Thursday, March 19, 2020

We've probably seen the worst

My sense is that yesterday marked the extremes of panic, despair, capitulation, short-covering, and anguish.

As emotions cool, even as covid-19 cases soar and deaths rise, we are beginning to see the light at the end of this tunnel. There are several drugs that are now available as therapeutics, thanks to Trump twisting the reluctant FDA's arm. Trump knows, and everyone does also, that maximum pressure needs to be applied to the Saudis and the Russians to encourage them to end their mutually-destructive crude oil price war. Even as Italian virus cases soar and mortality rates exceed what happened in China, the numbers in the rest of the world are becoming more realistic. High fatality rates appear to reliably coincide with colder climates, older and sicker populations (99% of the Italians who died from covid-19 deaths had at least one other infirmity or illness!), populations with high rates of smoking, and populations with centralized healthcare systems. Mortality rates in Germany, the US, Germany, Japan, France, the UK, Canada, Australia, Switzerland, So. Korea, and Singapore are much lower. All mortality rates are most likely overstated in any case, since it appears that only about half of those infected with coronavirus show symptoms, and those are the only ones that tend to be tested.

If nothing else, the extreme measures already adopted by most of the U.S. and the rest of the world will almost certainly result in a slower progression of contagions in the weeks to come. Testing kits—essential to effectively control the disease, but tragically lacking in most of the US until recently—are now being widely distributed.

I'm not saying this is the absolute bottom. The Vix index has probably hit its peak, but that doesn't guarantee that risk assets have hit their bottom. The Vix peaked in October of 2008 but the stock market didn't hit bottom until early March '09. Oil prices surged almost 25% today, but they remain extremely low. The dollar continues to march higher, and that puts pressure on all commodity prices and most emerging market economies.

But the anguish that permeated everything yesterday seems to have faded to an important degree today. On the margin, the news is no longer uniformly bad; there are pockets of relief and glimpses of improvement beginning to show up here and there.

Some relevant charts:

 Chart #1

 Chart #2

As Charts #1 and #2 show, the Vix index has reached a high that is just shy of the worst levels we saw at the height of the 2008 global financial crisis. Back then, many thought that we were on the edge of the abyss, about to witness the collapse of the entire global financial system, coupled with a global depression. Can a little tiny virus be worse than that? Chart #1 shows that the market has effectively given up the gains it registered over the past three years. Three years of record-setting profits, decent growth, rising prosperity, lower taxes, and record-low levels of unemployment—all for naught.

 Chart #3

Chart #3 highlights the price action of the S&P 500 over the past six months. It also shows (bottom bars) how trading volume has soared as prices have plunged. Record levels of panic, record levels of trading, and plunging prices are the hallmarks of a panic-driven market, and they are also typical of bottoms. Let's hope this is as bad as it gets.

 Chart #4

Chart #4 shows the spreads on high-yield, energy-sector bonds as of yesterday (Mar. 18th). We've never seen worse, and it is directly a function of the enormous decline in oil prices, which have created near- fatal conditions for most of the world's oil producers. But thanks to a 24% gain in oil prices today, we've probably seen the high-water mark for energy sector credit spreads. Importantly, Trump today announced that he is going to "apply pressure" to the Saudis and the Russians, in order to force them to cut their output.

 Chart #5

Chart #5 shows 10-yr Treasury yields (red line) and the level of the S&P 500 index (white line). It looks very much like Treasury yields have been leading the stock market. If that is indeed the case, the big jump in yields over the past several days suggests the stock market is likely to experience some welcome relief in the days to come. 10-yr yields have traditionally been a good barometer of the market's degree of confidence in the outlook for the economy. Most commentators will probably attribute the rise in Treasury yields to the market's expectation of huge federal deficits being funded to pay for fiscal "stimulus" plans. I have yet to see anyone of late come up with any fiscal plan that looks genuinely stimulative. Sending checks to everyone does nothing to change incentives to work or to keep idle workers on the payroll. I would get excited about a payroll tax holiday. In any event, it's just as likely that the market is reading the virus tea-leaves and concluding that the pandemic hype has been overblown.

 Chart #6

Chart #6 shows the spread between 10-yr and 30-yr Treasuries. Rising spreads are typical of economies that are growing and healthy. I think this chart reinforces the argument that the market is beginning to look across the valley of despair, and anticipating better times ahead.

 Chart #7

One troubling fact remains: the strong dollar. As Chart #8 shows, the strength and weakness of the dollar tends strongly to coincide with the ups and down of commodity prices. The dollar is now at an 8-year high, and commodity prices are uniformly weak. (Note that the dollar is plotted using an inverted scale.) That's bad news for emerging market economies, and it's even pulling down the price of gold—which is remarkable given all the bad news that's out there. For that matter, gold stands out among all commodities for its resistance to the strength of the dollar. Gold investors should be wary.

82 comments:

Unknown said...

Scott - I've heard market commentators today write/say that the rise in the 10 year yield is based on a huge amount of selling of these ultra-safe assets for liquidity purposes. Do you put any credence in that assertion? Tom

Downtown Adam Brown said...

Scott, any thoughts on IG Credit today? Short term got whacked more than anything longer. NEAR vs. LQD. Strange day for pricing or something to be concerned about going forward?

Benjamin Cole said...

Thank goodness for Scott Grannis' optimism. I will never criticize someone for an optimistic outlook.

In terms of equity prices I think we have to see another leg or two of the bear. A lot of companies will not be able to pay their bills, including debt payments. The financial system may end up in knots.

The Congress and the Federal Reserve appear unable to conduct helicopter drops on Main Street.

Hysteria appears to be the default response to Covid-19 from all levels of government.

It is not the end of the world. The bear markets of 1973, 2002, and 2009 all took about 50% off of stock market values. I think we are about halfway there and the worst is over. But a sullen grind ahead.

Frozen in the North said...

Bloody hell! I hope you are right. However, this is just the beginning of the process. It will not be one wave and done, but more than likely several. Maybe a "magic solution" will be found -- but there are still a lot of maybe out there.

There is simply no reason for stock price to stop their downward journey as there was no reason for the rise over the past 3 years. Aside from tax cuts, little money has been put back to work, instead an unprecedented wave of share buybacks have dominated the world of finance.

But CBP I hope you are right!


minnesota nice said...

What politician can stand up and say "OK, everyone back to work!"? None. It will take more than good news about Covid-19 to get people back to work. The media? Politicians? Big government?
What's the end game here? Who is going to have courage to tell us the world is normal?

Bill Snarf said...

3200 dead in China off a 1.3b population. Italy 3400 off a population of 60M while 1% tyoically die a year and most of those from flu/ pneumonia. The Italian number is going to go up a bunch but still we are far off from the natural death rate of 600k. Quarantine at this stage is likely too late. Want to get tested. Wait in line with sick people. You just increased your chances. Why get tested.

Trump is getting pushed around and of course your great state California just capitulated to the media. Those workers at telsa are not going to die unless they have a previous condition. This is likely a huge mistake closing the economy because some scientists and fear mongers are controlling the narrative. Acting on worst case. Don't know for sure so shut down the economy.
Regarding drugs to treat, good luck most if not all will not be approved before it naturally burns out. Need safety studies. Existing drugs off label make sense. No harm in prescribing chloroquine which is showing some efficacy.
There will be a huge ramp in diagnosis now testing is available and the media will scare everyone for a virus that is not very deadly to healthy people. The fatality rate will peak quickly and Trump better encourage people back to work as opposed to handing out money.
How many people are sick from his first press conferences where he shook everyone's hand while the press were all huddled together a few inches from each other. Let's get back to work.
Not good if the economy is closed for months especially with the massive amounts of corporate debt. Eventually that debt load will come to bite us all. Stay healthy and I wish the elderly the attention they deserve.

Benjamin Cole said...

Do we really want government-controlled output of oil? The autocracies of Russia and Saudi Arabia should straitjacket production of oil by ukase?


If the hobnail boots of government are going to stomp into oil markets, let us have the US government prevent import of oil from Saudi Arabia and Russia. Those are a pair of thug-states anyway.

didier said...

Your articles are very helpful to navigate this mess.

Frozen in the North said...

Benjamin

No Middle Eastern oil goes to North America...it all goes to Europe and Asia! In fact, NA has been protecting the flow of ME oil to the rest of the world. So not sure what the US government can do to "stop the flow of Saudi or Russian oil (BTW 99% of Russian oil moves by pipeline)

Grechster said...

The DXY, credit spreads, commodities, inflation expectations... All are screaming that the world is short of dollars. Print, print, print.

This is obvious. The remaining question is how to distribute the printed money to the greatest effect. I think we all sense that to rely on the borrowing/lending function (by buying Treasuries and MBS) is like pushing on a string at this point.

I say send the money to the people. And be audacious. Think $5000 to every man, woman, and child. That would be $1.7 trillion which is a number that is in the ballpark of numbers being thrown around.

This is purely a monetary move. It would have nothing to do with preserving payrolls or incentivizing work or anything else. It would be recognition that everything we have done over the last eleven years has failed to get inflation up to 2% on a sustainable basis.

Side note: This would allow the people to decide which businesses survive, at least on the margin. I prefer this to tasking our buffoonish leaders with such a task.

steve said...

I wish I could share your optimism, I really do. It's not my nature to be pessimistic. I consider my self a realist and let's be real: we aren't even close to the bottom of the spread of covid 19. Moreover, this is not your garden variety bear market. It's worse, way worse. S&P 500 off about 30% does not strike me as a drawdown that fits this scenario.

I HOPE the hell I'm wrong.

Grechster said...

I think I agree with the sentiment of your post, Scott. Today is the first day in a while in which the DXY is down. Perhaps, the long unwind of the low-vol trade is nearing its end. Also, emerging acts well today. Tenuous, but encouraging.

Oeconomicus said...

I don't know, when initial claims skyrockets and corporate profits roll over in a huge way I don't think a 33% draw-down discounts all that. But, I don't know anything really.

Scott Grannis said...

I'm having second thoughts, especially in light of Gov. Newsome's statement last night. He began by asserting that the virus is spreading rapidly and projections show 15.5 million Californians would be infected with 8 weeks. That is the most absurd claim I can imagine a public figure making these days. It's obvious he wants to scare people into staying home, but scaring the public is also a favorite way dictators remain in power. And it calls into question whether he is totally ignorant, or very poorly advised.

In any event, massive shutdowns here and in NY are very worrisome in their own right. The economic damage being done is almost incalculable.

(the WSJ has a similar view in today's op-ed section: https://www.wsj.com/articles/rethinking-the-coronavirus-shutdown-11584659154?mod=opinion_lead_pos1)

An even greater concern now is the precedent that this sets. The next time a new virus shows up the stock market will instantly sell off drastically. We can't live like this. Our living standards will plunge, all because we can no longer tolerate virus-caused deaths which have been an accepted part of life for all of history?

JDonley said...

Good work Scott.....thanks for taking the time and initiative to post some not so bad news. am guessing the stimulative package will be surprisingly large. those of us with the wherewithal should seriously consider donating our checks [or portion of] to the less fortunate.

Rick Jones said...

>Our living standards will plunge, all because we can no longer tolerate virus-caused deaths which have been an accepted part of life for all of history?

We've never tolerated them, and they've never been accepted. Good God, man, much of the entire health care effort throughout history and across the globe has been an effort to eradicate things like viruses, plagues, poxes, and other infectious diseases because we do not accept them. What on earth are you thinking?

You have pointed out that the anticipated deaths of this virus are small compared to other causes of death, like last year's flu. Well, I would point out that the anticipated negative economic impact will almost certainly be smaller than other disasters we've had and lived through and after which we prospered and achieved new heights. It's just money.

Oeconomicus said...

And they threaten misdemeanors and fines for those who don't follow the order. Seriously? In the middle of all this let's task the police force and judicial system with petty busy-work.

He also said social pressure will help to police the new order. Brilliant, get the already stressed out populace to argue with each other.

With New York and California shutting down more states will probably follow. Managers tend to copycat in a kind of game theory decision.

I read through the financial crisis, through the Bull, and will surely read through this crisis. Can't thank you enough for your thoughts Scott!!!

steve said...

Number don't lie and the numbers are exploding. We expected Italy's new cases to be falling by now but they're doing just the opposite. New cases in the US are the same and the lethality is over 1% NOT .1% which is just silly.

This is WW III and until we except that we can expect no significant change.

Adam said...

At a given moment in the the future stories about small biz problems should enlight decisionmakers. A lot of them has some kind of fixed costs. Restaurants owners here in Poland laying off the staff, taxi drivers not paying lease, etc. They can withstand that for 2,3 months max.

Scholar87 said...

We tolerate the influenza virus every year, so I don't what that guy is saying. We don't build a car that will protect against all crash deaths but cost a $1,000,000 a car. Instead, we live with the reality that there is a cost-benefit analysis. The hysterical bleeters that are crying Armageddon predictably are out in force, but once again the end of the world will be delayed. Of that, I am sure.

steve said...

Of course it will be delayed. Not the point. Great piece here on perspective:

https://www.collaborativefund.com/blog/common-enemies/

randy said...

Steve - thanks for the link, an interesting perspective. An unfortunate reality that only a real crisis could bring people together again.

Regarding statistics - that's problem number 1. This smart expert says 0.1%, that smart expert says 1%. Everyone's got their own favorite expert. Different reports daily about which age groups are impacted and likely severity of illness. Some news sources point to promising peer reviewed studies of treatment, others (NYT) specifically refute that.

News is almost useless with 20 somethings writing news pieces with ignorance and for excitement value and cherry picked anecdotal stories. Pre-internet, the news consolidated in a few channels and there was less competition for clicks. Would be nicer right now. So, a massive part of uncertainty is not knowing what to believe.

A 2nd problem with media is that news consumers have all been trained to over-react. Trump, global warming, illegal immigrants, plastic bags, Russian interference, etc are all "existential crisis". Exhausting. This may actually be the existential crisis, but these days it doesn't take much for public and policy makers to be persuaded to over-react. Jeez, refer to the democratic debates. I wish Trump was a sober leader, but he isn't.

None of that is to dispute the likelihood this is WWIII. Just sucks trying to sort out reality. Time.. we need time. More cohesive stats from the US and testing treatments.





Scott Grannis said...

Re "those of us with the wherewithal should seriously consider donating our checks [or portion of] to the less fortunate." I agree, and we are taking several steps in that direction. My wife and I continue to pay our personal trainer even though the gym is now closed and we are not training. We are giving super-extra-large tips to restaurant staff, and making a point of using Take-Out when ever we can. The other day we made a significant contribution to our favorite local charity to help fund a program that helps laid-off workers and their families who need help paying rents, mortgages and utilities. I expect we will need to increase that effort before too long.

Scott Grannis said...

Scholar87: Thank you for clarifying my position. Life is all about tradeoffs. Every time we get on the freeway we face a higher risk of death. Every time we walk out the door we are at risk of a multitude of things. We learn to live with these risks, because it is impossible, from a practical standpoint, to eliminate risk. We'll never eliminate the risk of dying from a bout of the flu or whatever. But suddenly it seems that we are willing to sacrifice trillions of dollars and millions of jobs in order to avoid flu deaths that might prove to be only a small fraction of the population. As a society we are going to have to deal with this greatest of cost/benefit calculations.

Charlie said...

The one thing we can be absolutely sure about is that this will happen again. Some other year, some other virus, with its own R0 and lethality and seasonal/non-seasonal particulars, maybe not for 10 years but probably sooner...

S. Korea learned from MERS and responded correctly to the current virus. They fight it smartly while still going to work and restaurants (and will pay a smaller economic price when all is said and done). China got off to a terrible start due to government suppression of information. Italy, Spain, US and others got nothing but "happy talk" from government (and government mouthpieces like Fox news) for many weeks rather than preparation. States are on their own for better or worse. Our leader is too thick-headed to look ahead even one week to the tidal wave coming at our hospitals. He'll say "no one could have imagined...!"

Benjamin Cole said...

I agree with Scott Grannis, and I like to think I am worthy of the company.

No one wants to say it out loud, but the victims of Covid-19 are largely the elderly.

I wonder if we just tanked the global economy on behalf of elderly smokers.

Suppose the US gives up $9 trillion dollars of GDP in the next three years, and we save 90,000 lives due to Covid-19 policies.

That is $100 million per life saved, and almost exclusively an elderly life.

Go ahead, play with my math, you still end up with numbers that just do not make sense.

Call me inhuman but I say we all go back to work yesterday and set up tent hospitals where needed. Call out the military-VA to run the hospitals, but nothing else. Declare a payroll tax holiday until the end of the year and radically cut withholding taxes on income.

Tell people they have a patriotic duty to go out and watch ball games, eat at restaurants, do the happy hour and all the rest.

Good luck everybody

Rick Jones said...

>The hysterical bleeters that are crying Armageddon predictably are out in force, but once again the end of the world will be delayed. Of that, I am sure.

I agree. A few people losing their jobs...a few companies going under...a quarter or two of negative real GDP...we've lived with it before and it's not the end of the world.

Rick Jones said...

>That is $100 million per life saved, and almost exclusively an elderly life.

I had a somewhat similar thought a few years ago. My very old mother-in-law was in an assisted care facility and basically just breathing everyday. She had some sort of brain seizure, and they operated on her. For some reason the surgeon thought it appropriate to tell my sister-in-law that the operation had cost somewhere well in excess of $100,000.

And I thought, "There are some very smart kids in this family who cannot afford to go to college, and we (society) just spent $100,000+ so this woman in her late-80s can continue to lie in bed...look at the ceiling...and breathe."

Not the decision I would have made had I had $100,000 to spare and the choice between keeping grandma alive or sending some of the grand kids to college.

steve said...

To Scott's point re accepting reasonable risk in society I get it. The issue goes beyond valuing life at $X. If we as a society decided that we're just going to live our lives "normally" then a large % of the population would be infected. Could be 20-30%. No one really knows but without question since many of covid 19 patience require hospital care we would quickly over run our hospitals. Indeed, this is our greatest risk now. THEN, people with non related virus issues would suffer/die. There are stories coming out of Italy of this very problem. So this goes beyond a valuation issue of life and anyways that just ain't gonna happen is the US.

Rick Jones said...

>....but without question since many of covid 19 patients require hospital care we would quickly over run our hospitals...THEN, people with non related virus issues would suffer/die.

Great point. Good second-order thinking.

invest2bfree said...

I scooped up on Corporate Bonds for blue chip companies BBB+ rated selling for 85 cents on the dollars paying 5.5% coupon.
Normally these were selling for 120 cents which they will go back eventually.

Less Risky trade than the stock Market and you will get your money back eventually and you are paid to wait.

Thanks Scott for bringing clarity to the market.

Special thanks to your friend Brian Wesbury from FT who saved me from the last downturn by being positive and go back into the market right at the bottom.

Oeconomicus said...

There's a reason some call economics the dismal science. But in reality its ends are completely utilitarian. It may be one of the most misunderstood areas of study to the general population out there.

ABQ Stephen said...

Scott,

Yesterday I detected a lot of positive news: vaccine developments, businesses improvising to manufacture respirators and masks, China's almost control of the situation (if you can believe their reports), how S. Korea is working their pandemic/CV testing plan, etc, etc. Thanks for your stats on the disease overall - it is great positive news. Keep up the good news.

On a personal note, enjoy SC. We love walking/jogging up to Calafia Beach along trail or beach.

So long neighbor.

Stephen M

Adam said...

A very good comment from ARK FUND.
1.Algo trading selling stocks with low cash positions dumping the prices to extrem levels.
2. Low vol ETF selling by definition.

Cabodog said...

Stocks are all about statistics and so is this virus. Sharing a very well written article that deals with the numbers...

https://medium.com/six-four-six-nine/evidence-over-hysteria-covid-19-1b767def5894

Rick Jones said...

>https://medium.com/six-four-six-nine/evidence-over-hysteria-covid-19-1b767def5894

What else would you possibly expect? We went hysterical over the 9/11 attacks and started a war that is still ongoing. Why would this be any different?

steve said...

That piece is ancient news given how quickly this thing is moving. Italy"s numbers just came out with 6600 new cases. This is explosive. Death rate still crazy high at 9%. Their healthcare system is overrun. What they are NOT reporting is numbers of deaths NON virus related due to lack of heath care.

Same could easily happen here (especially NYC) as we are still in a relaxed quarantine stage. Bars, restaurants, airlines still open for business in most locations.

It's delusional at this point to not this as serious as we did Pearl Harbor. We can defeat this but it will take a much more draconian approach than we are taking now.

Trump way over his head. I'd rather he step aside and let Pence take over.

Rick Jones said...
This comment has been removed by the author.
Rick Jones said...

Trump way over his head.

"On some great and glorious day the plain folks of the land will reach their heart's desire at last, and the White House will be adorned by a downright moron."

H. L. Mencken, 1880 - 1956

randy said...

What a relief that we have Biden riding to the rescue.

Scott Grannis said...

Gregg Jarret has a nice commentary on his blog that fit into the themes of this post. Here’s an excerpt:

“... coronavirus represents just a fraction of what happens each year in America as tens of thousands die of another respiratory illness with similar symptoms called influenza. This season alone (since October), as many as 45 million Americans have been infected by the common flu, killing upwards of 46,000 –this according to the Centers for Disease Control and Prevention.

Even if coronavirus deaths multiply into the thousands over the next few months, will it even reach the level of the flu fatalities each year that we have come to accept as normal?“

https://thegreggjarrett.com/amid-the-panic-of-coronavirus-dont-let-fear-consume-you/?utm_source=socialflow

Scott Grannis said...

Gregg Jarret has a nice commentary on his blog that fit into the themes of this post. Here’s an excerpt:

“... coronavirus represents just a fraction of what happens each year in America as tens of thousands die of another respiratory illness with similar symptoms called influenza. This season alone (since October), as many as 45 million Americans have been infected by the common flu, killing upwards of 46,000 –this according to the Centers for Disease Control and Prevention.

Even if coronavirus deaths multiply into the thousands over the next few months, will it even reach the level of the flu fatalities each year that we have come to accept as normal?“

https://thegreggjarrett.com/amid-the-panic-of-coronavirus-dont-let-fear-consume-you/?utm_source=socialflow

steve said...

Wow, you seriously miss the point Scott. Unchecked, covid 19 will infect 30-50% of the population. We're PARTIALLY checked now. The POINT is that without draconian shutdown, we overwhelm our healthcare system. Why is this hard to understand?

Italy is in "quarantine" but I suspect cheating hence the awful numbers coming out from there. The US has not taken the steps necessary to eradicate this virus YET. This partial mamby pamby approach will not work and we are simply spreading the pain out over a longer time frame than required. Economists and politicians are the worst people to listen to in this crisis which is unlike anything this country (world) has ever faced.

We need to listen to scientists who have been insisting on more drastic action right along but have been ignored.

Rick Jones said...

Time for a little MMT...?

https://www.nytimes.com/2020/03/21/opinion/-coronavirus-stimulus-trillion.html

Q: Where does all the money come from?

Ben Bernanke: “We simply use the computer to mark up the size of the account.”

"(But) What (people) are missing is that the Federal Reserve doesn’t have the authority to procure ventilators, to declare a moratorium on mortgage and tax payments, or to send checks to every American. Only Congress can direct those actions."

Ahem...Congress?

Unknown said...

One of the best and most comprehensive write-up's I've seen - Tom


https://medium.com/six-four-six-nine/evidence-over-hysteria-covid-19-1b767def5894

David MacInnes said...

Scott, it seems you are seeking out sources which confirm your own view.

Assuming covid-19 infects 15% of the US pop.(same infection rate of the flu, which you mentioned), and an 0.8% death rate, it is still 390k. How can that be compared to the flu?

The data is constantly evolving, but the above are all on the low side. Covid-19 is more infectious as it is a novel virus and humans have no in built immunity, or drugs to combat. Many infected can be asymptomatic, which adjusts the death rate lower, but also increases the infection rate (as you come into contact with someone who you think is safe). Sure the death rate "may" be lower than what is currently estimated, but it "may" also be higher due to lack of hospital staff, supplies, beds to treat the patients. Hospital can handle the flu load, they can't also handle the extra speed and load covid-19. Who wants to be the doctor who has to decide who lives or dies, as is happening in Italy?

50% US infection rate and 1.3% death rate is 2.1m Americans. Where is the science that is saying that is 100% not going to happen?

The economic pain in terms of $ is felt most by whom? I'd suggest the average American would rather keep their parents for many more years than suffer a financial hardship. Perhaps a different story for the top 1% economic / money focused folks, however.

Grechster said...

I concur with Unknown Tom: good, comprehensive article. Well worth reading.

Johnny Bee Dawg said...

Nobody on Earth knows what's going to happen, but I sure hope when this is all over that it was all worth it.
Our government is fundamentally transforming the greatest nation in man's history...in 4 weeks. It just happened.
Massive consequential decisions have been made without credible data.

Decades-old local businesses are already completely destroyed.
Tens of millions to be out of work, and/or out of business.
Life savings smashed. All to stop a virus of unknown potential.

Hope the food and the cops remain.
Hope we aren't bankrupt once the virus hibernates.
Hope China doesnt decide to invade!

Like an idiot, I bought more stocks this week. Indicators made higher lows from unprecedented bottoms, while indexes dropped. That divergence is a good sign, but could all be blown out again.
But inside, I feel like it isn't going to work. Feels like its too soon.

Bill Snarf said...

covid is killing the elderly not younger healthy people or at least statistically very few . Isolate all of the elderly as much as possible and spend everything to save them vs trillions to bail out businesses. No one on the shop floor of Tesla was going to die.

David MacInnes said...

Evidence over hysteria.
This is written by Aaron Ginn. A Silicon Valley technologist who has worked in Republican party politics. This article was taken down by Medium.

https://twitter.com/CT_Bergstrom/status/1241522140559503360
The above twitter thread breaks down why it was misleading.

Not in the twitter thread, but as an example he linked to an article regarding Iceland leading the way by testing it's entire 300k population. As at 21 March they have actually only tested 9,786. Aaron said they randomly tested 1,800 citizens who showed no symptoms, and as far as they new had not been exposed to a positive individual. Only 19 (1.1%) came back positive, thus asymptomatic is not a big deal. The linked article mentions nothing of this what so ever. What it does say is from the 425 positives 34% is linked to travel, 32.7% to domestic transmission and 33.2% could not be traced to a source.

People will believe what they want to believe. Keep an open mind, and stay safe.

steve said...

The GOOD news is that we have the greatest technologists in the world right here in the US and it's all hands on deck (if these people aren't "essential" who is?) to find a palliative and vaccine. I think we'll find something sooner than expected.

In the meantime we must think and act guardedly. We live in a high rise upscale condo in Naples, FL with a pool and gym on the roof. Some idiot invited 30 college kids from outside our residence as guests to the roof yesterday. Selfish and stupid. Now the roof is shut down until it's properly decontaminated. You can't mandate against idiocy.

Benjamin Cole said...

Side note to anyone: Sometimes in life and public policy, it is not what you want, but what you have to do.

We cannot shut down the economy. This is not an option. And not because we want to drive fancy cars and luxuriate at five-star hotels. Most people working in this economy earn the essentials, some modest luxuries, and that is it. That is life, and it is a good life compared to other eras. But when you cut those people off from their jobs...well, that is your game plan? And then what?

The most at-risk from COVID-19 are the elderly with multiple co-morbidities, or older smokers. Doctors are supposed to try save every life, not make judgements. Maybe public-health officials too. That is admirable. But you cannot have specialists make general public policy.

The media is supposed to relate the news, but they have gone hog-wild into sensationalism. I guess the best fear-mongers will get awards.

I say we go back to work, and build tent hospitals, and let the virus burn out.

Sometimes, you take the least-bad option. That is the least-bad option.









steve said...

Benjamin, for a smart guy that is an incredibly obtuse judgement. If we "go back to work" we WILL have something on the order of 20-50% infection rate. That's 70-160 MILLION Americans with covid 19 many of whom require hospital care. What are you thinking of?

Rick Jones said...

>I say we go back to work, and build tent hospitals, and let the virus burn out.

I'll do my damnedest to make sure the President and Congressional leaders get this. I'm quite certain this was the option they've been missing all along, and equally sure that once they've seen it and realized the inherent wisdom, you'll be next in line for the Presidential Medal of Freedom.

>We cannot shut down the economy.

Actually, yes, we can. I'm not saying I want to, but it's certainly as feasible as your Monty Python option of vehicles driving slowly along the streets yelling, "Bring out your old...bring out your old..."

>But you cannot have specialists make general public policy.

Hmmm...good point. So who should make this policy? Oh, I know...how about this...how about if we create something called "Death Panels"?

Johnny Bee Dawg said...

Amen, Benjamin.

Isolate the elderly and the terminally ill.
Send the young back to work with all these extreme hygiene methods.
Seat people apart in restaurants and clean between each customer.
Clean keyboards and rails and doorknobs every day.
Work from home if feasible.

SBA loans immediately to protect paychecks
These can be paid back over 30 years.

Harvard epidemiology professor said 40% of the Earth will get it, or may already have it...but almost everyone who gets it will have zero to mild symptoms, and never even know they had it.

What we are doing now is insane, and will destroy the fabric of society and the rule of law if allowed to play out....we are plunging off the cliff without reliable data. This is not "science". This does not balance risk vs. reward.

JOHN P.A. IOANNIDIS, epidemiology professor at Stanford writes the following. For some reason Twitter is banning it as fast as it gets posted.

https://www.statnews.com/2020/03/17/a-fiasco-in-the-making-as-the-coronavirus-pandemic-takes-hold-we-are-making-decisions-without-reliable-data/

Rick Jones said...

>Life is all about tradeoffs...We learn to live with...risks, because it is impossible, from a practical standpoint, to eliminate risk.

But there's a difference between "risk" and "uncertainty." A couple of possible distinctions that are floating around the Internet:

-- In risk you can predict the possibility or probability of a future outcome, while in uncertainty you cannot.
-- Risks can be managed while uncertainty is uncontrollable.
-- Risks can be measured and quantified while uncertainty cannot.

I think one of the big issues is that with the Coronavirus we are dealing more with uncertainty than with risk. There are too many unknowns at this point to be making good tradeoffs among the options. Until more is known and understood, expect people -- especially politicians -- to be behaving the way they're behaving now.

randy said...

Steve -

Everyone and every where I hear about is already highly isolated. There are definitely idiots like your neighbor, but it does seem for the most part, the at risk especially, are highly isolated. What are you seeing that needs more clampdown?

Also, so much to read it's a challenge to get your arms around. But I haven't yet seen an irrefutable argument about why it's not an option to isolate the vulnerable, but let the younger, healthy people go back to work. Some suggest in waves. 20-40, then 40-50, etc. Continue to restrict large public gatherings, but letting healthy people go to work. I know the answer depends on ones assumption of how many of those waves will actually need hospital care - perhaps the answer to that is still unknown.

You usually have comment sense positions so your maximum alarm is noteworthy.

Rick Jones said...

>This does not balance risk vs. reward.

The problem, as I alluded to elsewhere, is that to balance risk vs reward, you have to have have a scenario in which the "risk" (vs "uncertainty") is understood. But as you, yourself, point out -- "we are plunging off the cliff without reliable data" -- there is not a whole lot of reliable data, so it's kind of impossible to develop a risk vs reward tradeoff mechanism.

steve said...

Isolating the vulnerable sounds like a reasonable solution until implementation. To wit, how do you isolate the vulnerable? It is much more difficult than it sounds. Someone has to care for the vulnerable. Hence the word "vulnerable" and by definition those people are NOT vulnerable UNTIL they become infected and then inadvertently kill the vulnerable!

There is no good solution people but the most viable is unfortunately quarantine except essential workers and find a palliative ASAP and then a vaccine. Even under that scenario it's gonna get uglier and BTW we are as a nation nowhere NEAR shutdown yet.

steve said...

One more point; let's say we can't find an effective palliative before absolute financial and economic Armageddon. That possibility is not slight and it's not that far in the distant future either. By then the infection rate will be so high that WTF, GO BACK TO WORK!

Hopefully it won't come to that but the future has never been murkier. On that I'm sure we all agree.

Finally, I have to reiterate that I'm OPTIMISTIC that our great technologists will find answers sooner than expected.

Oeconomicus said...

Yep, how to unwind this.

randy said...

Another thought... we have 50 states. We need better and more reliable statistics. Why not experiment at the state level. Let some younger demographic states send younger groups back to work, and measure rate of infection, hospitalization, fatality etc.

Rick Jones said...

>Why not experiment at the state level...

That's an excellent idea. As Supreme Court Justice Louis Brandeis said, a "state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country."

And that seems to be what's happening. Some states -- California, New York, Illinois -- are tightening up on things, while other states are not.

Over the next six months or so we should know something about which approaches were more appropriate.

Johnny Bee Dawg said...

State competition is what's right about America

steve said...

https://www.wsj.com/articles/these-drugs-are-helping-our-coronavirus-patients-11584899438?mod=opinion_lead_pos6

You won't be able to access this piece if you don't have a WSJ subscription but it's a worthwhile read especially in that the normal channels of medical research protocol have to be thrown out the window and a far more streamlined-if somewhat more dangerous approach must be taken. I mean, what do we have to lose?

Bottom line is there is promise in the use of hydroxychloroquine in combination with a Z pak in treating patients with covid 19 as well as prophylactic for high risk workers. YES, this is preliminary but promising. Now is NOT the time for red tape BS but instead down and dirty rapid testing.

Johnny Bee Dawg said...

Super Flu or Mild Cold?
March 20

https://www.americanthinker.com/articles/2020/03/super_flu_or_a_mild_cold.html

Platitudestothebiggreenweiner said...

Bullshit platitudes focused on economic maladies, not real world pandemics, Scott. This isn't about TuckFard Trump prevaricating on platitudes and how he's a 10 out of 10, and how could anyone have been prepared. This is about competence to address real world challenges. Where this admin had failed. Buck stops at the top.

The ginned up financial markets and sugar high from the Tax cuts, and our current reset/correction are a result of this admin and greed leading our financial efforts. Loved it when my 401k was soaring, didn't blink. Didn't like the BS of the USA and our competitive competence being tied to prognosticators on Wall Street. That must change. Shit has hit the fan, as everyone slowly realized there has been no "THERE" there, it's all been BULLSHIT and lies. Reality bites, and our fat asses and assets had a big chunk removed.

Put the markets in hiatus for at least 4 weeks, as we trudge through this mired wall street landscape and pandemic. Once "the light at the end of the tunnel is seen". There is no trump admin "miracle" F**ksticks, it's science and common sense.

Benjamin Cole said...

For those advocating we continue to shut down the economy:

If this virus threatened to kill millions of children I would say, "Fine, we have to throw the economy under the bus. If I eat beans and rice for five years, small price to pay. My investment portfolio goes to zero, and my house worth 30 cents on the dollar, so be it. My older children have no jobs, and limited economic future, well, we have to do what we have to do."

But we are throwing the economy under the bus to save, primarily, perhaps 1 million elderly with co-morbidities, often caused by smoking.

Am I selfish and callous? I could say the same of the gerontocracy we evidently live in.

Besides all that, we have Medicare. Every person over 65 qualifies. Double the Medicare budget, and build tent hospitals, and do the best we can.

That is the least-bad option.



Scholar87 said...

We have roughly 2300 abortions a day. Those calling you callous probably have little problem with that if I had to guess Benjamin.

Roy said...
This comment has been removed by the author.
Roy said...

https://mobile.reuters.com/article/amp/idUSKBN21910S

GOP led government "axed CDC expert job in China months before virus outbreak".

Following axing the entire pandemic response team in the USA in 2018.

All in the name of "smaller government". Imagine the horror if we had that bigger government with the pandemic response team and the CDC expert in China. Surely that would have been far, far worse considering the government would have been bigger. Common sense.

Thank God we have a much smaller government now.

P.S. Thoughts and prayers to Rand Paul. May he have the spiritual and ideological strength not to use tax-payer money to heal himself. Thoughts and prayers.

Roy said...


GOP led government just suggested creating a 500 billion "secret slush fund" -- this is the absolute definition of Big Government!

Don't start rationalizing why this is necessary.

Let's stop lying to ourselves that the current GOP's agenda is really about smaller government or rational actions for a better economy. It's about obsessive ideological/religious/nationalistic fanaticism with the inevitable end result of us having someone like AOC/Sanders for POTUS.


Rick Jones said...

>Am I selfish and callous?

I would just say -- no offense intended -- that you're being stupid. Because there is no one who's going to follow your suggestions on moving grandma to a field tent and letting her die an agonizing death. You're wasting your time trying to make a case for it.

Now is the time to focus on what you can control, not wishful thinking about what policy makers should do.

As Jamie Dimon said, "I don’t look at recessions as a bad thing. I mean, it’s bad for America. It’s bad for the people that are unemployed. It’s usually an opportunity for JPMorgan."

This is just an updated version of Nathan Rothschild's alleged, "Buy when there's blood in the streets, even if the blood is your own."

If you're following Scott's blog, presumably you have some investment gigs going. Ask yourself, "What would Nathan Rothschild do in this situation?"

steve said...

"I would just say -- no offense intended -- that you're being stupid. Because there is no one who's going to follow your suggestions on moving grandma to a field tent and letting her die an agonizing death. You're wasting your time trying to make a case for it."

So True. Why are we discussing "going back to work" when it AIN'T GONNA HAPPEN! Perhaps in the grand scheme of things it's the least painful option for everyone-all things considered but it's SURRENDER to an F-ing virus!

And let's say you capitulate and say "just go back to work". Tens of millions of American will be infected, many of whom need hospital care. So what do you say to them? Go home, maybe you'll survive? This suggestion is not thought through to its logical conclusion.

Benjamin Cole said...

As Jamie Dimon said, "I don’t look at recessions as a bad thing. I mean, it’s bad for America. It’s bad for the people that are unemployed. It’s usually an opportunity for JPMorgan."

---30---

Dimon can talk tough. I bet he is wearing adult diapers right now.

Yes, I think we should go back to work.

It is the least-bad option. .

Rick Jones said...

>Yes, I think we should go back to work.

Noted.

Now, what would Nathan Rothschild do...

Rick Jones said...

One of this morning's headlines...

>Dow drops 500 points as investors wait for Congress to agree on a stimulus bill

As someone said, there are no Austrians in a foxhole. When the unemployment figures look to go insane, everyone prays to Lord Keynes...

And what would Nathan Rothschild do in this situation...?

Can't say, but I would note that in all that red bleeding over the ticker, AMZN more often than not has been showing green. And when it hasn't been green, it has been nowhere near as red as the indexes.

Jules said...

IMO the volatility will die down in two weeks. Maybe China was upset with the trade deal so they decided to shut down their economy. The Dems saw it as an easy opportunity to get at Trump. They got everyone scared and we're all walking around with masks and gloves for a virus that, so far, kills less people than the common flu. Mind control at it's finest!

Benjamin Cole said...

Nathan Rothschild would put on two pairs of adult diapers.

After that, he would curl up in a fetal position on the floor and sell everything,

From there to a hospice, where he will watch Dr. Phil reruns with old ladies in a clamor about breathing ventilators.

Rick Jones said...

>...kills less people than the common flu...

fewer

...kills far fewer people than the common flu...



amritsari said...

Its illuminating to see the same folks who cried hoarse about "death panels under obamacare" advocate for the sacrifice of the elderly and infirm to coronavirus for the sake of economic growth. All these voices are from the right/conservative side. Perhaps they would like to start with their loved ones ?
They don't seem to understand the logic that coronavirus is not like the Flu. The Flu does not overwhelm the hospital system. Unfettered corona infections will overwhelm and force doctors to make impossible choices over whom to treat. As it is, try getting regular care from hospitals - most non-essential care is cancelled.

HHDesigns said...

Hi Everyone: As a small business owner I now find myself facing so much uncertainty. I signed my last contract 3 weeks ago now. Any new potential opportunities are on hold which Is very understandable. I am in the interior remodeling business. The question is when will people feel comfortable allowing someone in their home to do work? So many people have a family member that they are either living with or one that is in their life that is elderly or immune compromised. They are trying to avoid the virus more for someone else.

I think what we are facing is a pandemic. I wonder though too have we overreacted? We are headed for a recession that for me will be just as bad as the one in 2008. Except this one has my customers scared and I think people would have been scared whether the government shut our economy down or not. This virus is overwhelming our healthcare system and taxing or risking the lives of our medical professionals. Did the flu have that kind of impact even though it may have killed around the same number of people in the end. What would have happened if our government would have let it rip? The hospitals would have been over run don’t you think? We were headed for this no matter what. Damned if you do and I think really damned if you don’t.