, the wilderness is novel, and full of unfamiliar hazards.” True enough. And the investment world is full of unfamiliar hazards as well.

It is also important for mental models to change with the circumstances in order to be useful. Part of this is simply recognizing when things change. Gonzales describes a working definition of being lost as “the inability to make the mental map to match the environment”. If you aren’t paying attention, it is easy to wander astray.

When You’re Lost

It also matters what you do when you’re lost. The best thing to do is to recognize that you are lost, stop, and reassess. Some people refuse to accept the reality in front of them, however, and instead try to “make reality conform to their expectations.”

In short, mental models must be kept up to date. On this point, Gonzales pulls no punches: “Some people update their models better than others. They’re called survivors.”

It is easy to see how many of these lessons can be applied to the investment landscape. Investors who were not tracking the divergence between stock prices and economic reality didn’t recognize the fragility of market conditions earlier this year. Investors who were not following shadow banking and the eurodollar system didn’t see important warning signals in the fall of 2018 and the fall of 2019. The Fed has repeatedly resisted acknowledging model failures and instead has tried to make reality conform to its expectations.

Further, our physiological reaction to stress often makes difficult challenges even more so. Gonzales highlights that “most people are incapable of performing any but the simplest tasks under stress”. The reason is that stress impairs our capacities of “perception, cognition, memory, and emotion.” As a result, it is often when we are in most need of all our faculties that they are the least accessible. Gonzales describes:

“But it’s easy to demonstrate that many people (estimates run as high as 90 percent), when put under stress, are unable to think clearly or solve simple problems. They get rattled. They panic. They freeze.”

In a sense, then, the selloff in February and March may have done investors a favor. The stress induced by such a selloff simply can’t be replicated by abstract discussions or by questionnaires on risk tolerance. As a result, the selloff may have provided something like a stress simulator.

Getting Rattled

Did you get rattled? Did you panic? If that happens, it is important to realize that “you’re not all there.” It is a terrible time to try to figure things out. Because investors can’t be all there in a moment of stress, it is all the more important to plan ahead and prepare.

As it turns out, Deep Survival also serves as an extremely useful guide for such preparation by sharing tips for staying out of trouble and for dealing with trouble when it comes.

One important thing to do is “Get the information” about “hazard zones”. Knowing where trouble is especially likely to crop up is an important part of the battle. Gonzales adds, “Avoiding accidents, avoiding survival situations, is all about being smart.” He continues, “A deep knowledge of the world around you may save your life.”

When trouble does arrive, it is extremely important to “Take correct, decisive action”. As Gonzales explains, “Survivors are able to transform thought into action. They are willing to take risks to save themselves and others.” Obviously, this is difficult to impossible for people who have a tendency to panic or freeze in stressful situations.

While it is important to “Do whatever is necessary”, it is also important to be realistic. Gonzales notes: “Survivors have meta-knowledge: They know their abilities and do not over- or underestimate them.”

Another point that is important in surviving adversity is that it is critical to let go of the past. This can be especially hard for investors who savor paper investment gains (and everything they imply) but cannot accept when those gains become losses. Gonzales notes, “The best survivors spend almost no time … getting upset about what has been lost, or feeling distressed about things going badly.”

An important silver lining in these studies of survival, and one that should hearten investors, is that making it through difficult situations normally does not require absurdly high skill sets:

“You don’t have to be an elite performer [to survive]. You don’t have to be perfect. You just have to get on with it and do the next right thing.”

Key Tips

Helpfully, there are a couple of key tips for successfully navigating any potentially hazardous situation. One is, “Be here now. It’s a good survival rule. It means to pay attention …” In other words, be actively engaged in assessing and evaluating your environment. Many investors only check in periodically, if at all, and miss fundamental changes to the landscape that happen gradually over time.

Another useful insight is that the “greatest skill [of people with strong navigational abilities] lay in keeping an up-to-date mental map of their environment.” This is something I always try to do with my blog posts and there are several commentators who also regularly provide useful updates and insights. It is all designed to help keep mental models up to date.

Needless to say, the insights from Deep Survival have some broader implications for investors. One is that a number of investors are probably “lost” in this investment environment and need to get reoriented in order to avoid trouble. Many people were surprised at the violence and depth of the selloff in March and they shouldn’t have been. In addition, John Hussman observed recently, “My sense is that investors remain disoriented about where they actually are in the cycle.”

Another implication is that investors should be thoughtful in drawing on resources to orient, or re-orient, themselves. After the financial crisis in 2008, several investors shunned Wall Street research as being far too conflicted to be useful. As a result, many investors embraced new and independent research services and used them to inform a DIY approach to investing. Other investors stuck with very conventional asset allocations constructed with passive funds.

Conclusion

Both approaches worked fairly well for as long as the market kept going up. With far more problematic challenges for stocks in the context of Covid-19 lockdowns, investors face greater challenges than they have for over ten years.

Interestingly, Mike Green made a point to highlight the concept of “adult swim” in an April 8, 2020 interview on Realvision. He meant that there are certain investment vehicles that should only be employed if you have an excellent understanding of the risks. The same is true of the environment for stocks right now – this is adult swim – and a lot of investors and advisors will find out the hard way.

Finally, there are ups and downs in markets and then there are events that can really cause investors harm. The best course is to avoid trouble from the start but that requires effort, knowledge and awareness. The recent turbulence creates an excellent opportunity to freshly assess the situation and get models up to date.

On Tuesday, with stocks already solidly in positive gamma territory – meaning any incremental gains would force dealers to buy even more stocks in a the now infamous gamma feedback loop – we reported that according to Nomura calculations a close in the S&P futs above 2901 would trigger a flip in CTAs from “-69% Short” to a “+100% Long”, with Nomura’s Charlie McElligott not accidentally adding “that anecdotally on these days where the model indicates a “flip” potential, said buying to cover and go long is likely already part of the flow creating the current move (ES1 +1.2%)”

One day later, that’s precisely what happened, because even as yesterday’s dismal GDP print confirmed the US has now entered a recession – the CTA “flip” threshold serving as the bogey for all momentum-chasers to ramp the “pain trade” rally which has seen virtually no hedge fund participation, even higher and the S&P had no problem spiking to new post-crisis highs, just shy of 3,000 in the S&P.

Commenting on this reversal, McElligott today writes that his CTA model’s S&P futures position flipped yesterday, from the recent “-69% Short” signal to the current “+100% Long,” they bought a total of $36.8BN across Emini futures yesterday.

And as stocks seek to recapture 3,000 and the Nasdaq unchanged for the year, McElligott points out that the “buy to cover” triggers are getting closer across various other Global Equities futures legacy “short” positions as well, and worth keeping track of (still “-100% Short” in HSCEI, Nikkei, Estoxx & RTY):

Meanwhile, as pointed out previously, the higher the market rose – start of the recession notwithstanding – the greater the gamma push, and as we have recently seen the aggregate SPX/SPY dealer positioning flip from what had been “short gamma” to then a “neutral gamma” one and now increasingly outright “long gamma” (approaching overwriter strikes), Nomura “sees the benefits of “vol suppressing” dealer hedging behavior with these grinding, less spastic market moves, while the largest Gamma strikes shift higher on the move, with the biggest gamma strike now at the nice, round 3,000.

Incidentally, despite today’s modest drop in stocks, we are still deep in positive gamma territory…

… so don’t be surprised to see another forceful levitation higher, further infuriating purist investors who still care about such market trivia as fundamentals. Here is McElligott explaining in his own unique way why fundamentals are meaningless when one has technicals: 

US Equities continue to sit near 2 month highs, to the shock of many who “fundamentally” remain focused on the obviously horrific economic ramifications of the COVID19 shutdown…but without an appreciation of the ability within the Equities market to “pull forward” future inflections, on top of client positioning dynamics, vol dealer positioning / hedging realities and the “sling-shot” that is a market structure built-upon “negative gamma” which creates this seemingly rolling “Crash DOWN, then Crash UP” cycle.

Effectively, in a “VaR” risk management world where volatility is the exposure toggle—the implications of vol resetting LOWER (following a “macro shock” spike) then has a tendency to contribute to sling-shot HIGHER in spot Equities, as vol control & target volatility strategies mechanically need to re-leverage risk exposures, while “expensive vol” / inverted VIX term-structure, per the back-testing model-driven systematic community, signals an “all-clear” to load back into “short vol” behavior…all of which feeds into the risk virtuous cycle

It is precisely this “slingshot” risk we discussed on Tuesday when we said to expect a “Violent “Slingshot” Higher” if “CTAs Flip From -69% Short To +100% Long On Close Above 2901.”

There is another reason for the relentless grind higher in stocks, which is completely disconnected from fundamentals: the continued massive short squeeze which as we discussed earlier this week has been the most furious on record:

“Peak pessimism” in late March (selling into cash, slashing net length exposure, grossing-up of shorts, dynamic hedging in futs / downside in index and ETF options/ upside in VIX futs), historic “Momentum Unwind” seasonality in April, unprecedented CB asset purchases & liquidity on top of government fiscal stimulus,  and the tendency for “reflation” sensitives to outperform “as the recession hits” have all created a brutal backdrop for said “shorts” to explode to the upside—all despite being economically sensitive plays into a crashing economy

Via SchiffGold.com,

The mainstream is a fickle place.

• On the one hand, we had Bank of America raising its 18-month price projection for gold to $3,000.

• On the other hand, some people argue the price of gold could crash later in the year.

Gold is up over 13% on the year, but the yellow metal has seen some price pressure over the last couple of days as various government agencies have started to move toward reopening the economy.

An article published by CCN offers three reasons gold could “crash to earth” in the coming months – none of them particularly compelling.

1. A coronavirus vaccine.

2. A quick economic recovery

3. Deflation and a soaring dollar

The first two reasons both embrace the mainstream narrative that the economy was great before the pandemic and that it will quickly go back to “normal” as soon as governments open things back up again.

But there is no normal to go back to. The economy wasn’t normal before the pandemic.

Coronavirus was merely the pin that popped the economic bubble. Everybody is still fixated on the pin, but getting rid of it doesn’t stop the air from coming out of the bubble. A coronavirus vaccine would ease the pandemic, but it wouldn’t do anything to address the malinvestments and debt that were already rampant in the economy before coronavirus reared its ugly head.

In fact, gold was already on an upward trajectory before COVID-19. In 2019, the yellow metal charted its best year since 2010. The price increased by 18.4% in dollar terms. This was in large part due to the Fed’s pivot to loose monetary policy last year. Keep in mind, the central bank was already cutting interest rates, running repo operations and relaunching quantitative easing prior to the pandemic. The response to coronavirus simply put the Fed’s extraordinary monetary policy into hyper-drive.

The economy was already broken thanks to the efforts of the Fed in response to the 2008 financial crisis. To fight the impact of coronavirus, the central bank doubled down on those policies. This is basically like the arsonist throwing gasoline on the fire he set and then claiming he’s trying to put it out.

And that leads us to CCN’s reason #3 – deflation.

This kind of Federal Reserve monetary is the exact opposite of deflation. In fact, it is literally inflationary – increasing the money supply. That doesn’t necessarily mean it will manifest in rising consumer prices, but it certainly doesn’t scream “deflation.” Peter Schiff recently said that with this monetary policy, hyperinflation has gone from the worst-case scenario to the most likely scenario.

During a recent interview, Peter made a strong case for rampant price inflation.

When you create money, you are creating inflation. Now, that inflation will manifest in various ways. I mean, when the stock market went up a lot, when the real estate market went up a lot, it was inflation that was driving those price increases, not the real increase in the value of the businesses, but the nominal price. And prices are going to rise. The Fed is putting money into the economy at a time where production is actually going down. What’s happening as a result of the coronavirus is businesses are not operating. Goods are not being produced. Services are not being provided. Yet, we are creating more demand by flooding the economy with freshly printed money. You’re just focusing on certain prices. Yes. Airline tickets are down. Nobody is flying. OK. Gas prices are down. Nobody is driving. This is only temporary. But look at what’s happening to other prices. They’re already rising. And they’re going to rise even faster in the days, weeks and months ahead.”

The CCN article focuses on the plunge in oil prices. But this is purely a function of supply, demand and overproduction. It does not imply a broader drop in consumer prices. In fact, other prices are skyrocketing. As Peter explained, “When you have a rise in consumer prices, it’s a broad-based rise in the general level of prices. But within that, prices can be falling. … Oil prices can go down in an inflationary environment. Don’t be fooled by what you are seeing in the oil market.”

And it will take months for the impacts of all of this Fed money-printing to work its way through the economy. In a nutshell, deflation is not the worry here. And the dollar isn’t likely to soar. In fact, Peter said people will likely start dumping dollars.

Nobody can hold dollars. Nobody can hold any bonds denominated in dollars. This is now like a game of musical chairs where nobody wants to get caught with dollars when the music stops playing.”

And when that happens, what will they buy?

Gold.

What else are they going to do? I mean, what are they going to use as an asset? They’re not going to just swap dollars for euros or swap dollars for yen. They’re going to just buy gold.”

Indeed, the environment is bullish for the yellow metal. After all, the Fed can’t print gold.

The last time a couple of local cops stumbled on a freezer truck packed with dozens of dead bodies, it became an international news story and object of lurid fascination for millions around the world.

But during the age of COVID-19, it’s just another quickly forgotten headline amid a global crisis that has produced a surfeit of misery and suffering. If Internet-surfing consumers weren’t inured to photos of dead bodies already, after seeing thousands of morbid photos out of China, Europe, you probably are now.

The latest disturbing headline comes from the outerboroughs of NYC, where a funeral home in Brooklyn was apparently busted for illegally storing bodies in a freezer truck after being absolutely swamped with deaths related to COVID-19. According to Sky News, roughly 50 bodies were found stored in ice trucks rented by a funeral director at the Andrew T Cleckley funeral home on Utica Ave. in South Brooklyn’s Flatlands neighborhood.

The corpses were discovered after passers-by (New Yorkers presumably scurrying out to pick up their daily food and booze) complained about the smells and leaks.

Here’s the kicker: The funeral home was apparently in violation of no laws. It was cited for “failing to control the odours”, and the police moved on.

Instead, the home ordered an even larger refrigerated truck and all the bodies were transferred into it later that day by workers at the home clad in protective gear.

As Steven Mnuchin previewed last week when he said he’s considering an additional lending facility for troubled U.S. energy companies, at 10am on Thursday the Fed – which is now joined at the hip with the Treasury – announced that it is expanding the scope and eligibility for the Main Street Lending Program which was developed “as part of its broad effort to support the economy” and “to help credit flow to small and medium-sized businesses that were in sound financial condition before the pandemic.”

Specifically, the central bank said businesses with up to 15,000 employees or up to $5 billion in annual revenue are now eligible, compared to the initial program terms which were for companies with up to 10,000 employees and $2.5 billion in revenue, doubling the revenue limit from previous guidelines and raising the employee limit by 5,000.

The maximum loan size would be limited to 4x adjusted 2019 EBITDA while the minimum loan size was lowered to $500,000 from $1 million.

The Fed also added a third loan option for companies was higher debt. Under the new loan option, lenders would retain a 15% share on loans that when added to existing debt do not exceed 6x EBITDA. This compares to the existing loan options where lenders retain a 5% share on loans, but have different features.

Under all of the loan options, lenders will be able to apply their industry-specific expertise and underwriting standards to best measure a borrower’s income. All the loans will have a 2-4 years term and pay interest at a rather high Libor+3% rate (on the flipside, there are no covenants).

In total, three loan options—termed new, priority, and expanded—will be available for businesses. The chart below summarizes the different loan options.

It wasn’t immediately clear if the adjustments on the Fed facility are meant to make it easier for energy companies to access the Fed’s loans. Previously, the Fed’s reading of its emergency lending authority has been that it doesn’t permit the central bank to erect a facility to support a specific industry.

The unspoken message here is that with every passing day, the Fed is expanding its various bailout programs suggesting that demand for Fed backstops is far greater than expected, which then also means that the economic damage is much broader than the Fed anticipated just weeks ago.