The Cost Of Covid-19 Quarantine: Will You Be Financially Prepared?

The Cost Of Covid-19 Quarantine: Will You Be Financially Prepared?

Authored by Daisy Luther via The Organic Prepper blog,

As the world tries frantically to contain a rapidly spreading outbreak of Covid-19, schools, public venues, tourist attractions, and workplaces are being closed in an attempt to keep even more people from contracting the illness. Quarantines and self-isolation protocols are also being instituted across the globe for those who may have been exposed.

Of course, everyone knows that millions of people in China have been in lockdown for more than a month. People are told to stay home, many businesses have ceased to operate, and Chinese New Year celebrations simply didn’t happen this year. China’s debts are all coming due now, at the worst possible time as the financial loss for the country has been astronomical. For example, car sales are down 92% and Lunar New Year celebrations and travel that usually earn a billion dollars were canceled.

And that tourism hit affects far more than just China. In 2017, Chinese outbound tourists spent $258 billion around the world. The airline industry is bracing for a $29 billion dollar hit. All in all, this virus could end up costing the global economy more than 1.1 trillion dollars, a number that is practically unfathomable.

While the numbers cited here are outrageously large, obviously, these losses aren’t only going to affect “the economy” and “the businesses.” They’re going to have devastating effects on normal folks who just want to go to work, pay their bills, and keep living their lives normally.

A great deal has been written about the economic hits on a global scale as well as the shortages we could soon expect as production in China grinds to a halt, but what about simply being able to pay your rent when your workplace or business is ordered to shut its doors?

Something nobody is really talking about is the financial hit that people will be taking during such closures. This is a very real concern, and for families who already live paycheck to paycheck, the loss of income could prove devastating.

How will containment efforts affect average folks financially?

All over the world, cities are frantically attempting to contain the virus.

Yesterday came the news that 10 cities in northern Italy had closed all public venues due to a new cluster of coronavirus patients. The towns, in the Lombardy region, have shuttered restaurants, stores, and schools. Public gatherings like carnival celebrations, church masses, and sporting events have been banned for at least a week. In one town, Casalpusterlengo, an electric sign reads, “Coronavirus: the population is invited to remain indoors as a precaution.” Seventeen people in the region have tested positive for Covid-19, and two have perished there from the illness.

Millions of people in South Korea have been told to stay at homePreschools have been closed and public gatherings and demonstrations have been banned.

Thousands of people in the United States are under voluntary self-quarantine, not to mention the hundreds who have been repatriated and put into mandatory quarantine. Obviously, unless these folks have jobs to which they can telecommute, they’re not working.

All of these containment measures are certainly wise and in the best interest of peoples’ health. But what about their bank accounts?

Here’s a scenario that’s seeming less and less farfetched.

If you’re the owner of a physical business like a store or restaurant, you’re going to have to shut down under any of the kind of mandates mentioned above. When you’re closed, of course, you’re not making money. It’s the same thing with factories (who will be there to produce the goods?) and offices. Your business will grind to a rapid halt.

And what about employees? Obviously, if you don’t go to work, you’re not going to get paid. And this isn’t just a case of “evil capitalists” who are too stingy to give their employees paid leave. If the business is not running, there is no revenue coming in. That means that even if the business owners were the most generous people alive, they probably couldn’t afford to maintain payrolls for very long.

So how are you going to pay your bills? It’s safe to expect that the mortgage company, the credit card companies, the utility companies, and all those other businesses with their hands out each month are still going to want their money. And their businesses could potentially carry on to some degree, remotely. That stuff isn’t just going to magically disappear. You’re going to owe that money. Even if companies try to work with folks as they did during the most recent government shutdown, the money will still be owed and you’ll still be unpaid for a week, a month, or however long you were out of work.

This doesn’t include the cost of food, medication, general expenses, and medical bills – heaven help you if you do get sick.

What can you do to prepare for this financially?

Here’s where the situation becomes even more difficult.

I strongly, adamantly advise getting prepared for being home for a period of time whether that quarantine is official or self-imposed. I advise also that you get prepared for other ramifications of a potential global pandemic, too. And if you aren’t already pretty well-prepped, that is going to cost money.

That leaves us in a quandary.

Do you save your money for the possibility of being without work or do you spend your money to feed your family while you’re without work? It’s like a choice between the rock or the hard place.

If you have an emergency fund, avoid cracking into it for supplies. This will be your cushion for bills if you go for a period of time without work. If you do not have an emergency fund and you’ve been struggling with a paycheck to paycheck lifestyle, things will be a lot tougher.

Temporarily halt your efforts to pay off debt faster. Pay only the minimum payment for a month or two while we see how this plays out. Put that extra money into your savings account and you can build a small emergency cushion. And if things don’t get bad, you can use it for debt later when things settle down. People always like to say I’m wrong when I suggest that paying off debt isn’t your first priority, but in this situation, keeping your utilities on and a roof over your head is more important than paying some extra interest.

Raise some money. Now’s the time to try and raise a bit of extra money. Do you have anything you can sell for a chunk of change? Is there a possibility of getting a second job temporarily? Put an ad on Craigslist for that exercise bike being used as a clothes-hanger in the basement. Sell a piece of unwanted jewelry. Get rid of the car nobody drives. Use this money for your emergency fund or for supplies. You will have a lot more difficulty selling it after a crisis because then everyone is going to be broke. If you’re going to do it, do it now.

If you’re flat broke, things will be more difficult. This isn’t news to you if you’re in this situation. Please know I’m not judging – I’ve been there, so broke that I literally cried over a gallon of spilled milk because it was a week until payday and I couldn’t afford to get more for my children. But this isn’t about emotional responses – it’s about practicality. If you have only a limited amount of money, you’re going to have to prioritize where you spend it. Your credit is most likely already shot if things are this tight, so don’t worry about that right now. Keep a roof over your head, utilities on, food in the kitchen, and a car in your driveway if your job depends on it. Credit card debt should be the last thing you pay in a situation like this. Go read this article, How to Survive When You Can’t Pay Your Bills, for more detailed information.

Prioritize your supply purchases. While people are frantically buying up N95 masks and PPE, spend your money on the things you need to have on hand during a month or more at home. Sure, I think it’s great to have medical supplies for a possible pandemic, but these measures are to be used if you go out into the germy masses. And your goal should be to avoid doing that. Other reasons you’d need these supplies would be if a family member became ill – you’d want to do your best to avoid contracting the illness yourself while you care for them and you’d want to protect your other family members. The more I learn about this virus though, the less convinced I am that gloves and masks are going to be preventative enough if you’re living in close quarters with an infected person. Look at the rapid rates of transmission aboard the Diamond Princess cruise ship for more information on that. While of course, it is best to have both medical supplies and food, if you can only get one type of supply or the other, focus most of your money on food and other essentials – not PPE.

Use some of the money coming in for supplies you need to buy. Think about what you would need if you couldn’t leave your house for a month, two months, etc. (It’s pretty difficult to put a time on something like this. China has had people in some areas locked down for a month with no real end in sight.) Here’s some of the stuff I bought to top up our supplies and be prepared for lockdown. Use my list only as a general guideline – you know what your family needs and it will be different from mine. Be sure to include plenty of nutrients in your supplies – you want your immune system to remain highly functional when you could be at risk of contracting an illness.

At the same time, go for quantity over quality if money is an issue. Get some stuff that is cheap yet filling as the last resort of your pantry. Remember, you want to be able to stay home and not send someone out to be exposed while trying to acquire food. So if that means some peanut butter and crackers or mac and cheese in the back of your pantry, it’s better than getting sick to go out and seek fresh veggies. (And you most likely wouldn’t even be able to find them – expect the supply chain to break down pretty quickly.)

Talk to the people to whom you owe money. Contact utility companies, mortgage companies, banks, credit card companies, etc., and let them know about your situation. Everyone will be in a similar boat and these businesses may have some suggestions for you. Mortgage companies may be able to offer you a month of grace, credit card companies may make arrangements with you, etc. Do this early on and it will help you plan where your money is going to go during the crisis.

Prioritize your bills. You need a place to live (although I doubt they’re going to be running around evicting people during a pandemic, you could lose your house afterward unless you can work something out.). You need to keep your utilities on. You may have some other essential spending, too – this will be very individual. Credit card debt and unsecured loans come dead-last in bill-paying during a crisis like this. Other things that are not essential? Cable, which seems like a great option for whiling away the hours when you’re cooped up in the house, is not a priority. Nobody in your family will die without television although some people may act like they’re going to perish from the very idea of it. Each family member having an operable cell phone? Not a priority. Extreme situations may call for measures that people find less than pleasant. Make these decisions early on. A monthly cable bill of $120 would buy you quite a bit of non-perishable food.

Be frugal. Let’s assume you’re able to work out a deal with the utility companies to pay your overdue bill a month after the crisis has resolved. These aren’t going to be the only bills you are behind on. It would behoove you to be as frugal as possible with utility usage. Don’t leave on every light in the house, don’t crank your heat or air conditioner, and try to keep your bills low so that the amount you pay when things go back to normal isn’t quite as daunting. Trust me, paying 2-3 electric bills at a time will still be a big chunk of money, regardless of how careful you are. Don’t make it worse by acting like you’re in a hotel where you don’t pay for the power used.

Be ready for the long haul.

This is a crisis that could have snowballing repercussions and they could last for a very long time. Hopefully, it gets contained and blows over without affecting us too badly. Hopefully, we get lucky and in a few years, the Covid-19 outbreak warrants the same eye-roll that the 2014 Ebola scare does.

But if it doesn’t – if the scenario described in this article comes to pass – you need to be prepared for a long-haul. You need to be ready for your lifestyle to change fairly dramatically. A loss of more than a trillion dollars from the global economy isn’t something that we’ll bounce back from with “business as usual.”

  • Jobs will be cut as businesses struggle to stay afloat.

  • Businesses will fail.

  • Properties will not sell.

  • Shortages of food and other supplies will occur.

  • If people are unable to pay back debt, expect a banking crisis that makes 2008 look like a rainy Sunday afternoon.

The same measures taken to contain the virus can cause these economic effects.

…experts like Richard Schabas, Ontario’s former chief medical officer, worry that draconian measures that stoke fear in the population do more harm than good.

“Recessions kill people, in fact will probably kill more people than this virus does,” he told CBC News host Michael Serapio last week…

…”Our world has become so interconnected,” says Jia Wang, deputy director of the University of Alberta’s China Institute.

Wang suggests that the next few weeks will be critical, showing whether the epidemic, with its global economic impact, is moderating or getting worse…

…Fear and government restrictions mean people in China have been staying home, slashing the business of retailers and restaurants. Some reports say property sales are down by more than 80 per cent, affecting a business that represents about one-quarter of China’s gross domestic product.

Wang says that while the country’s giant companies are big enough to outlast the crisis, especially with government help, a significant and dynamic part of China’s economy is based on much smaller businesses that could disappear, leading to lingering economic effects.

“If the quarantines and shutdowns of many cities around China continue for a few more months or even just one month, many of the smaller companies may not survive,” she said.

Wang says there are also worries that the coronavirus and its economic effect will spread outside China. Last Friday, Singapore’s president, Lee Hsien Loong. warned the disease could push that country into recession.

Putting a figure on the global impact is not easy, and estimates of the damage vary widely. Oxford Economics says global growth will fall to 2.3 percent in 2020, the lowest level in more than 10 years and below the IMF’s global recession level. (source)

Currently, it’s impossible to predict how far this will spread and how bad it will be. There’s no way to know how long quarantine and containment measures will be put into place, or even if they’ll be necessary.

But be ready for anything, economically speaking. Covid-19 is the wild card that nobody expected.

Tyler Durden

Sat, 02/22/2020 – 17:40


Girl Who Sued To Stop Biological Males From Running Girls’ Track Defeats Trans-Runner For Championship

Girl Who Sued To Stop Biological Males From Running Girls’ Track Defeats Trans-Runner For Championship

Now this is a story about actual “girl power”…

It was only two days after filing a lawsuit against the Connecticut Interscholastic Athletic Conference (CIAC) that Chelsea Mitchell made a much bigger statement than one she could have made in the courtroom. 

She had sued because the CIAC was permitting biological males to compete in women’s sports, leading one trans runner to win “numerous titles” in women’s events, according to The Daily Wire

So Mitchell decided not just to make a statement in court – but also to make one on the track. She defeated trans runner Terry Miller in the Class S 55-meter dash with a time of 7.18 seconds in the state championships.

“Mitchell also came first in the 300-meter dash, while Miller was 16th, and Mitchell won the long jump,” according to The Daily Mail

And there didn’t appear to be any pleasantries exchanged between the two runners after the race, either. The Harford Courant stated: “There was no interaction between the two before or after the race.”

Mitchell didn’t think her win could negatively affect her lawsuit: “I don’t think it could go against, there’s still tons of girls that lose on a daily basis,” she said.

Mitchell is a senior at Glastonbury High School. Along with another athlete, Alanna Smith, she filed a Federal lawsuit with their families after the CIAC allowed two biological males to compete in girls’ athletic competitions. Those males went on to take a collective 15 women’s state championship titles, formerly held by 9 different girls. The males took more than 85 opportunities to participate in higher level women’s competitions between 2017 and 2019. 

“The three plaintiffs have competed directly against them, almost always losing to Miller and usually behind Yearwood. Mitchell finished third in the 2019 state championship in the girls 55-meter indoor track competition behind Miller and Yearwood,” The Daily Mail said. 

Mitchell is currently ranked the fastest biological girl in Connecticut and had lost four girls’ state championships and two all New England awards to the males.

She stated: “I knew that I was the fastest girl here, one of the fastest in the state. I remembered all my training and everything I had been taught on how to maximize my performance … I thought of all the times that other girls have lost. I could feel the adrenaline in my blood and hope that wafted from me. That just possibly, I could win this. Then, the gun went off. And I lost.”

Biological male Miller had stated in 2019: “I have faced discrimination in every aspect of my life and I no longer want to remain silent. I am a girl and I am a runner. I participate in athletics just like my peers to excel, find community, and meaning in my life. It is both unfair and painful that my victories have to be attacked and my hard work ignored.”

Tyler Durden

Sat, 02/22/2020 – 17:15


Bizarro World: Retail Investors Are Now Crushing Hedge Funds

Bizarro World: Retail Investors Are Now Crushing Hedge Funds

As if financial markets needed one more reason to boycott the “smart money” and stop paying 2 and 20 for the “privilege” of underperforming the free S&P500 for the 10th straight year – an S&P which is now actively managed by central banks who step in any time there is even a modest 5% drop in stock prices  – here it is: Retail investors are now crushing the smartest money on Wall Street.

Yesterday we reported that 2020 has started off dismally for equity hedge funds, whose short books and unwillingness to chase the rally crippled their YTD performance, which is at the very bottom of asset classes tracked by Goldman…

… yet it was the impressive outperformance of the most popular longs, also known as the Goldman Sachs Hedge Fund VIP basket of stocks…

… that has saved the day for hedge funds, whose performance would have been far worse had it not been for the handful of stocks owned by most hedge funds.

During the last few months, the most popular hedge fund positions have enjoyed one of their strongest rallies on record. Our Hedge Fund VIP basket, which tracks the most popular hedge fund long positions has returned 24% since the start of 4Q 2019, sharply outperforming both the S&P 500 (+14%) and our basket of the largest short positions. The basket’s return relative to its realized volatility and its outperformance versus the largest shorts each rank as the strongest in the basket’s history. The outperformance of VIPs has continued in early 2020 (+9% YTD), contributing to a 1% YTD return for the average hedge fund.

And not just hedge funds have piled into the same small group of mega cap stocks: as we pointed out yesterday, it was retail investors, i.e., the “dumb money” that saved the day for the “smartest guys in the room” as they scrambled  to buy the names most widely held by the hedge fund community.

Recall that the YTD period has been most notable because after a long absence, retail investors finally stormed back into the market with a bang, buying not just stocks, but call options – highly levered bets typically with a 1 week maturity  – on stocks at a time when nothing seemed like it could go down, in the process creating a self-reinforcing tidal wave of buying that has risen all boats, especially those owned by hedge funds.

To be sure, it wasn’t just single-stocks as index and ETF options volumes have also soared to record highs…

… but yes, a handful of stocks were the biggest benficiaries.

Goldman confirmed as much, when Ben Snider and David Kostin said that “the most popular hedge fund stocks have also been bolstered by a surge in retail trading activity. The sharp increase in retail trading has lifted a basket of popular retail stocks by 14% YTD and 25% since the start of 4Q 2019.”

Which brings us to the most remarkable chart we showed yesterday in our recap of the latest quarterly Goldman Hedge Fund Monitor: retail investors, i.e., the “dumb money” has now trounced the performance of hedge funds, incorrectly known as “the smart money” not only YTD, as the 50 most-popular stocks among retail investors rallied 13% so far in 2020, nearly double the 8.7% return for the hedge fund favorites but since the start of 2018.

It’s not just the breadth of returns that has diverged between the two investor classes. Picking up on where we left off yesterday, Bloomberg writes on Saturday morning that retail investors have also been far better pickers of blockbuster stocks in 2020: “Only two of their popular holdings have gained at least 50%: Tesla Inc. and PG&E Corp. By contrast, individual investors scored seven such wins. Besides Tesla and PG&E, they reaped big pay-offs from Virgin Galactic Holdings Inc., Plug Power Inc., Sprint Corp., Vivint Solar Inc. and Beyond Meat Inc.”

These, of course, as the berserker momo names that went parabolic as an army of retail investors staged a call buying spree in one momo name after another, orchestrated out of a peculiar source: the wallstreetbets section on reddit.

We also know the enabler, of course: the retail investing hordes have the Fed’s QE4 which was launched in October 2019 to thank for the outperformance. It was then that hedge funds had hunkered down and turned short, when Powell instead of allowing the market to drop, injected hundreds of billions in liquidity into the market, bailing out not hedge funds – he did that back in September with the return of repo operations, but retail investors.

“Retail investors tend to buy what’s just done well, and in a market like we’ve been in the last several years, that’s worked very well,” said Rich Weiss, CIO of multi-asset strategies at American Century Investments told Bloomberg, adding that “if that type of outperformance by the retail basket over the hedge fund basket would persist for another year or longer, that makes quite a statement, if not an indictment, on professional money managers.”

Rich is right, but only partially: it would make an even bigger statement on the Federal Reserve, which now finds it imperative to intervene in the market to rescue all investors, not just a given wealthy subset.

But what is worse, is that this intervention by the Fed, and the tremendous outperformance of retail investors over hedge funds, will further bolster optimism among small investors, who are rushing back to the market with the conviction that they are investing geniuses further facilitated after some brokerages eliminated commissions on trades. According to the latest sentiment reading from the Conference Board, the share of respondents expecting stocks to rise in the next year advanced to 43.1% in January, the highest since October 2018.

Some additional observations on the two stocks baskets.

Among the 50 favorite stocks for both hedge funds and retail investors, 13 overlap, with tech giants – Apple Inc., Inc., Facebook Inc. and Microsoft Corp – at the top of both lists. That said, retail investors have gravitated more toward smaller companies, with sixteen of the top 50 picks having a market value of less than $10 billion, compared with six for hedge funds.

Ultimately it all really boils down to the far higher beta of the retail basket compared to the hedge fund VIPs: which means that while retail investors tend to win big, they also lose big when stocks tumble. As Bloomberg notes, seven of the top retail stocks have fallen at least 10% this year, including Chesapeake and Groupon. Meanwhile, all of the hedge funds’ top selections have fared better.

For those wondering, here is the full list of the Top 50 “VIP” hedge fund names as of Dec. 31…

… and the same list for retail investors.

And while it is certainly a novelty to see retail investors outperform hedge funds, we doubt this divergence will last long, especially once the Fed is forced to taper its QE4 in the coming months, at which point the retail panic will be a sight to behold, as will be the length of the list of those furious at Chair Powell.

Which is why the only thing that matters, in our view, is the list of Top 50 most shorted names. As discussed extensively here in the past, it is the 50 or so most shorted – or hated by hedge fund – names that has year after year been and a far better source of alpha (for those who buy them) as they have significantly outperformed the braoder market due to periodic and vicious short squeezes year after year…

… especially in this day and age when the link between fundamentals and asset prices has been terminally severed by central banks, something we described most recently in “Going Against The Wall Street Crowd Has Been The Most Profitable In 5 Years.”

Tyler Durden

Sat, 02/22/2020 – 16:50


Bernie Tells “Autocrat” & “Thug” Putin To “Stay Out” Of US Elections, But Also Slams WaPo For Hit Job

Bernie Tells “Autocrat” & “Thug” Putin To “Stay Out” Of US Elections, But Also Slams WaPo For Hit Job

The newest evidence-free anonymously sourced claims of Russian interference ahead of the 2020 election is a return to and new twist on Trump and Putin’s supposed three-dimensional chess playing, this latest version which goes something like this:

…the Kremlin wants Trump for four more years, so the best way to do this is elevate Bernie Sanders as the Democratic nominee — ensuring a Trump win. 

Sanders said he’s been briefed on the matter, however, The Washington Post admitted revealingly, “It is not clear what form that Russian assistance has taken.”

As we noted earlier this seemingly by design puts the Democratic front-runner in a difficult spot, given he runs the risk of being attacked for disbelieving (even disloyalty to) U.S. intelligence, and, by default, defending the Kremlin.

Naturally, he had to go full anti-Putin to satisfy the Russia-obsessed Democratic base, warning the “autocrat” and “thug” to “stay out out US elections”. 

“Mr. Putin is a thug. He is an autocrat. He may be a friend of Donald Trump —  he’s not a friend of mine,” Sanders said while in California.

“Let me tell Mr. Putin: The American people, whether you’re Republicans, Democrats, independents, are sick and tired of seeing Russia and other countries interfering in our elections.”

He also took the timing of The Washington Post’s reporting to task. Sanders’ intelligence briefing was about a month ago, but has only been made public a day before the crucial Nevada vote.

“I’ll let you guess, about one day before the Nevada caucus. Why do you think it came out?” he told reporters. “It was The Washington Post? Good friends,” he added sarcastically.

Sanders had previously questioned of the new allegations, “Show me the proof that Russia is trying to help me” because, well… zero evidence has actually been presented. Sanders said additionally:

“I don’t care, frankly, who Putin wants to be president. My message to Putin is clear: Stay out of American elections, and as president I will make sure that you do. In 2016, Russia used Internet propaganda to sow division in our country, and my understanding is that they are doing it again in 2020.”

But his opponents have predictably already seized on what appears a carefully timed and calibrated smear.

Joe Biden immediately on the heels of the Post report told a Las Vegas crowd that Russia is “engaged again, right now as we speak, trying to affect not only the general election but who becomes the nominee of the Democratic Party.”

Elizabeth Warren also chimed in, questioning why the “Russian efforts” were not made public earlier, saying further the Russians “continue to have too much influence”. 

Though this is all clearly part of the Democratic establishment’s well-documented ongoing war to prevent a Bernie Sanders nomination, it must be remembered that Sanders himself for years added his own fuel to the Russiagate conspiracy fire when it came to Trump and the Republicans.

It’s now been repackaged and is coming back to bite him. 

Tyler Durden

Sat, 02/22/2020 – 16:25


Orange County NIMBYs Win Injunction Against Plan To Open Coronavirus Quarantine “Under Cover Of Darkness”

Orange County NIMBYs Win Injunction Against Plan To Open Coronavirus Quarantine “Under Cover Of Darkness”

Costa Mesa, a city in California’s suburban Orange County, convinced a federal judge to intervene in what’s quite possibly the first overt display of “NIMBYism” – “Not In My Back Yard – connected tot he coronavirus outbreak in the US.

According to the Press Telegram, a local newspaper, city officials went berserk on Thursday when they caught wind of a plan to house coronavirus quarantine patients at the Fairview Development Center in Costa Mesa. On Friday, they asked US District Judge Josephine L. Staton to issue an injunction preventing the plan from moving forward.

The city filed the injunction on Friday, and a few hours later, it had its desired result: Stanton issued a temporary restraining order and scheduled a hearing for 2 pm on Monday. We suspect the outcome of that hearing will be closely followed by many in the area. 

According to the LA Times, city officials said they had heard of a plan to bring 30-50 evacuees from the Diamond Princess to Fairview in the near future. They asked the federal government to stop launching these schemes “under the cover of darkness”, leaving local officials and the community in the dark.

Since the government started bringing evacuees from infected areas back to the US, the Pentagon has spearheaded the job of quarantining patients, mainly housing them on military bases.

But soon, many fear that the number of patients who warrant a quarantine will overwhelm capacity, forcing the government to source potential venues from the private sector.

Of course, this is one area where China has an advantage: Communist Party officials can simply commandeer venues, since nobody would dare disobey them. But the question of where to house quarantined patients, and confronting the difficulty of doing so safely around large suburban populations like the communities sprawled across California,

In one deft stroke of the pen, the Press Telegram reporter lays bare the idiocy of health authorities claims that Americans face a ‘low risk’ of infection, and that they shouldn’t panic. 

If there’s no reason to panic, then why are you making plans for massive quarantine facilities?

While the virus can cause severe illness and even death, health and infectious disease experts have said the risk to most Americans is low, noting that it is mainly passed between people who are in close contact via droplets from coughs or sneezes.

As Chinese scientists have already proven, the virus spreads through the goddamn air. The same air that these neighbors will be sharing with hundreds of infected patients. And on Saturday, a team of Chinese researchers said they had managed to isolate a strain of the virus from a patient’s urine, raising new questions about the virus’s ability to spread through sewer systems and ventilation systems (many suspect that the virus spread so widely aboard the ‘Diamond Princess’ because it had infected the water and the air).

State and city officials who spoke with the Press Telegram said the plan to potentially utilize Fairview in the virus response came from the CDC. Fairview is a 60-year-old, state-owned campus on Harbor Boulevard that was once home to about 2,000 people with intellectual and developmental disabilities. It’s now nearly empty as the state moved residents into ‘community homes’ and other alternative arranges that in many cases likely allowed them to slip back into homelessness amid California’s homelessness boom (another factor that could soon complicate the virus response in America’s largest and most economically vibrant state).

The problem with the plan, according to city officials, is that there are so many unknowns. The city doesn’t know how many patients would be expected, or whether they would be infected or just under supervision.

Granted, the CDC probably hasn’t determined any of that for certain either – it’s still early days, and the important thing is that these patients have somewhere to be isolated.

City officials don’t yet know how many people might be placed at Fairview, whether they would have tested positive for or be showing symptoms of coronavirus (officially known as COVID-19), what protocols would be followed or how long the center might be used, Costa Mesa Mayor Katrina Foley said. Americans returning from overseas who may have been exposed to the virus have typically been quarantined for 14 days.

“There’s just so many unknowns. We don’t know what the plan is,” Foley said. “The city has not been part of any of the process that led to the consideration of the site and it would be unfair to not include us in this kind of significant decision that has great impact on our community.”

While the virus can cause severe illness and even death, health and infectious disease experts have said the risk to most Americans is low, noting that it is mainly passed between people who are in close contact via droplets from coughs or sneezes. The Centers for Disease Control and Prevention’s website late Friday listed 14 confirmed cases in the U.S., but a CNN article said the agency is reporting 34 domestic cases, including American cruise ship passengers who just returned to the U.S.

Costa Mesa’s court filing said federal authorities (including the CDC, Department of Health and Human Services and Department of Defense) and state agencies (including the Governor’s Office of Emergency Services and Department of General Services) propose to relocate “35 to 50 patients already diagnosed with the coronavirus from a secure location on Travis Air Force Base” to Fairview, which was “not intended to house individuals infected with a highly contagious and deadly disease.”

City officials are asking the federal court to block a transfer until the site is determined suitable to house the patients.

State Assemblywoman Cottie Petrie-Norris said in a statement that the federal government is evaluating “a number of potential secondary sites for the treatment of California coronavirus patients.” She added she would be “shocked” if Fairview were chosen given its location amid a “densely populated” community.

It’s just like in Beijing with the Communist Party’s official narrative: How can you expect the people to believe you’re winning the war when you’re building 19 new hospitals in Wuhan?

Tyler Durden

Sat, 02/22/2020 – 15:35


Why The US Is Headed Into Its Fourth Turning

Why The US Is Headed Into Its Fourth Turning


International Man: The economic, political, social, and cultural situation seems to have become increasingly volatile in the United States and more broadly in the West. Is this a unique situation or part of a recurring historical cycle?

Authors William Strauss and Neil Howe introduced a popular theory in their book, The Fourth Turning, outlining the recurring generational cycles that have occurred throughout American history.

What are your thoughts?

Doug Casey: I read Strauss and Howe’s first book, Generations, when it came out back in 1992. I thought it was brilliant.

Let me start off by recommending both Generations and The Fourth Turning to everybody. Both books offer quite a scholarly, readable, and prescient view of the cyclicality of history. And offer a very plausible forecast for the 2020s.

History’s best seen as cyclical, rather than a straight-line progress to some preordained end the way both the Marxists and the Abrahamic religions see it. But then, Ecclesiastes has its famous quote that there’s nothing new under the sun.

Plato in the Republic talks about how the younger generation—and we’re talking fourth century BC—can’t stand up to the moral values of their forefathers.

Older people have always thought that the younger generation wouldn’t quite measure up. In recent American history, you’ll recall, the younger generation were the beatniks in the ’50s, the hippies in the ’60s, and the yuppies in the ’80s—so it’s a passing parade. Older people have a tendency to think the world is going downhill. Nothing new there. But there’s always a rebirth.

Niccolò Machiavelli, in his Florentine Histories, said:

Virtue gives birth to tranquility, tranquility to leisure, leisure to disorder, disorder to ruin… and similarly from ruin, order is born, from order virtue, from virtue, glory and good fortune.

The bottom line is that societies arise from poverty through moral strength—and that brings them prosperity. But that prosperity brings on arrogance, and the arrogance brings on laziness, which brings on weakness and moral decline. Then they’re reduced to a condition of slavery and poverty again. Change is the only constant—except in human nature.

As I look at the United States, it seems to me the peak of American culture was the time just before Teddy Roosevelt came into office. Teddy is certainly among the top five worst presidents. And there’s plenty of competition for that title.

He was the first real “progressive” president; he wanted the government actively involved in all areas of life.

Now, that’s not to say that Teddy Roosevelt wouldn’t have been a really great drinking pal, a wonderful guy to go camping with, a fun guy to have an intellectual conversation with. He had a lot of admirable personal values. But he was a nationalist, a statist, and a warmonger. That’s why I say he was a horrible president.

The long-term trend of US overseas imperialism started with the Spanish–American War and the building of an overseas American empire in Cuba, Puerto Rico, the Philippines, and Hawaii—followed by World War I.

The US has gone from being noninterventionist to now having many hundreds of bases around the world and trying to give orders to every other country in the world. That kind of arrogance always ends badly.

As a civilization—a culture—the US has been on an accelerating path downhill for about 120 years now. That’s true even while science and technology have greatly increased the general standard of living. It’s a mistake to conflate a higher standard of living with higher moral values—that’s what Machiavelli was talking about.

I question whether that trend will change—at least until we have a genuine crisis. Why not? Because a lot of the way a society acts comes from the way kids are brought up—the values that are inculcated in them when they’re young. And increasingly, kids are taught what I would call the wrong values.

Saint Ignatius said this in the 17th century, and Lenin repeated it in the 20th century. They both said that if you indoctrinate someone in his youth, chances are you’ve directed his worldview for the rest of his life.

Cultural Marxists are now totally in control of the US educational system, and have been for a couple of generations. That’s absolutely the case in the colleges and universities but also in the high schools and even in the grade schools. Kids are being taught to be socialists, ecowarriors, social justice warriors, and “woke” from an early age. It’s really serious.

And it’s not a cyclical phenomenon. This is one of the few areas in which I take some issue with The Fourth Turning. The trend towards collectivism and statism seems to be a secular long-term trend that’s still accelerating.

There are a few bright spots. Libertarians, for instance, are somewhat more prominent than in the past. But the fact that libertarians believe in personal freedom, in the face of a societal trend in the opposite direction, makes me tend to believe they’re actually genetic mutants. They’re just a small percentage of the population, whose nature has resisted the prevailing nurture.

I say that, only partially because of my own experience. I grew up in what could—jokingly—be called a cannibalistic death cult and was imbued with all kinds of strange notions by nuns and priests at the schools that I went to. I rejected them intuitively and intellectually, but they still stick to you like tar. It can take years to wash off the effects of early indoctrination.

I’m more of a maverick than most people are, however. Most just continue to believe what they’re taught as kids, reflexively and automatically—right or wrong. So I don’t think there’s really much hope of a serious change in the direction of American culture. At least until a major crisis—and the outcome of that is in doubt.

International Man: OK. That’s the long-term trend. Where are we in the generational cycle now? Are we moving into the fourth turning and headed for a crisis?

Doug Casey: Strauss and Howe take a cyclical point of view over the course of roughly 80 years, four generations.

To very briefly summarize their theory, there are four “turnings”: a “high,” an “awakening,” an “unraveling,” and a “crisis.”

Over the last couple of decades, we’ve been undergoing the unraveling, where old values fall apart. Next, Strauss and Howe predicted a crisis, starting about 2015, which tests the very existence of the society. Or at least the way it’s run.

They go beyond seeing generations as being simply “liberal” or “conservative.” According to Strauss and Howe, there are four generational archetypes that last over a cycle of 80 years—20 years per generation—corresponding to the “turnings.”

Without going into all the details, they see the baby boomers as being a “Prophet” Generation. The authors are ideologically oriented—fire and brimstone types—very much like Bernie Sanders on the left and Donald Trump on the right. Kind of biblically apocalyptic by nature.

They were quite correct in defining the Generation X types as the so-called “Nomad” Generation. These are kids who learned to take care of themselves—and are not so ideological in the way they think.

The Millennials are who are relevant at the moment. They correspond, in Strauss and Howe’s view, to the World War II generation. They’d be the frontline soldiers in the coming crisis and conflicts.

International Man: What happens after a crisis? Is there a positive way forward?

Doug Casey: Historically, the answer is, “Almost never”—in the short run. The best recent example is the French Revolution. It got worse with Robespierre—a Bernie Sanders of the era—followed by Napoleon. Or take the case of the Russian revolution. As necessary as it was to get rid of Nicholas II, it got worse with Lenin, and then it got even worse with Stalin. But even in those cases, France and Russia recovered.

If it all comes unglued in the US over the next decade, those two revolutions could be templates. Look at the way leading Democrats think, and listen to what they’re saying. They’re echoing Robespierre and Lenin.

The Republicans aren’t much better, because although they sometimes talk the talk of peace and personal freedom, they almost never walk the walk. The two major US parties—and people in the Red counties and the Blue counties—seem to really hate each other.

It’s quite ugly sociologically. There are irreconcilable differences. They’re exacerbated by the fact we’re headed for a financial blow up. There’s no doubt about that.

Some years ago, there was a poll taken among Generation X types. It turned out that more of them believed that space aliens were going to invade than that they were ever going to collect Social Security. People have very little faith in “the system” anymore, the society, or the government.

If we go back to the beginning of the 20th century, the country really wasn’t very political at all. People worried about their own lives, their own families, and their own local communities. Americans shared a common culture, beliefs, and values—that’s no longer true. Now the country has become very politicized—everybody has a loud voice and they use votes as weapons against their neighbors. It’s become a nation of nasty busybodies.

That makes me think the next upset will be something like a revolution. It’s likely to be really ugly, because we’re looking, simultaneously, at an economic catastrophe, political chaos, and a social and demographic upset—and probably a military situation as well. Government often sees war as a way to unite the country.

So, what’s going to happen?

I’ll hazard a guess that 50 years from now, the United States and, for that matter, most countries are not going to exist in anything like their present form. The best solution is a peaceful break up into smaller political subdivisions. As opposed to a civil war—which is a contest between one or more groups for the control of a central government.

*  *  *

The economic trajectory is troubling. Unfortunately, there’s little any individual can practically do to change the course of these trends in motion. The best you can and should do is to stay informed so that you can protect yourself in the best way possible, and even profit from the situation. That’s precisely why bestselling author Doug Casey just released Surviving and Thriving During an Economic Collapse an urgent new PDF report. It explains what could come next and what you can do about it so you don’t become a victim. Click here to download it now.

Tyler Durden

Sat, 02/22/2020 – 15:10


Most Patients In South Korean Psychiatric Ward Infected With Coronavirus

Most Patients In South Korean Psychiatric Ward Infected With Coronavirus

As the number of confirmed coronavirus infections in South Korea goes parabolic, the latest development in the Pacific Rim nation is right out of Arkham Asylum.

But first, the big picture: South Korea reported 229 new confirmed cases on Saturday, as the number of infections more than doubled in a day to 433, an eightfold jump in just four days. As the chart below shows, the number of new cases in South Korea has now doubled each day for the past 4 days, a true exponential increase.

The country’s prime minister, Chung Sye-kyun, called the situation “grave,” according to The Korea Times, while the country’s Vice Health and Welfare Minister Kim Kang-lip told reporters that “The situation is entering a new phase.” But the high number of confirmed cases is also because the country’s medical industry has high diagnostic capability, according to experts; with the implication that the real number of Chinese cases is orders of magnitude higher than officially disclosed.

While the current period is still “early stage” the government is cautiously confident that the spread of the novel coronavirus could be contained surrounding the Daegu area, Kim added, although that particular cruise ship has now officially sailed.

Indeed Daegu, South Korea’s fourth-largest city, is where the initial cluster of cases of emerged; it has since been designated a “special management zone.” The central government is channeling medical support to the zone with more staff, hospital beds and equipment. In Daegu, more than half of South Korea’s cases have been among members of a secretive religious sect who often crowd together in worship, and their relatives or contacts. Another 111 are patients or staff members at the Daenam Hospital in Cheongdo, where the two South Koreans who have died of the virus had been admitted.

It gets worse: more than 1,250 members of the sect, the Shincheonji Church of Jesus, have reported potential symptoms, and officials are still trying to locate 700 members so they can be screened. “In accordance with law and principles, the government will sternly deal with acts that interfere with quarantine efforts, illegal hoarding of medical goods and acts that spark uneasiness through massive rallies,” Chung said, pointing out just how convenient the coronavirus will be when government seek to squash all future protests.

It gets even worse: Samsung, the world’s biggest smartphone maker, shut down a factory after a worker tested positive. The factory, located in the city of Gumi, about an hour north of Cheongdo, is expected to resume operations on Monday morning, Samsung said. But the floor of the factory where the patient has worked will be closed until Tuesday morning, it said. We wonder how long until it truly reopens.

But the scariest development in the past 24 hours is that almost all patients at a psychiatric ward of a South Korean hospital tested positive for the coronavirus, with local reports saying members of the abovementioned Shincheonji Church of Jesus sect which has rapidly emerged as the single biggest cluster of new S. Korean cases, had attended a funeral in the same complex.

South Korea’s two confirmed deaths from the virus were also from the Daenam Hospital in Cheongdo hospital’s mental health division, Korea’s Centers for Disease Control and Prevention said Saturday. Both patients had been moved out of the psychiatric ward for medical treatment before their deaths, Vice Health and Welfare Minister Kim Kang-lip said at a briefing.

In other words, of the total 443 confirmed cases, more than half, or  231 were linked to Daegu, sect, while at least 111 – including four nurses – were from the psychiatric ward of the hospital in Cheongdo County. The two clusters account for almost 80% of the confirmed cases.

Cheongdo, famous for its bull-fighting competition, is a rural town near Daegu. The funeral of the brother of the Shincheonji’s leader took place earlier this month in Cheongdo, and health officials are examining ties between the church and the hospital. Local media reports say the funeral was held in the building that houses the psychiatric ward.

According to Bloomberg, Shincheonji, formally known as Church of Jesus, the Temple of the Tabernacle of the Testimony, said on its website that it’s trying to list attendees of the funeral and denied its Chinese followers were part of the crowd at the ceremony. Hundreds are still unaccounted for.

Earlier this week, the country’s disease-control center said an inpatient who died after suffering for a long time with chronic pneumonia was confirmed only after his death to have been infected with the coronavirus. The 63-year-old man had been at the hospital’s mental health unit since late 2017, the KBS broadcaster reported.  The second fatality was a patient from the same ward, identified only as a woman born in 1965. She died shortly after being transferred to another hospital in Busan because of a lack of beds, the center said.

As the pandemic is now set to claim more new cases in South Korea than in China, where Beijing has made a total mockery of data reporting, we expect many more tragic fatalities as one government after another seeks to mitigate the risk posed by the covid pandemic – perhaps in hopes that just like stock market crashes, central banks can make this whole thing just go away – in order to avoid a social panic, when in cases like this letting people know the truth instead of having the government decide for them what is best, is the best strategy… and is why it will never happen.

Tyler Durden

Sat, 02/22/2020 – 14:45


Michael Bloomberg: The Democrat’s Billionaire Strawman?

Michael Bloomberg: The Democrat’s Billionaire Strawman?

Authored by Kit Knightly via,

The latest Democratic Primary debate was a cringe-worthy affair, even more than US political “debates” usually are, it left you with one burning question – Why is Michael Bloomberg in this race?

As all the Democratic candidates rush to outdo each other in terms of identity politics, wokeness and – for want of a better word – “leftist” credentials… why has a billionaire, highly unpopular former mayor thrown his hat into the ring? He must have know he was going to be a massive target at this week’s debate.

And, indeed, he was.

They all took shots. Obviously Bernie Sanders was going to strike back after Bloomberg criticised him throughout the build-up to the debate. But Warren, Buttigieg and even Biden chimed in, too.

Bloomberg was attacked on racism and sexism and his tax returns. It became a feeding frenzy, with both the liberal mainstream media and the alternate media celebrating the ritual slaughter as if Bloomberg’s blood was going to bring the sun back and guarantee a good harvest.

The Guardian reported that Bloomberg was “roundly attacked by rivals in fiercest Democratic debate so far”. CNN compared him to Donald Trump (the worst rebuke in their lexicon). MSNBC declared him “unprepared and unequipped”.

Even some from the alternate media were enthused by the Bloomberg free-for-all:

Everyone agrees – Bloomberg was a disaster, and Warren (especially) was “historic”.

The Intercept wrote a glowing write up of Warren’s performance, including this key paragraph:

When Mike Bloomberg sauntered onto the debate stage, the old Elizabeth Warren reemerged, turning in a historic debate performance that left the former New York City mayor a politically bloodied mess. Bloomberg, it turned out, was the foil Warren needed.

The Guardian picked up that it had been a successful night for Warren too, highlighting in separate article “Elizabeth Warren’s strong debate performance inspires best fundraising day yet”:

Warren, who repeatedly excoriated billionaire rival Mike Bloomberg during the Nevada debate, enjoyed the best fundraising day of her entire campaign on the back of the event. The Massachusetts senator raised $2.8m in donations on Wednesday, according to her campaign team.

“The foil Warren needed”. Quite.

Funny how that works out.

So was this a real debate? Is putting Michael Bloomberg in the stocks for an evening a real political discussion? Was there any genuine progress of rational argument and philosophical debate last night?

I didn’t see any. I saw a live action puppet show.

Accepting the surface level narrative of this campaign is naive in the extreme. Remember how contrived politics is – most especially American politics. Remember that the DNC fixed the primaries last time around, and fed the debate questions to Clinton early.

There’s no reason to think that kind of manipulation isn’t still going on. We should assume it is as a baseline.

In fact, we’ve seen signs of it already. They went out of their way to exclude Tulsi Gabbard, and then changed the rules at the last minute to include Bloomberg. Why did they do that?

Because the DNC want a billionaire with accusations of sexual harassment and tax avoidance to run against Trump? Of course not.

No, what happened on that stage was, fittingly enough, a piece of theatre. Bloomberg is cast as the villain, and we all boo and hiss as he ties a pretty damsel to the railway lines, and then cheer when Uncle Joe and Aunt Liz turn up in the wokemobile, bonk him on the nose, and save the day.

As we said last night:

Bloomberg definitely there to serve a function. It couldn’t be more obvious if they’d put an actual straw-man on the stage, hung a sign that says “the elite” around its neck, and had Warren & Biden run at it with bayonets.

Bloomberg boosts everyone else on the poll, he is “exactly the foil they need”. Like everything else in the media, it’s about narrative management.

Firstly, his presence counter-balances the Sanders storyline.

Bernie Sanders isn’t going to change anything, he’s demonstrated with his foreign policy speeches that he’s too timid to truly challenge establishment orthodoxy (that’s why people like Jonathan Freedland prefer him to Corbyn). But he’s at least slightly genuine. Slightly.

Sanders is winning this race, but more importantly he’s controlling the narrative – elevating dangerous ideas in the public mind, ideas that might live on in the minds and speeches of braver, more honest politicians. All this off the back of casting himself as a leftist outsider up against the right of the Democratic party. Bloomberg changes that conversation by putting another extreme on the right side.

Now Biden, Buttigieg and Warren are the sensible candidates in the middle, far more “leftist” than mean old Mike, but far more “electable” than crazy commie Bernie. The rational compromise.

(Sidenote – I haven’t totally ruled out that the DNC end up letting Sanders win the nomination – I think the endgame here might be to have Sanders run against Trump, get his ass kicked, and declare that “Americans don’t want socialism” and all leftists are “unelectable”. Here in the UK we call that “being Corbyned”).

Secondly, there’s the total undermining of the idea of “debate”, which is becoming more childish every cycle. Bloomberg’s presence on that stage guaranteed no real issues were ever discussed. Instead we had supposedly adult politicians exchanging cheap jibes and “sick burns” in the hopes of pleasing their cheerleaders on twitter. Reality was barely touched upon, and that’s just the way they like it.

Politics is becoming just Big Brother or Love Island only with better suits and bigger budgets. No thought, no rational argument, just pick a team, tweet a hashtag, cheer your side. Last night was as real as a WWE bout, and couldn’t have been more obviously stage-managed if Mike Bloomberg had entered to the sound of breaking glass and Lester Holt declaring “By gawd, that’s Bloomberg’s music!”

Bloomberg has already benefited the field simply by providing a distraction from the Iowa chaos. As an even richer member of the “elite” than the rest of the ballot he acts as an anger heat-sink, with many so happy to see the corrupt billionaire taken down a peg they don’t realise they’re cheering for Joe Biden, or Liz Warren or Pete Buttigieg or even that other brunette whose name no one remembers.

Further, with his frequent attacks on Sanders he can torpedo the favourite (and only even vaguely genuine threat) by using smear tactics, whilst the real DNC picks keep their hands clean (they may even halfheartedly defend Bernie, acting outraged whilst reaping the benefits).

Lastly, there’s the game of identity politics. A lot of political discourse these days is about billionaires, some constantly attack them, others defend them as heroes of aspiration, but both these sides individualize inequality. Turning it into the malign result of the exceptionally self-interested, rather than the natural by-product of system designed to draw all the profits to the top. Billionaires are just the heads of the hydra, cut one off and two more will take its place.

Discussing the personal wealth of Person A or the tax of Person B isn’t the real issue, and letting it become so leaves you open to soft appeasement. If the problem is just “billionaires”, rather than the system, then the establishment can cut a disposable member of the club off at the knees, feed him to the braying mob, and pretend we’ve made some strides toward progress.

Which is actually a pretty fair description of what happened last night.

Whatever the final result of the race, Bloomberg won’t win, and his entry to the race has already proved a shot in the arm to establishment candidates right across the DNC board. It’s hard not to see that as a contrivance.

And whilst kicking someone like Bloomberg while he’s down might feel good, in this case it’s singing harmonies with the mainstream chorus. And that’s never a good idea.

Tyler Durden

Sat, 02/22/2020 – 14:20


“This Ship Is Out Of Control” – NYT Exposes Japan’s “Disastrous” Missteps In Botched “Diamond Princess” Quarantine

“This Ship Is Out Of Control” – NYT Exposes Japan’s “Disastrous” Missteps In Botched “Diamond Princess” Quarantine

Days after the CDC publicly questioned Japan’s handling of the ‘Diamond Princess’ quarantine, claiming that health officials failed to maintain the quarantine and also failed to keep passengers and crew safe from the virus. Now, it looks like even the Japanese are admitting that the US had a point.

All of this is coming after a chilling New York Times investigation that detailed Japan’s lax response after being informed that a passenger who had disembarked tested positive for the virus in Hong Kong.

The reporter who wrote the story was the NYT’s Motoko Rich. Rich has closely covered the situation aboard the Diamond Princess, even communicating with trapped passengers and publishing their complaints and stories for an earlier piece,  Japanese health officials neglected to test every single one of the nearly 3,000 passengers and 1,000+ crew members. Shortly after the NYT report dropped, Japanese officials publicly acknowledged the overnight.

According to Bloomberg, Japanese Health Minister Katsunobu Kato told a press conference on Saturday that 23 passengers who disembarked from the Diamond Princess cruise ship in Yokohama were never tested for the coronavirus during the quarantine period.

Given the infection rate so far going by only confirmed cases, it’s extremely likely that one of these individuals carried the virus with them after the quarantine ended. While many governments imposed quarantines for returning passengers – the US is one example – it’s not clear what’s being done to track and monitor these passengers.

The comment came “amid increasing skepticism” about Japan’s handling of the crisis, something highlighted by the fact that foreigner governments opted to evacuate their citizens rather than leave them to languish in the petri dish of disease. However, the US and most other nations refused to take citizens who had been confirmed to harbor the virus, leaving them to be cared for either on the ship or in a Japanese hospital.

Rich’s story starts out tame enough: Thousands of honeymooners, retirees and others were traveling, enjoying their vacation with overflowing buffets, night clubs and events. Then, the ship got word from Japanese officials that a passenger had tested positive.

The initial reaction was mild. Passengers and crew were still allowed to do more or less what they wanted. The buffets continued, events went on as scheduled, and the nightclubs were open.

It wasn’t until three days later, as the ship was approaching Yokohama, that health officials demanded that a quarantine be instituted immediately.

Many guests first learned that they would spent the next 14 days in their cabins while they were on their way to the breakfast buffet, which was incidentally cancelled.

Passengers figured their departure would be delayed by only a day or so. Many were walking up to breakfast when the captain came over the intercom again on the morning of Feb. 5.

The Japanese health ministry had now confirmed 10 cases of the coronavirus on the ship, he told them.

Guests needed to return to their rooms immediately, where they would have to stay, isolated, for the next 14 days.

The rest of what Rich describes is a slow descent into horror. Overwhelmed staff and public health authorities working overtime to test everyone and attend to those showing symptoms. Some passengers were allowed brief trips outside if their rooms were windowless.

The crew continued to serve meals, and quarantine rules were routinely violated, increasing the risk of exposure.

While many patients were moved to hospitals, some of the younger infected patients deemed low-risk were essentially left to fight the virus on their own.

At one point, someone came to the door with a clipboard, he said, asked for his temperature and left. Inside the cabin he shared with his wife, Mr. Haering, 63, sweated it out, taking cold showers and swallowing the last of their Tylenol supply as his temperature climbed to 104 degrees Fahrenheit.

Four days later, after his fever had broken, officials in hazmat suits showed up at the couple’s door, ordered Mr. Haering to pack a bag, and loaded him into an ambulance, leaving his wife on the ship.

Fearing for his life, one elderly passenger wrote a handwritten note to the Japanese Ministry of Health complaining about the “out of control” situation aboard the ship.

Tadashi Chida, a passenger in his 70s, sent a handwritten letter to Japan’s health ministry complaining that the crew seemed overwhelmed and that quarantine officers were not attending to those with symptoms.

“The ship is out of control,” Mr. Chida said, adding that his wife had waited nearly a week for medication.

“An outbreak is happening,” he said. “We have no road maps.”

Yoshihide Suga, the chief cabinet secretary to Prime Minister Shinzo Abe, said this past week that the country’s authorities had “made the maximum consideration to secure the health of passengers and crew.”

The story also appears to confirm reports that the CDC opposed the decision to bring the 14 infected Americans on the flight. One evacuee told the Times about standing next to a woman as she was being told she had tested positive for the virus.

In that moment, the man said, he felt like he had just wasted two weeks of effort trying to avoid exposure.

Officials from the State Department and the Department of Health and Human Services ultimately decided to take them all. They put the infected at the back, separating them on two planes with only 10-foot plastic sheeting and tape.

As the passengers boarded, Ms. Courter was standing next to a woman as she was being told she had tested positive. “We were less than three feet away,” Ms. Courter said. “And I remember thinking, ‘I just spent two weeks to avoid anyone who is positive, and now here is one breathing right in front of me.'”

Even more stunning: Even as the State Department told the public that the evacuees would be shielded from the infected, the NYT reveals that the 14 positive patients were simply placed in the back of the planes, separated from everyone else by “10-foot plastic sheeting and tape.”

A week and a half later, American officials reversed their position. The U.S. government announced that it was evacuating them before the end of the quarantine and would confine them for an additional 14 days on bases in California and Texas. A letter to American passengers said that “the Department of Health and Human Services made an assessment that passengers and crew members onboard are at high risk of exposure.”

The evacuation turned problematic. While the 328 passengers and crew members were on their way to the airport in Tokyo, American officials learned from Japanese health authorities that 14 of them had tested positive for the coronavirus.

They waited for hours on the tarmac as C.D.C. experts debated with officials from the State Department and the Department of Health and Human Services about what to do. It took so long that some passengers had to get off and urinate against the side of the buses.

Officials from the State Department and the Department of Health and Human Services ultimately decided to take them all. They put the infected at the back, separating them on two planes with only 10-foot plastic sheeting and tape.

Unsurprisingly, members of the crew were treated essentially as disposable, with little consideration for their safety. They worked grueling 13-hour shifts as new duties like preparing individual meals and guarding corridors of rooms suddenly became priorities. They did the best they could to keep morale high. Some described being forced to sleep in crowded rooms with other crew members who were exhibiting symptoms of the virus.

Ultimately, more than 80 were infected, nearly one in ten crew members.

Japan has defended its actions, arguing that there is no precedent for a situation where thousands of people are basically trapped in a petri dish of disease. Still, there’s now no doubt that officials should have reacted more quickly. If they had, dozens, maybe hundreds, of infections could have been avoided.

Tyler Durden

Sat, 02/22/2020 – 13:55


Stone Moves To Remove Jackson From Case

Stone Moves To Remove Jackson From Case

Authored by Jonathan Turley,

Roger Stone’s defense team moved to force the recusal of Judge Amy Berman Jackson from the case for bias. These motions have a very low success rate and this particular motion likely has an even lower likelihood of success. Jackson is a respected and experience judge. I actually was taken aback by a couple of her comments about the case but courts of appeal are extremely reluctant to force such recusals.

Moreover, the main thrust of the motion is a statement about the jury which would be viewed as virtually standardized language for courts.

The Stone team seems particularly aggrieved that Jackson said that the jury in the case had “served with integrity.”

There is a pending motion for a new trial based on the alleged bias of the foreperson of the jury and the defense feels that the comment prejudges the merits of that motion.

I happen to agree that Stone deserves a new trial if these allegations are true. I have a column appearing in today Hill newspaper calling for such a new trial. An appellate court would like view such a statement as virtually rote for judges and not a commitment on the outcome of the pending motion.

I am actually more concerned with another statement that Jackson made at the last hearing.

Jackson declared that Stone “was not prosecuted, as some have claimed, for standing up for the president. He was prosecuted for covering up for the president.”

A “cover up” suggests that Stone was hiding damaging information against Trump. The evidence shows that Stone was covering up aspects of his own conduct. He was open about his work and fealty to Trump. There was no evidence of any misconduct or criminal conduct by Trump himself. Jackson had to know that this sensational line would be the take-away from the hearing and it was.

Nevertheless, while injudicious, such a statement in isolation is not likely to warrant the removal of a judge by a court of appeals. Overall, Jackson conducted the trial and sentencing in an efficient and fair way. Some judges would have hammered Stone more severely for his poor conduct before the trial in his public comments, including the use of an image of the judge that many thought was threatening. She also handed down a sentence that was exactly what some of us predicted and less than half of what the prosecutors originally asked for.

The motion will be denied and the defense probably has no expectations to the contrary. The motion is a shot across the bow for the court and preserves the question of bias for appeal. It is all setting up for the most important decision in the case on how the court will deal with what appears to be a valid juror bias motion.

Tyler Durden

Sat, 02/22/2020 – 13:30


Twitter Suspends 70 Pro-Bloomberg Accounts For Violating “Platform Manipulation” Policy

Twitter Suspends 70 Pro-Bloomberg Accounts For Violating “Platform Manipulation” Policy

Mike Bloomberg isn’t having the best February.

After taking a severe beating during last week’s Democratic debate which saw a sharp reversal to his approval ratings (and boosted Bernie Sanders’), and a spate of vandals defacing his campaign offices which he blamed on Sandernistas, Bloomberg is now facing a Twitter bot scandal.

On Friday, the LA Times reported that Twitter began suspending 70 pro-Bloomberg accounts in a pattern that violates their rules against “platform manipulation.”

Michael R. Bloomberg’s presidential campaign has been experimenting with novel tactics to cultivate an online following, or at least the appearance of one.

But one of the strategies — deploying a large number of Twitter accounts to push out identical messages — has backfired. On Friday, Twitter began suspending 70 accounts posting pro-Bloomberg content in a pattern that violates company rules.

We have taken enforcement action on a group of accounts for violating our rules against platform manipulation and spam,” a Twitter spokesman said. Some of the suspensions will be permanent, while in other cases account owners will have to verify they have control of their accounts. –LA Times

Bloomberg has hired an army of hundreds of temporary internet shills to canvass the interwebs and promote the billionaire candidate over Facebook, Twitter, Instagram – and some say, 4chan. These “deputy field organizers” are paid $2,500 per month according to the Times.

After being fed pro-Bloomberg messaging, organizers were spewing often identical text, images, links and hashtags using accounts created in the last two months.

After The Times inquired about this pattern, Twitter determined it ran afoul of its “Platform Manipulation and Spam Policy.” Laid out in September 2019 in response to the activities of Russian-sponsored troll networks in the 2016 presidential election, the policy prohibits practices such as artificially boosting engagement on tweets and using deliberately misleading profile information.

By sponsoring hundreds of new accounts that post copy-pasted content, Twitter said the campaign violated its rules against “creating multiple accounts to post duplicative content,” “posting identical or substantially similar Tweets or hashtags from multiple accounts you operate” and “coordinating with or compensating others to engage in artificial engagement or amplification, even if the people involved use only one account.” –LA Times

In a statement, Bloomberg campaign spokeswoman Sabrina Singh said “We ask that all of our deputy field organizers identify themselves as working on behalf of the Mike Bloomberg 2020 campaign on their social media accounts. Through Outvote [a voter-engagement app], content is shared by staffers and volunteers to their network of friends and family and was not intended to mislead anyone.”

Perhaps Bloomberg can explain this during his next debate drive-by.

Tyler Durden

Sat, 02/22/2020 – 13:05


Devin Nunes Suing Washington Post Over “Garbage” Report

Devin Nunes Suing Washington Post Over “Garbage” Report

Authored by Debra Heine via,

Rep. Devin Nunes (R-Calif.) announced Friday night that he is suing the Washington Post, accusing the paper of publishing “demonstrably false” “garbage” about him.

“I don’t know what planet the Washington Post is on but they’ll have an opportunity in federal court in the next couple weeks to explain who their sources are because I’m going to have to take them to court,” Nunes told Fox News host Harris Faulkner.

Nunes was appearing on Fox’s “The Story” (with Faulkner filling in for Martha MacCallum) to talk about a recent classified briefing to House intelligence members. As has become expected, information (and disinformation) from that briefing was promptly leaked to the media.

On Thursday, the New York Times reported that Russia was actively trying to help President Trump win the 2020 election, an allegation few people outside of the never-Trump fever swamps takes seriously. Then late Friday, the Washington Post reported—also based on anonymous leaks—that Russia is also trying to help the Bernie Sanders Campaign.

“The most concerning part about all this is that we can’t talk about what happened in that meeting,” Nunes explained.

“So if anything in the Washington Post story or the New York Times story is true about either Bernie Sanders or Putin’s plans and intentions or anything else, nobody on the committee that’s seen this classified information should be talking about it.”

Nunes then tore into the Washington Post for claiming in a separate story that he told President Trump “really bad things” in an attempt to get him to fire his acting acting director of national intelligence, Joseph Maguire.

WaPo reported on Friday that a senior intelligence official  told congress that Russia wanted to see him reelected.

The official, Shelby Pierson, said several times during the briefing that Russia had “developed a preference” for Trump, according to a U.S. official familiar with her comments. That conclusion was part of a broader discussion of election security that also touched on when the U.S. government should warn Democratic candidates if they are being targeted by foreign governments.

The analysis reportedly made the president unhappy with Maguire, and that, according to anonymous sources, is what spurred him to announce Wednesday that he was replacing Maguire with U.S. ambassador to Germany Richard Grenell.

Maguire, however, is leaving his post because his 200 day acting director term will be expiring soon.

One of the Post’s anonymous sources said that Trump learned about Pierson’s remarks from Nunes, the Intel committee’s ranking Republican.

Trump’s suspicions of the intelligence community have often been fueled by Nunes, who was with the president in California on Wednesday when he announced on Twitter that Grenell would become the acting director, officials said.

Nunes told Faulkner that he is suing the Washington Post because the story is a complete fabrication.

“I didn’t talk to President Trump, Harris,” Nunes said, calling the report “the same garbage” they reported about him sneaking to the White House three years ago.

“They build a narrative, they plant a narrative, they write fake news stories about it of things that shouldn’t even be talked about, you know, this classified information. And then they run these stories. Who the hell is leaking this?” he wondered.

“How do you make up a story like this?” he asked plaintively.

The California Republican went over the timeline of events leading up to the fake news reports.”[Rep.] John Ratcliffe was nominated, the press went after him so John Ratcliffe said, ‘hey, forget this’; Maguire was put in temporarily—his time is coming up; now they’re bringing our ambassador to Germany back, Mr. Grenell, to be in that position,” he explained.

“So how on earth are people who are getting classified briefings—how does this end up in the Washington Post and the New York Times? All I can tell you is it’s total garbage and demonstrably false. I didn’t talk to the president,” he insisted.

“But you have CNN, the Washington Post, all the usual suspects claiming that I went somewhere that I didn’t go. This has got to stop and this is why the courts have to step in,” he declared.

Tyler Durden

Sat, 02/22/2020 – 12:40


Hundreds Of Animals Drop Dead In China After Being Poisoned By Virus Disinfectant

Hundreds Of Animals Drop Dead In China After Being Poisoned By Virus Disinfectant

What’s the point of saving millions of people from a virus that causes severe pneumonia just to poison them instead?

That appears to be what the Chinese Communist Party is doing all across the country. Over the last month, videos of people in full hazmat suits with giant tanks of chemicals strapped on their backs walking around public areas and spraying giant clouds of chemicals have become common.

What’s inside the tanks? Well, nobody’s really sure. But CNBC’s Eunice Yoon noted recently that everywhere she goes in Beijing, she smells bleach and disinfectant.

The only thing is, the virus has still managed to spread via many other methods (including potentially through sewer systems, as researchers revealed on Saturday that they had isolated a strain of the virus from an infected patient’s urine). And in the mean time, the government is exposing the public to massive quantities of potentially dangerous chemicals.

But that’s all besides the point, really: the Politburo has repeatedly prioritized ‘stability’ and protecting President Xi’s precious growth targets over the public wellfare (it’s one reason why Dr. Li Wenliang has become a martyr in the struggle against the virus).

Whatever the impact on the human population, Chinese state media reported on Saturday that hundreds of animals have reportedly dropped dead all around China, and local party officials believe that chemicals sprayed to combat the virus are to blame.

Here’s more from the Daily Star:

State-run media reported at least 135 animals were found dead in one discovery near the city of Chongqing.

At least 17 species were found to have died – including wild boar, weasels, and a number of birds.

The Chinese press reports that Chongqing has mobilized a force of 5,300 forest rangers to monitor wildlife in the area, and have also enlisted a force of 200 “full-time supervisors” (with so many out of work, we’re sure it wasn’t hard for the party to find qualified men and women with some free time on their hands, nevermind that millions are terrified of leaving their homes).

The reports come after reporters confirmed a shipment of 40 incinerators to Wuhan…while we wondered whether the crematoriums are running at full capacity, it’s also possible that dead animals – even dead neglected pets – could be incinerated.

One final irony: The dead animals will be buried where they were found – and then that area will also be disinfected.

Tyler Durden

Sat, 02/22/2020 – 12:15


Make American Steel Great Again Backfires In Trump Lawsuit

Make American Steel Great Again Backfires In Trump Lawsuit

Authored by Mike Shedlock via MishTalk,

JSW Steel had nothing but praise for Trump’s steel tariffs. Now the company has filed a lawsuit against the Trump admin.

Make American Steel Great Again Backfires

Gosh, I want to say “I told You So”.

So I will.

I Told You So!

Trump’s Tariffs Backfire

Trump had a plan to Make America Steel Great Again.

Let’s check in and see how well Trump’s plan worked out for American producer JSW Steel.

JSW Steel Files Lawsuit Against Trump Administration

The irony in this sad story is JSW Steel Praised Trump’s Tariffs.

John Hritz, president and chief executive officer of JSW Steel USA Inc., put on a big smile and a Texas flag pin for his television spot on Fox Business in March 2018. “It’s a special day,” he told his host, then told her again: “It’s a special day.” JSW Steel’s India-based parent company, JSW Group, had announced it would invest $500 million and create 500 jobs at its steel mill in Baytown, Texas. “We’re going to make history,” Hritz said.

Hritz was counting on help from President Trump, who three weeks earlier had announced his intention to impose tariffs of 25% on steel and 10% on aluminum imported to the U.S. The Fox anchor wondered if the import levies might interfere with JSW’s Baytown plan, given that much of the raw steel processed at the mill was imported from India and Mexico. “Absolutely not,” Hritz said. On the tariffs, JSW was “in lockstep with the president and with the administration.”

Not so much anymore. A big piece of the Baytown project has been postponed indefinitely, in part because of Trump’s tariffs. Both Baytown and a sister plant in Ohio, where JSW once planned to invest another $500 million, have been operating at unprofitably low production levels, also owing in part to the tariffs. JSW has sued the administration for refusing to exempt it from paying the levies on the massive slabs of steel the company imports and turns into pipe and other products for industrial use. “It’s the hypocritical nature of these tariffs that’s completely dumbfounding us,” says Parth Jindal, director of JSW Steel USA and managing director of JSW Cement Ltd. in India. “It just doesn’t add up.

That’s What Sucks

Other steel processors are in a position similar to JSW’s, paying tariffs on raw steel they say they can’t procure here. NLMK, the U.S. arm of Russia’s Novolipetsk Steel PJSC, has had rolling layoffs at a plant in Pennsylvania because it’s been paying tariffs on slab from Russia—$184 million and counting, says Robert Miller, NLMK’s U.S. CEO and president. “That frustrates me because now you’ve affected people’s families,” he says. “We’re an American company with American workers represented by American unions. That’s what sucks.”

Avalanche of 50,000 Petitions

The department was unprepared for the flood of requests it got for exclusions. It had estimated there would be 4,500 petitions for tariff relief. By early 2019 it had more than 50,000 from steel and aluminum makers, as well as from manu­facturers of furnaces, razor blades, automobiles, and other metal goods, according to an analysis by the Mercatus Center, a research think tank at George Mason University. As of late January, steel claims alone had risen to more than 141,000, with almost 75,000 granted, 22,000 denied, and 27,000 rejected for filing errors, according to the Commerce Department.

JSW filed six exclusion requests for imports from India in April 2018, followed by another six for Mexican imports that June. JSW told Commerce it couldn’t rely on “direct competitors” in the U.S. to supply its slab. Echoing the department’s 2001 analysis, JSW said that the material it needed simply wasn’t available in the quantities and specifications it required and that, furthermore, competitors had no incentive to sell JSW slab that they could process and sell themselves at a higher markup.

Another Idea Down the Drain

The amazing thing about all of this is Hritz is still a Trump tariff backer.

But that does not matter.

What does matter is many of those those laid off workers likely feel quite a bit differently. So does anyone with an ounce of common sense.

Recession Coming Up

A recession was long overdue anyway. But Trump’s inane trade policy coupled with the coronavirus will seal the fate.

Japan and Germany are already in recession.

A few days ago, I commented Japan Isn’t Headed for Recession, It’s In Recession

Today Markit reports PMI Contracts For the First Time Since Oct 2013

Supply Chain Disruption

Huge supply chain disruption is underway in cars, auto parts, iPhones, and textiles.

Please note that Half the Population of China, 760 Million, Now Locked Down

That alone would trigger a recession. The US will not be immune to a slowdown in China, Japan, and Germany.

Tyler Durden

Sat, 02/22/2020 – 11:55


Berkshire Letter Highlights: Buybacks, Cash Hit All Time High; Earnings Soar As Market Rebounds

Berkshire Letter Highlights: Buybacks, Cash Hit All Time High; Earnings Soar As Market Rebounds

In its latest (surprisingly short at just 12 pages, perhaps the shortest yet) annual letter released at 8am on Saturday, Warren Buffett’s Berkshire Hathaway surprised investors when it announced that Q4 net earnings rebounded to a $29.2 billion profit, or $17,909 per share, from a shocking $25.4 billion loss (or $15,467 per share) a year prior, when last year’s unexpected write-down at Kraft Heinz and unrealized investment losses reversed following the best quarter for stocks in years, and while revenues also rose to $65.4 billion from $63.7 billion for the fourth quarter, the all important operating earnings – which strip away capital gains and focus on Berkshire’s core business – declined 23% to $4.42 billion from $5.7 billion a year earlier, due to underwriting losses at the Berkshire reinsurance group which was hurt by typhoons in Japan, wildfires in California and Australia, and widening losses at its business writing retroactive reinsurance contracts.

Operating earnings exclude most investment results and Buffett has said they are more reflective of Berkshire’s performance than net earnings, which tend to fluctuate widely due to unrealized investment gains or losses.

For the full year, Berkshire reversed the disappointing performance in 2018 (when it earned just $4.0 billion in GAAP profits, down 90% from the previous year, prompting the WSJ to describe this as “one of Buffett’s worst years ever”), and recorded a whopping $81.4 billion in net earnings, driven mostly by unrealized investment gains with full-year revenues rising modestly from $247.8 billion to $254.6 billion. At the same time total asset across the conglomerate-cum-hedge fund (which at last check managed at least $242.1BN in US stocks ) rose by $110 billion to $817BN as of Dec 31, compared to the year prior.

Commenting on the company’s $81.4 billion in 2019 GAAP net earnings, Buffett said that “the components of that figure are $24 billion of operating earnings, $3.7 billion of realized capital gains and a $53.7 billion gain from an increase in the amount of net unrealized capital gains that exist in the stocks we hold.”

Buffett then focused on the $53.7 billion capita gain, saying that “It resulted from a new GAAP rule, imposed in 2018, that requires a company holding equity securities to include in earnings the net change in the unrealized gains and losses of those securities. As we stated in last year’s letter, neither Charlie Munger, my partner in managing Berkshire, nor I agree with that rule.

The adoption of the rule by the accounting profession, in fact, was a monumental shift in its own thinking. Before 2018, GAAP insisted – with an exception for companies whose business was to trade securities – that unrealized gains within a portfolio of stocks were never to be included in earnings and unrealized losses were to be included only if they were deemed “other than temporary.” Now, Berkshire must enshrine in each quarter’s bottom line – a key item of news for many investors, analysts and commentators – every up and down movement of the stocks it owns, however capricious those fluctuations may be.

Berkshire’s 2018 and 2019 years glaringly illustrate the argument we have with the new rule. In 2018, a down year for the stock market, our net unrealized gains decreased by $20.6 billion, and we therefore reported GAAP earnings of only $4 billion. In 2019, rising stock prices increased net unrealized gains by the aforementioned $53.7 billion, pushing GAAP earnings to the $81.4 billion reported at the beginning of this letter. Those market gyrations led to a crazy 1,900% increase in GAAP earnings!

And speaking of market gyrations, here is the breakdown of Buffett’s top 15 investments (excluding the Kraft Heinz embarrassment), which naturally soared in the quarter in which the Fed launched QE4. As a reminder, one year ago, the market value of these top investments was just $172.8BN, so a nearly $80 billion increase in market cap.

Some other observations on Berkshire’s latest quarterly and annual results:

  • After imploding in late 2018, Kraft Heinz, which counts Berkshire as its largest shareholder, had a tumultuous 2019, with writedowns, management shakeups and downgrades to junk. As Bloomberg notes, Buffett’s company carries its Kraft Heinz investment on its balance sheet at $13.8 billion, a figure unchanged since 2018’s fourth quarter, even as the market price of the stake dropped to $10.5 billion at the end of last year.
  • Berkshire’s BNSF railroad posted a 5% gain in profit in the fourth quarter, just shy of record earnings in the previous three months, as a 3.8% drop in expenses helped counter falling revenue across shipments of products such as coal, consumer items and agricultural goods. BNSF had posted its full-year filing Friday night, on the eve of the release of Buffett’s annual letter, giving investors a sneak peek of results.

Of note: unable to find outside deep-value investments in a market that is overvalued and overflowing with liquidity, Berkshire bought back $5 billion of its own shares in 2019, with the buyback in Q4 rising to $2.2 billion, the most ever. The company changed its buyback policy last year, and some shareholders have been frustrated the company hasn’t spent significantly more cash repurchasing its stock. Ironically, it is none other than Buffett who has repeatedly urged his investments to engage in aggressive buybacks even as Berkshire has sternly resisted in putting Buffett’s money where his mouth has been for years. 

As he has in prior years, Buffett dedicated a modest portion of the last page of his letter to the topic of buybacks, making it very clear to even the most hardened skeptics, that buybacks to indeed support stocks, when Buffett said that “we will likely become more aggressive in purchasing shares. We will not, however, prop the stock at any level.” Almost as if buying back stock tends to, gasp, prop it up. But… but… that nice fellow who runs that giant (money losing) quant shop said… yes, we know. He is wrong. Moving on: Buffett also had a tongue-in-cheek challenge to anyone who thinks the company hasn’t bought back enough stocks, saying that “shareholders having at least $20 million in value of A or B shares and an inclination to sell shares to Berkshire may wish to have their broker contact Berkshire’s Mark Millard at 402-346-1400…. call only if you are ready to sell.” The full excerpt below:

In past reports, we’ve discussed both the sense and nonsense of stock repurchases. Our thinking, boiled down: Berkshire will buy back its stock only if a) Charlie and I believe that it is selling for less than it is worth and b) the company, upon completing the repurchase, is left with ample cash.

Calculations of intrinsic value are far from precise. Consequently, neither of us feels any urgency to buy an estimated $1 of value for a very real 95 cents. In 2019, the Berkshire price/value equation was modestly favorable at times, and we spent $5 billion in repurchasing about 1% of the company.

Over time, we want Berkshire’s share count to go down. If the price-to-value discount (as we estimate it) widens, we will likely become more aggressive in purchasing shares. We will not, however, prop the stock at any level.

Shareholders having at least $20 million in value of A or B shares and an inclination to sell shares to Berkshire may wish to have their broker contact Berkshire’s Mark Millard at 402-346-1400. We request that you phone Mark between 8:00-8:30 a.m. or 3:00-3:30 p.m. Central Time, calling only if you are ready to sell.

Yet even with the $2.2BN in Q4 buybacks, Berkshire’s cash pile continued to rise, and it ended 2019 at a full-year record, or $128 billion, just shy of the all time high of $128.2 billion in Q3. Buffett has sought to redeploy those funds into higher-returning deals or stock purchases, but has been held back by what he’s said are “sky-high” prices for good businesses.

As one can expect, the theme of scarce investments continued in Q4, with Buffett writing that “we constantly seek to buy new businesses that meet three criteria. First, they must earn good returns on the net tangible capital required in their operation. Second, they must be run by able and honest managers. Finally, they must be available at a sensible price. When we spot such businesses, our preference would be to buy 100% of them. But the opportunities to make major acquisitions possessing our required attributes are rare. Far more often, a fickle stock market serves up opportunities for us to buy large, but non-controlling, positions in publicly-traded companies that meet our standards.”

And yet despite the massive cash hoard and record buyback, perhaps in response to the company’s shrinking set of investment opportunities (despite Berkshire surprising the market by buying a small new stake in Kroger, Biogen, SPY and VOO in Q4) and the decline in the company’s operating earnings, the company has underperformed the S&P 500’s total return in recent years. In 2019, the company’s stock rose just 11% compared with a 31.5% total return in the S&P — Berkshire’s biggest underperformance since 2009.

Besides investment opportunities, in his annual letter, Buffett discussed corporate boards of directors, which he said are often ill-equipped to oversee companies and incentivized not to challenge executives.

He also said that at Berkshire’s annual meeting in May, shareholders will be able to ask questions of Berkshire executives Ajit Jain and Greg Abel, the two leading candidates to succeed Mr. Buffett as CEO, in addition to questioning Messrs. Buffett and Munger.

Buffett harped on the benefits of diversification, invoking not only a recent Lubrizol incident but also the New Testament:

… one final item that underscores the wide scope of Berkshire’s operations. Since 2011, we have owned Lubrizol, an Ohio-based company that produces and markets oil additives throughout the world. On September 26, 2019, a fire originating at a small next-door operation spread to a large French plant owned by Lubrizol. The result was significant property damage and a major disruption in Lubrizol’s business. Even so, both the company’s property loss and business-interruption loss will be mitigated by substantial insurance recoveries that Lubrizol will receive.

But, as the late Paul Harvey was given to saying in his famed radio broadcasts, “Here’s the rest of the story.” One of the largest insurers of Lubrizol was a company owned by . . . uh, Berkshire. In Matthew 6:3, the Bible instructs us to “Let not the left hand know what the right hand doeth.” Your chairman has clearly behaved as ordered

That said, Buffett did not leave out the Old Testament either:

Our P/C companies have meanwhile had an excellent underwriting record. Berkshire has now operated at an underwriting profit for 16 of the last 17 years, the exception being 2017, when our pre-tax loss was a whopping $3.2 billion. For the entire 17-year span, our pre-tax gain totaled $27.5 billion, of which $400 million was recorded in 2019. That record is no accident: Disciplined risk evaluation is the daily focus of our insurance managers, who know that the rewards of float can be drowned by poor underwriting results. All insurers give that message lip service. At Berkshire it is a religion, Old Testament style.

We can only guess who the Old Testament god at Berkshire is.

Curiously, unlike in prior years, Buffett decided to stay out of the political fray this year, and as Bloomberg notes, the billionaire Democrat and Hillary Clinton supporter didn’t mention the words “election,” “Trump,” or any Democrat running for president in the letter.

To be fair, Buffett did try to tone it down last year too, when in lieu of bashing Trump, he focused on overall prosperity in the U.S., saying that America’s success over the decades has been achieved in a bipartisan manner. And while in the past Buffett had openly campaigned for presidential candidates such as Hillary, he said more recently that he prefers not to use his position at Berkshire to promote his political views or, conversely, to impose his political opinions on Berkshire’s business activities.

Some other political flashbacks: Buffett wrote in 2013 that although he voted for Barack Obama the previous November, 10 of the 12 daily newspapers that Berkshire owned at the time endorsed the Republican candidate, Mitt Romney.

In the 2015 letter, written during the 2016 election campaign, Buffett said candidates “can’t stop speaking about our country’s problems” but that their downbeat views on the U.S. were “dead wrong.”

The son of a four-term Republican U.S. Representative has voted for more Democrats than Republicans over the the past 30 years, he said last year. He attended fundraisers for both Clinton and Obama ahead of the 2008 Democratic primaries. While he’s yet to publicly endorse for November’s election, Buffett said in early 2019, ahead of any campaign announcement, that he would support Michael Bloomberg if he ran for president.

Buffett concludes the letter by noting that his companies collectively paid 1.5% of the total corporate federal tax paid in America in 2019:

In 2019, Berkshire sent $3.6 billion to the U.S. Treasury to pay its current income tax. The U.S. government collected $243 billion from corporate income tax payments during the same period. From these statistics, you can take pride that your company delivered 11?2% of the federal income taxes paid by all of corporate America.

Fifty-five years ago, when Berkshire entered its current incarnation, the company paid nothing in federal income tax. (For good reason, too: Over the previous decade, the struggling business had recorded a net loss.) Since then, as Berkshire retained nearly all of its earnings, the beneficiaries of that policy became not only the company’s shareholders but also the federal government. In most future years, we both hope and expect to send far larger sums to the Treasury

One thing is certain: if Buffett endorses “bigger government” for the 2020 election, he will end up paying far more in taxes in the coming years. Assuming he is around, of course.

Full Berkshire letter below.


Tyler Durden

Sat, 02/22/2020 – 11:36


Are US Intel ‘Officials’ Meddling In US Election With “Report” Russia Is Aiding Sanders?

Are US Intel ‘Officials’ Meddling In US Election With “Report” Russia Is Aiding Sanders?

Authored by Joe Lauria via,

With Democratic frontrunner Bernie Sanders spooking the Democratic establishment, The Washington Post Friday reported damaging information from intelligence sources against Sanders by saying that Russia is trying to help his campaign.

If the story is true and if intelligence agencies are truly committed to protecting U.S. citizens, the Sanders campaign would have been quietly informed and shown evidence to back up the claims.

Instead the story wound up on the front page of the Post, “according to people familiar with the matter.” Zero evidence was produced to back up the intelligence agencies’ assertion.

“It is not clear what form that Russian assistance has taken,” the Post reported. That would tell any traditional news editor that there was no story until it is known. 

Instead major U.S. media are again playing the role of laundering totally unverified “information” just because it comes from an intelligence source. Reporting such assertions without proof amounts to an abdication of journalistic responsibility. It shows total trust in U.S. intelligence despite decades of deception and skullduggery from these agencies.

Centrist Democratic Party leaders have expressed extreme unease with Sanders leading the Democratic pack. Politico reported Friday that former New York Mayor Mike Bloomberg’s entry into the race is explicitly to stop Sanders from winning on the first ballot at the party convention.

A day after The New York Times reported, also without evidence, that Russia is again trying to help Donald Trump win in November, the Post reports Moscow is trying to help Sanders too, again without substance. Both candidates whom the establishment loathes were smeared on successive days.

In a Tough Spot

The Times followed the Post report Friday by making it appear that Sanders himself had chosen to make public the intelligence assessment about “Russian interference” in his campaign.

But Sanders had known for a month about this assessment and only issued a statement after the Post asked him for comment before publishing its uncorroborated story based on anonymous sources.

Sanders was put in a difficult spot. If he said, “Show me the proof that Russia is trying to help me,” he ran the risk of being attacked for disbelieving (even disloyalty to) U.S. intelligence, and, by default, defending the Kremlin.

So politician that he is, and one who is trying to win the White House, Sanders told the Post:

“I don’t care, frankly, who Putin wants to be president. My message to Putin is clear: Stay out of American elections, and as president I will make sure that you do. In 2016, Russia used Internet propaganda to sow division in our country, and my understanding is that they are doing it again in 2020.”

The Times quoted Sanders as calling Russian President Vladimir Putin an “autocratic thug.” The paper reported Sanders saying in a statement: “Let’s be clear, the Russians want to undermine American democracy by dividing us up and, unlike the current president, I stand firmly against their efforts and any other foreign power that wants to interfere in our election.”

Responding to a cacophony of criticism that Sanders’ supporters are especially vicious online, as opposed to the millions of other vicious people online, Sanders attempted to use Russia as a scapegoat, the way the Clinton campaign did in 2016. He said: “Some of the ugly stuff on the Internet attributed to our campaign may well not be coming from real supporters.”

But no matter how strong Sander’s denunciations of Russia, his opponents will now target him as being a tool of the Kremlin.

Mission accomplished.   

Tyler Durden

Sat, 02/22/2020 – 11:00


Coronavirus Deaths Outside China Spike As WHO Team Visits Wuhan

Coronavirus Deaths Outside China Spike As WHO Team Visits Wuhan


  • Italy confirms second death, 12 towns on lockdown, more than 30 cases confirmed
  • Japan cases triple in a week to 121
  • Chinese scientists find virus in urine
  • Experts propose 27 day quarantine, say 14 days likely not long enough
  • Cases outside China go exponential
  • WHO team visits Wuhan; will give Monday press conference
  • Iran reports 10 new cases, deaths climb to 5
  • San Diego says 200 under ‘medical observation’
  • Young woman infected five relatives without ever showing symptoms
  • South Korea cases surge 8-fold in 4 days to 433; country reports third death

* * *

When WHO Director-General Dr. Tedros was asked on Thursday whether the COVID-19 virus was at a tipping point, he replied that the window to stop the outbreak from growing exponentially worse was rapidly closing.

Though by Friday night, it certainly seemed like that window had slammed shut. In South Korea, cases went exponential, soaring by 70% in one day.

Overnight, the country reported another rash of confirmed cases, bringing the total to 433, with 352 in Daegu, presumably members of the cult-like church where a ‘super-spreader’ worshipped. That marks an eight-fold increase in cases in just four days for South Korea, as the AP reported.

SK also reported its third death, a man in his 40s who was found dead in his apartment and posthumously tested.

South Korean health officials warned they could soon see a rash of deaths as several patients are in serious condition. Virus patients with signs of pneumonia or other serious conditions at the Cheongdo hospital were transferred elsewhere as 17 of them are in critical condition, according to SK Vice Health Minister Kim Gang-lip told reporters.

The country has followed China in imposing quarantines (everyone is too terrified to go outside anyway) and they’re hoping to prevent a national outbreak, despite a few cases in Seoul that weren’t immediately traceable to an obvious source, which is sort of discouraging.

“Although we are beginning to see some more cases nationwide, infections are still sporadic outside of the special management zone of Daegu and North Gyeongsang Province,” Kim said during a briefing. He called for maintaining strong border controls to prevent infections from China and elsewhere from entering South Korea.

In Italy, a seemingly minor outbreak went exponential. By day’s end, Italian health authorities had confirmed their first virus-related fatality, and 12 towns in Lombardy were under strict quarantine orders with residents huddling terrified inside their homes, a tableau that has become all too familiar by now. Another fatality followed overnight, as a couple more towns joined in the lockdown. This marked Italy as the first European country to see its own nationals succumb to the virus, according to Euronews.

Across Italy, there are 32 cases in Codogno, Lombardy, and seven in Veneto, according to the AFP and Sky Italia television. Many of the new cases represented the first infections in Italy acquired through secondary contagion.

In Iran, 10 more cases, and one more death, were recorded overnight. That brings the total number of confirmed cases to 28, including cases in Qom and Tehran. So far, five Iranians have died.

As we await more information out of China, CNBC’s Eunice Yoon reports that the team would hold a press briefing on Monday at 6 am ET.

Meanwhile, as we noted yesterday, the team has arrived in Wuhan, where it’s gathering information and observing the situation on the ground.

The team has already been to three Chinese provinces, Beijing, Sichuan and Guangdong, but are only now just visiting the city at the heart of the outbreak. Dr. Tedros confirmed the trip during public comments on Saturday, where he once again shared some familiar words.

“We have to take advantage of the window of opportunity we have, to attack the virus outbreak with a sense of urgency,” Dr. Tedros told the leaders, who had gathered for an emergency meeting on the response to the coronavirus in the continent.

President Xi said Saturday that the situation in Wuhan remains ‘grim and complex’ – which means the WHO team should be in for an eye-opening experience.

As of Saturday morning in the US, 1,200 cases of COVID-19 have been diagnosed outside China. More than 200 cases have been confirmed in South Korea, more than 30 in Italy, roughly a dozen in Iran, and one in Egypt, the first to be confirmed in Africa. China has reported over 76,000 cases, including over 2,300 deaths.

Confirmed cases in Japan rose to 121 on Saturday, having more than tripled in a week.

Meanwhile, the Washington Post reports that health officials and the cruise line are continuing to test crew members aboard the Diamond Princess. So far, 74 crew have been confirmed to have the virus, but they have been included in the toll already.


So far, China has reported only 397 new cases Saturday, as the rate of increase continued to decline, but another 109 have died. And even the Washington Post acknowledges that there is a “great deal of skepticism” about China’s numbers, according to a new case study seen by Reuters.

Cases where patients didn’t show signs of infection for longer than two weeks have prompted some epidemiologists to suggest a 27 day quarantine period instead of just a 14 day. Also on Saturday scientists in China revealed that they had discovered a strain of the virus in a patient’s urine, raising new and uncomfortable questions about the virus’s ability to spread through sewer systems.

There have also been several new indications that the virus’s incubation period might be longer than the 14 days currently believed. A woman in Wuhan with no symptoms infected five relatives without every showing signs of infection.

In the US, health officials are scrambling to contain the fallout from the evacuation of 300 Americans from the ‘Diamond Princess’. It appears that the decision to transport 14 infected passengers along with the rest of the group was a disaster. Dozens of others appear to have been infected either during the trip, or shortly before.

But in San Diego, officials announced that they’re monitoring some 200 cases, none of which had anything to do with the ship.

After confirmed US cases more than doubled to 34 on Friday, officials in San Diego on Saturday confirmed that more than 200 people are currently being monitored over virus concerns, according to ABC News 10.

Officials said everyone being monitored had either come in contact with one of the three confirmed cases, or others under suspicion. Health officials didn’t exactly offer specific details.

They’re among more than 300 people who have been, or are being, ‘monitored’ by the county.

The 204 people under county supervision include those deemed at risk of having been exposed to the virus due to close contact with confirmed cases or because of travel to China in the past 14 days, the county said.

Those individuals are monitoring their health under the supervision of county health officials.

So far, 338 people in all have been monitored by the county, with 134 people completing their time under supervision.

Health officials say the CDC is conducting screening for those landing at one of 11 U.S. airports from China. From there, if a patient shows no symptoms they are self-quarantined at home for self-monitoring with public health supervision.

Keep in mind: These individuals aren’t being held in isolation or a mandatory quarantine. Instead, they’ve been asked to self-quarantine, and immediately report any suspicious symptoms.

San Diego has had two confirmed cases of coronavirus, or COVID-19, among the evacuees who were flown out of Wuhan a few weeks ago. One patient has since recovered from the virus and has been released. The second patient is still receiving care. A third patient, reportedly a child, is still awaiting test results, but has been said to be showing symptoms.

When they extended a coronavirus-related emergency declaration for another 30 days, officials said there were no signs the virus was spreading around San Diego. But it never hurts to be cautious.

Before we go, we wanted to remind readers of a chart we first shared a couple of days ago:

Terrifying indeed.

Tyler Durden

Sat, 02/22/2020 – 10:11


Japan, The Fed, & The Limits Of QE

Japan, The Fed, & The Limits Of QE

Authored by Lance Roberts via,

This past week saw a couple of interesting developments.

On Wednesday, the Fed released the minutes from their January meeting with comments which largely bypassed overly bullish investors.

“… several participants observed that equity, corporate debt, and CRE valuations were elevated and drew attention to  high levels of corporate indebtedness and weak underwriting standards in leveraged loan markets. Some participants expressed the concern that financial imbalances-including overvaluation and excessive indebtedness-could amplify an adverse shock to the economy …”

“… many participants remarked that the Committee should not rule out the possibility of adjusting the stance of monetary policy to mitigate financial stability risks, particularly when those risks have important implications for the economic outlook and when macroprudential tools had been or were likely to be ineffective at mitigating those risks…”

The Fed recognizes their ongoing monetary interventions have created financial risks in terms of asset bubbles across multiple asset classes. They are also aware that the majority of the policy tools are likely ineffective at mitigating financial risks in the future. This leaves them being dependent on expanding their balance sheet as their primary weapon.

Interestingly, the weapon they are dependent on may not be as effective as they hope. 

This past week, Japan reported a very sharp drop in economic growth in their latest reported quarter as a further increase in the sales-tax hit consumption. While the decline was quickly dismissed by the markets, this was a pre-coronovirus impact, which suggests that Japan will enter into an “official” recession in the next quarter.

There is more to this story.

Since the financial crisis, Japan has been running a massive “quantitative easing” program which, on a relative basis, is more than 3-times the size of that in the U.S. However, while stock markets have performed well with Central Bank interventions, economic prosperity is only slightly higher than it was prior to the turn of century.

Furthermore, despite the BOJ’s balance sheet consuming 80% of the ETF markets, not to mention a sizable chunk of the corporate and government debt market, Japan has been plagued by rolling recessions, low inflation, and low-interest rates. (Japan’s 10-year Treasury rate fell into negative territory for the second time in recent years.)

Why is this important? Because Japan is a microcosm of what is happening in the U.S. As I noted previously:

The U.S., like Japan, is caught in an ongoing ‘liquidity trap’ where maintaining ultra-low interest rates are the key to sustaining an economic pulse. The unintended consequence of such actions, as we are witnessing in the U.S. currently, is the battle with deflationary pressures. The lower interest rates go – the less economic return that can be generated. An ultra-low interest rate environment, contrary to mainstream thought, has a negative impact on making productive investments, and risk begins to outweigh the potential return.

Most importantly, while there are many calling for an end of the ‘Great Bond Bull Market,’ this is unlikely the case. As shown in the chart below, interest rates are relative globally. Rates can’t increase in one country while a majority of economies are pushing negative rates. As has been the case over the last 30-years, so goes Japan, so goes the U.S.”

As my colleague Doug Kass recently noted, Japan is a template of the fragility of global economic growth. 

“Global growth continues to slow and the negative impact on demand and the broad supply interruptions will likely expose the weakness of the foundation and trajectory of worldwide economic growth. This is particularly dangerous as the monetary ammunition has basically been used up.

As we have observed, monetary growth (and QE) can mechanically elevate and inflate the equity markets. For example, now in the U.S. market, basic theory is that in practice a side effect is that via the ‘repo’ market it is turned into leveraged trades into the equity markets. But, again, authorities are running out of bullets and have begun to question the efficacy of monetary largess.

Bigger picture takeaway is beyond the fact that financial engineering does not help an economy, it probably hurts it. If it helped, after mega-doses of the stuff in every imaginable form, the Japanese economy would be humming. But the Japanese economy is doing the opposite. Japan tried to substitute monetary policy for sound fiscal and economic policy. And the result is terrible.

While financial engineering clearly props up asset prices, I think Japan is a very good example that financial engineering not only does nothing for an economy over the medium to longer-term, it actually has negative consequences.” 

This is a key point.

The “Stock Market” Is NOT The “Economy.”

Roughly 90% of the population gets little, or no, direct benefit from the rise in stock market prices.

Another way to view this issue is by looking at household net worth growth between the top 10% to everyone else.

Since 2007, the ONLY group that has seen an increase in net worth is the top 10% of the population.

“This is not economic prosperity… This is a distortion of economics.”

From 2009-2016, the Federal Reserve held rates at 0%, and flooded the financial system with 3-consecutive rounds of “Quantitative Easing” or “Q.E.” During that period, average real rates of economic growth rates never rose much above 2%.

Yes, asset prices surged as liquidity flooded the markets, but as noted above “Q.E.” programs did not translate into economic activity. The two 4-panel charts below shows the entirety of the Fed’s balance sheet expansion program (as a percentage) and its relative impact on various parts of the real economy. (The orange bar shows now many dollars of increase in the Fed’s balance sheet that it took to create an increase in each data point.)

As you can see, it took trillions in “QE” programs, not to mention trillions in a variety of other bailout programs, to create a relatively minimal increase in economic data. Of course, this explains the growing wealth gap, which currently exists as monetary policy lifted asset prices.

The table above shows that QE1 came immediately following the financial crisis and had an effective ratio of about 1.6:1. In other words, it took a 1.6% increase in the balance sheet to create a 1% advance in the S&P 500. However, once market participants figured out the transmission system, QE2 and QE3 had an almost perfect 1:1 ratio of effectiveness. The ECB’s QE program, which was implemented in 2015 to support concerns of an unruly “Brexit,” had an effective ratio of 1.5:1. Not surprisingly, the latest round of QE, which rang “Pavlov’s bell,” has moved back to a near perfect 1:1 ratio.

Clearly, QE worked well in lifting asset prices, but as shown above, not so much for the economy. In other words, QE was ultimately a massive “wealth transfer” from the middle class to the rich which has created one of the greatest wealth gaps in the history of the U.S., not to mention an asset bubble of historic proportions.

But Will It Work Next Time?

This is the single most important question for investors.

The current belief is that QE will be implemented at the first hint of a more protracted downturn in the market. However, as suggested by the Fed, QE will likely only be employed when rate reductions aren’t enough. This was a point made in 2016 by David Reifschneider, deputy director of the division of research and statistics for the Federal Reserve Board in Washington, D.C., released a staff working paper entitled “Gauging The Ability Of The FOMC To Respond To Future Recessions.” 

The conclusion was simply this:

“Simulations of the FRB/US model of a severe recession suggest that large-scale asset purchases and forward guidance about the future path of the federal funds rate should be able to provide enough additional accommodation to fully compensate for a more limited [ability] to cut short-term interest rates in most, but probably not all, circumstances.”

In other words, the Federal Reserve is rapidly becoming aware they have become caught in a liquidity trap keeping them unable to raise interest rates sufficiently to reload that particular policy tool. There are certainly growing indications the U.S. economy maybe be heading towards the next recession. 

Interestingly, David compared three policy approaches to offset the next recession.

  1. Fed funds goes into negative territory but there is no breakdown in the structure of economic relationships.

  2. Fed funds returns to zero and keeps it there long enough for unemployment to return to baseline.

  3. Fed funds returns to zero and the FOMC augments it with additional $2-4 Trillion of QE and forward guidance. 

In other words, the Fed is already factoring in a scenario in which a shock to the economy leads to additional QE of either $2 trillion, or in a worst case scenario, $4 trillion, effectively doubling the current size of the Fed’s balance sheet.

So, 2-years ago David lays out the plan, and on Wednesday, the Fed reiterates that plan.

Does the Fed see a recession on the horizon? Is this why there are concerns about valuations?


But there is a problem with the entire analysis. The effectiveness of QE, and zero interest rates, is based on the point at which you apply these measures.

In 2008, when the Fed launched into their “accommodative policy” emergency strategy to bail out the financial markets, the Fed’s balance sheet was running at $915 Billion. The Fed Funds rate was at 4.2%.

If the market fell into a recession tomorrow, the Fed would be starting with a $4.2 Trillion balance sheet with interest rates 3% lower than they were in 2009. In other words, the ability of the Fed to ‘bail out’ the markets today, is much more limited than it was in 2008.”

But there is more to the story than just the Fed’s balance sheet and funds rate. The entire backdrop is completely reversed. The table below compares a variety of financial and economic factors from 2009 to present.

Importantly, QE, and rate reductions, have the MOST effect when the economy, markets, and investors are extremely negative.

In other words, there is nowhere to go but up.

Such was the case in 2009. Not today.

This suggests that the Fed’s ability to stem the decline of the next recession, or offset a financial shock to the economy from falling asset prices, may be much more limited than the Fed, and most investors, currently believe.


It has taken a massive amount of interventions by Central Banks to keep economies afloat globally over the last decade, and there is rising evidence that growth is beginning to decelerate.

Furthermore, we have much more akin with Japan than many would like to believe.

  • A decline in savings rates

  • An aging demographic

  • A heavily indebted economy

  • A decline in exports

  • Slowing domestic economic growth rates.

  • An underemployed younger demographic.

  • An inelastic supply-demand curve

  • Weak industrial production

  • Dependence on productivity increases

The lynchpin to Japan, and the U.S., remains demographics and interest rates. As the aging population grows becoming a net drag on “savings,” the dependency on the “social welfare net” will continue to expand. The “pension problem” is only the tip of the iceberg.

While another $2-4 Trillion in QE might indeed be successful in keeping the bubble inflated for a while longer, there is a limit to the ability to continue pulling forward future consumption to stimulate economic activity. In other words, there are only so many autos, houses, etc., which can be purchased within a given cycle. There is evidence the cycle peak has been reached.

If the effectiveness of rate reductions and QE are diminished due to the reasons detailed herein, the subsequent destruction to the “wealth effect” will be larger than currently imagined. The Fed’s biggest fear is finding themselves powerless to offset the negative impacts of the next recession. 

If more “QE” works, great.

But as investors, with our retirement savings at risk, what if it doesn’t.

Tyler Durden

Sat, 02/22/2020 – 10:10


Covid-19 Triggers Global Luxury Bust

Covid-19 Triggers Global Luxury Bust

The impact of Covid-19 on supply chains has been tremendous. Uncertainty across the global economy is building as China remains in economic paralysis. The luxury fashion industry is suffering its most significant “shock” since the 2008 financial crisis, reported the Financial Times

Our angle in this piece is to asses which luxury brand companies are most exposed/dependent on China. Many of these firms have complex operations in the country, from manufacturing facilities to brick and mortar stores to e-commerce platforms. Chinese consumers accounted for 40% of $303 billion spent on luxury goods globally last year.

The virus outbreak has also disrupted complex supply chains for mid-market apparel brands, like Under Armour, Adidas, and Puma, warning about collapsing demand and factory shutdown woes. 

LVMH, Kering, and Richemont are luxury brands that are some of the least exposed to China because their manufacturing facilities are outside the country. 

However, Luca Solca, a luxury goods analyst at Bernstein, said it doesn’t matter where luxury brands are making their products, the whole demand story in China has collapsed. 

Kering, the owner of Gucci, warned earlier this month that the virus outbreak in China could damage sales in the first quarter. 

A Moody’s report this week showed US-listed luxury brands, Coach and Kate Spade owner Tapestry, have increased their market exposure to China in recent years to gain access to a robust market, allowing their revenues to increase far faster than industry norms. That strategy today is likely to have backfired. 

Fashion brands from Hennes & Mauritz, Next of the UK, and Tory Burch, have built factories in China to take advantage of inexpensive silk, fabrics, and cotton, along with lower labor costs, are now experiencing supply chain disruptions that could lead to product shortages in the months ahead. 

The National Chamber for Italian Fashion warned earlier this week that the virus impact in China would lead to a $108 million drop in Italian exports in the first quarter because Chinese demand has fallen. If consumption remains depressed, then luxury exports to China could drop by a whopping $250 million in 1H20. 

A top executive at Shanghai’s luxury shopping mall Plaza 66 said the mall had been deserted this month. Stores such as Cartier and Tiffany’s have been shuttered. 

“We are now, brand by brand, reallocating that inventory to other regions in the world so that we are not too heavy in stock in China,” Kering chief executive François-Henri Pinault said last week. The move suggests the environment in China remains dire and to persist well into March. 

Jefferies Group noted this week that Burberry Group is the most exposed luxury brand to China. 

The crisis developing in the global luxury retail market is the first demand shock since that last financial crisis more than a decade ago. Brands that have manufacturing and retail exposure to China will be damaged the most. 

UBS analyst Olivia Townsend said luxury brands she spoke with said factories are to remain shut for all of February may lead to product shortages. 

The demand crisis comes as the global apparel industry rolls over suggests that world stocks could be headed for a correction. 

Tyler Durden

Sat, 02/22/2020 – 09:48


Macron Vows Crackdown On Political Islam In France

Macron Vows Crackdown On Political Islam In France

Authored by Soeren Kern via The Gatestone Institute,

French President Emmanuel Macron has announced new measures aimed at countering political Islam in France. The changes would limit the role that foreign governments have in France in training imams, financing mosques and educating children.

Macron also vowed to fight what he called “Islamist separatism” and to lead what he described as a “Republican reconquest” aimed at reasserting state control over Muslim ghettoes — so-called no-go zones (zones urbaines sensibles, sensitive urban zones) — in France.

In a much-anticipated policy speech, Macron, during a visit to the eastern French city of Mulhouse on February 18, said that his government would seek to combat “foreign interference” in how Islam is practiced, and the way that Muslim religious institutions are organized in France.

“The problem is when, in the name of a religion, some people want to separate themselves from the Republic and therefore not respect its laws,” he said.

“Here in France, there is no place for political Islam.”

Macron outlined a four-pronged strategy to combat Islamism in the country:

1) fight against foreign influences in schools and places of worship;

2) reorganize Muslim worship in France in accordance with the principles of secularism and French law;

3) fight against all manifestations of Islamist separatism and communitarianism; and

4) reassert state control over all parts of France.

Macron said that, among other measures, he plans to terminate a decades-old teacher exchange program called Teaching Language and Culture of Origin (L’Enseignement Langue et Culture d’origine, ELCO), which allows nine countries — Algeria, Croatia, Italy, Morocco, Portugal, Serbia, Spain, Tunisia and Turkey — to send teachers to France to provide foreign language and culture courses without oversight by French authorities.

Four majority-Muslim countries — Algeria, Morocco Tunisia and Turkey — are involved in ELCO, which serves approximately 80,000 students each year. These countries also send several hundred imams to France every year. Foreign imams, Macron said, were often linked to Salafism or the Muslim Brothers and “preach against the Republic.” He stressed: “This end to the consular Islam system is extremely important to curb foreign influence and make sure everybody respects the laws of the Republic.”

Macron said that ELCO will be replaced with bilateral agreements to ensure that the French state has control over the courses and their content, as of September 2020. Macron added that Turkey was the only country that had refused to sign a new bilateral agreement.

The Turkish government operates a large network of mosques in France and elsewhere in Europe under the auspices of Diyanet, or Directorate of Religious Affairs, which spent more than $2 billion on promoting Islam in 2019 and is controlled by Turkish President Recep Tayyip Erdo?an, who has been accused of using Diyanet to prevent the integration of Muslims in Europe.

“Turkey today can make the choice to follow that path with us or not, but I will not allow any foreign country feed a cultural, religious or identity-related separatism on our Republic’s territory,” Macron said.

“We cannot have Turkey’s laws on France’s soil. No way.”

Macron also said that a new law is being drafted to allow for transparency in how mosques are financed. “Mosques financed with transparency with imams trained in France and respectful of the Republican values and principles, that’s how we will create the conditions so that Muslims in France can freely practice their religion,” he said.

Macron added that he would ask the French Council of the Muslim Faith (Conseil français du culte musulman, CFCM), the body representing Islam in France, to help the government find solutions to train imams on French soil and ensure they can speak French and not spread Islamism.

Macron also called for better integration of Muslims in French society and warned of the dangers of communitarianism — the practice of communities governing themselves in France:

“We are here for a reason that we share with Muslims — that is the struggle against communitarianism. What we must put in place is not, as I have sometimes heard from some people, ‘a plan against Islam.’

That would be a profound mistake. What we must fight is the separatism, because when the Republic does not keep its promises, others will try to replace it.

Macron’s speech, which comes just weeks before municipal elections set for March 15 and 22, is part of an effort to elicit support from conservative voters. The government has faced criticism over its lackluster efforts to promote Muslim integration in France, which is home to Europe’s largest Muslim population, estimated to number around 6 million, or 8 percent of the population.

Marine Le Pen, leader of the French nationalist party National Rally, has repeatedly argued that France has failed to assimilate its Muslim community — thus jeopardizing laïcité, or state secularism, a 1905 legal principle that separates church and state and requires the state’s neutrality on religion. Le Pen, who is neck and neck with Macron in public opinion polls, speaks for many voters who are concerned about the spread of radical Islam in France.

Macron, who took office in May 2017 and has focused most of his presidency on economic reform, has had mixed results on keeping promises regarding Islamism and mass migration.

  • October 2017. Macron signed a new counter-terrorism law — Law to Strengthen Internal Security and the Fight Against Terrorism (Loi renforçant la sécurité intérieure et la lutte contre le terrorisme) — which gives prefects, police and security forces wide-ranging powers, without the need to seek prior approval from a judge, to search homes, place people under house arrest and close places of worship. The measure also authorizes police to perform identity checks at French borders.

  • February 2018. Macron pledged to “lay the groundwork for the entire reorganization of Islam in France.” He said that the plan would be announced within six months and would limit the role that foreign governments have in training imams, financing mosques and educating children in France — the very same objectives that Macron announced two years later in his speech in Mulhouse in February 2020.

    Le Pen noted that Macron’s latest plan mirrors her own report — “Le Pen Plan for the Suburbs” (Plan Le Pen pour les banlieues) — published in May 2018.

  • September 2018. French Interior Minister Gérard Collomb launched the “Republican Reconquest” (Reconquête Républicaine) aimed at retaking control of 60 so-called no-go zones in France by sending in extra police and improving public services.

  • September 2019. Macron, arguing that the government must stop voters from drifting to populist parties, hinted at a tougher line on immigration. “France cannot host everyone if it wants to host them well,” Macron told French radio station Europe 1.

Macron’s comments caused a backlash from left-leaning members of his own party. They penned two open letters warning against “fueling hatred against all Muslim citizens.” Lawmaker Jean-François Cesarini accused Macron of “co-opting Le Pen’s talking points.”

Meanwhile, in a new book — “The Emirates of the Republic: How Islamists are Taking Control of the Suburbs” — François Pupponi, who for 20 years was the Socialist mayor of Sarcelles, a commune in the northern suburbs of Paris, recounts how supporters of political Islam have upset the balance in his community, where Arabs, Christians, Jews and Turks had lived together in peace for many decades.

Pupponi describes a landscape in which entire districts are being infiltrated by Islamists in order to “make a takeover bid on this community.” He added: “It is the fruit of my experience, what I live and what I observe.”

Tyler Durden

Sat, 02/22/2020 – 09:20


Paul Tudor Jones Literally “Bowed Down” To Pitbull At Florida Everglades Fundraiser Last Weekend

Paul Tudor Jones Literally “Bowed Down” To Pitbull At Florida Everglades Fundraiser Last Weekend

It was at an event in Palm Beach this past Saturday night that Paul Tudor Jones literally bowed down to Pitbull, who was performing a concert for the Everglades Foundation. Jones, in addition to being a hedge fund manager, is a well-known conservationalist. 

Joining other billionaires like David Tepper and Robert Kraft, Jones made his case to them for helping support the restoration of 1.5 million acres of wetlands in South Florida, according to Bloomberg. He reportedly made the pitch for other billionaires to chip in while eating “ceviche in a papaya boat and grouper with blood orange-grapefruit slaw”.

Jones sees saving the Everglades as the crux of the Florida “climate anxiety” problem, stating: “It’s the antidote for all the climate anxiety Florida feels. Saving the Everglades is one of the best ways to buttress resiliency, achieve carbon neutrality and it’s our best hope for carbon sequestration, to reverse the effects.”

He continued: “This ecosystem — and we’re working on the science to prove it — might be one of the most valuable ecosystems in the world for that.”

The idea of freshwater flowing south not only ensures clear water supply for those living in the state, but it also protects habitats for animals, birds, fauna and fish. 

The event was called “Foreverglades” and was hosted at the Breakers on February 15. 

The event drew in many people concerned with protecting the environment and animals. Among the entertainment was Pitbull and 10-year-old Samantha Ramos, who reportedly introduced the well-known Miami-based rapper and singer as “Mr. 305, Mr. Worldwide.”

The event raised $3.5 million.

Tyler Durden

Sat, 02/22/2020 – 08:45


“NATO Go Home!”

“NATO Go Home!”

Authored by Thierry Meyssan via,

For two decades, US troops have been imposing their law on the broader Middle East. Entire countries are now without a state to defend them. Populations have been subjected to the dictatorship of the Islamists. Mass murders have been committed. There have been famines as well. President Donald Trump has forced his generals to repatriate their soldiers, but the Pentagon intends to continue its work with NATO soldiers.

President Trump will spend the last year of his first term in office bringing the Boys home. All U.S. troops stationed in the broader Middle East and Africa are expected to withdraw. However, this withdrawal of troops will in no way mean the end of US governance in these regions of the world. Quite the contrary.

The Pentagon’s strategy

Since 2001 – and this is one of the main reasons for the 9/11 attacks – the United States has secretly adopted the strategy outlined by Donald Rumsfeld and Admiral Arthur Cebrowski. This strategy was mentioned in the Army Review by Colonel Ralf Peters two days after the attacks and confirmed five years later by the publication of the staff map of the new Middle East. It was detailed by Admiral Cebrowski’s assistant, Thomas Barnett, in a popular book The Pentagon’s New Map.

It is about adapting the missions of the US armies to a new form of capitalism giving primacy to Finance over Economics. The world must be divided in two.

  • On the one hand, stable states integrated into globalization (which includes Russia and China);

  • on the other, a vast area of exploitation of raw materials.

This is why the state structures of the countries in this zone must be considerably weakened, ideally by destroying them and preventing their resurgence by all means. This “constructive chaos”, as Condoleeza Rice put it, should not be confused with the homonymous rabbinic concept, even though the supporters of the theopolitics have done everything in their power to do so. It is not a question of destroying a bad order in order to rebuild a better one, but of destroying all forms of human organization in order to prevent any form of resistance and to allow transnationals to exploit this area without political constraints. It is therefore a colonial project in the Anglo-Saxon sense of the term (not to be confused with a colonization of settlement).

According to this map, taken from a Powerpoint by Thomas P. M. Barnett at a conference at the Pentagon in 2003, all state structures in the dewy zone must be destroyed.

In beginning to implement this strategy, President George Bush Jr. spoke of a “war without end. Indeed, it is no longer a question of winning wars and defeating opponents, but of making them last as long as possible, “a century” he said. In fact, this strategy has been applied in the “Broader Middle East” – an area stretching from Pakistan to Morocco and covering the entire CentCom theatre of operations and the northern part of the AfriCom theatre of operations. In the past, the IMs guaranteed US access to oil from the Persian Gulf (Carter doctrine). Today, they are present in an area four times larger and aim to overturn any form of order. The state structures of Afghanistan since 2001, Iraq since 2003, Libya since 2011, Syria since 2012 and Yemen since 2015 are no longer capable of defending their citizens. Contrary to official discourse, there has never been any question of overthrowing governments, but rather of destroying states and preventing their reconstitution. For example, the situation of the people of Afghanistan did not improve with the fall of the Taliban 19 years ago, but is getting worse and worse by the day. The only counter-example could be that of Syria, which, in accordance with its historical tradition, has kept its state despite the war, absorbed the blows, and although ruined today, has weathered the storm.

It should be noted in passing that the Pentagon has always considered Israel as a European state and not as a Middle Eastern state. It is therefore not affected by this vast upheaval.

In 2001, the enthusiastic Colonel Ralf Peters assured that ethnic cleansing “it works! “(sic), but that the laws of war forbade the USA to carry it out itself. Hence the transformation of Al-Qaeda and the creation of Daesh, which did for the Pentagon what it wanted but could not undertake publicly.

To understand the Rumsfeld/Cebrowski strategy, it should be distinguished from the “Arab Spring” operation, imagined by the British on the model of the “Great Arab Revolt”. The idea was to put the Muslim Brotherhood in power, just as Lawrence of Arabia had put the Brotherhood of the Wahhabites in power in 1915.

The official, albeit not publicly assumed, objective of the U.S. General Staff: to blow up the borders of the Middle East, to destroy both enemy and friendly states, to practice ethnic cleansing.

Westerners in general have no vision of the broader Middle East as a geographical region. They know only certain countries and perceive them as isolated from each other. In this way, they convince themselves that the tragic events that these peoples are enduring are all due to special reasons, in some cases civil war, in others the overthrow of a bloodthirsty dictator. For each country, they have a well-written history of the reason for the tragedy, but they never have one to explain that the war lasts beyond that, and they certainly do not want to be asked about it. Each time, they denounce the “carelessness of the Americans” who could not end the war, forgetting that they rebuilt Germany and Japan after the Second World War. They refuse to acknowledge that for two decades the United States has been implementing a pre-stated plan at the cost of millions of lives. They therefore never see themselves as responsible for these massacres.

The United States itself denies that it is pursuing this strategy with regard to its citizens. For example, the inspector general investigating the situation in Afghanistan wrote a report lamenting the countless missed opportunities for the Pentagon to bring peace when precisely the Pentagon did not want peace.

The Russian intervention

In order to pulverize all the states of the broader Middle East, the Pentagon organized an absurd regional civil war in the manner it had invented the pointless war between Iraq and Iran (1980-88). Eventually President Saddam Hussein and Ayatollah Khomeini realized that they were killing each other for nothing and made peace against the West.

This time it was the opposition between Sunnis and Shiites. On one side, Saudi Arabia and its allies, and on the other, Iran and its allies. It does not matter whether Wahhabi Saudi Arabia and Khomeini Iran fought together under NATO command during the war in Bosnia-Herzegovina (1992-95), or whether many troops of the “Axis of Resistance” are not Shiite (100% of the Palestinians of Islamic Jihad, 70% of the Lebanese, 90% of the Syrians, 35% of the Iraqis and 5% of the Iranians).

No one knows why these two camps are fighting each other, but they are asked to bleed each other.

One third of the populations of the Shia Axis of Resistance are not Shia.

In any case, in 2014, the Pentagon was preparing to recognise two new states in accordance with its map of objectives: “Free Kurdistan” (fusion of the Syrian Rojava and the Kurdish Governorate of Iraq to which part of Iran and all of eastern Turkey were to be added at a later date) and “Sunnistan” (composed of the Sunni part of Iraq and eastern Syria). By destroying four states, the Pentagon paved the way for a chain reaction that would in turn destroy the entire region.

Russia then intervened militarily and enforced the borders of the Second World War. It goes without saying that these are arbitrary, stemming from the Sykes-Picot-Sazonov agreements of 1915, and sometimes difficult to bear, but changing them by blood is even less acceptable.

The Pentagon’s communication has always pretended to ignore what was at stake. Both because it does not publicly assume the Rumsfeld/Cebrowski strategy and because it equates the Crimea’s accession to the Russian Federation with a coup de force.

The moult of supporters of the Rumsfeld/Cebrowski strategy

After two years of fierce fighting against President Trump, the general officers of the Pentagon, almost all of whom were personally trained by Admiral Cebrowski, submitted to him under conditions. They agreed not to

  • create a terrorist state (Sunnistan or Caliphate);

  • change borders by force;

  • maintaining US troops on the battlefields of the Broader Middle East and Africa.

In exchange, they ordered their loyal prosecutor Robert Mueller, whom they had already used against Panama (1987-89), Libya (1988-92) and in the 9/11 attacks (2001), to bury his investigation into Russiagate.

Then everything unfurled as smoothly as a player piano roll.

On 27 October 2019, President Trump ordered the execution of Caliph Abu Bakr al-Baghdadi, the main military figure in the Sunni camp. Two months later, on January 3, 2020, he ordered the execution of Iranian General Qassem Soleimani, the main military figure of the Axis of Resistance.

Having thus shown that he remained the master of the game by eliminating the most symbolic personalities of both sides, claiming it, and without incurring any significant retaliation, Secretary of State Mike Pompeo revealed the final scheme on January 19 in Cairo. He plans to pursue the Rumsfeld/Cebrowski strategy no longer with the US armies, but with those of NATO, including Israel and the Arab countries.

On the 1st of February, Turkey made its break with Russia official by assassinating four FSB officers in Idleb. Then President Erdogan went to Ukraine to chant the motto of the Banderists (the Ukrainian legionnaires of the Third Reich against the Soviets) with the Ukrainian National Guard and receive the head of the International Islamist Brigade (the anti-Russian Tatars), Mustafa Djemilev (known as “Mustafa K?r?mo?lu”).

The North Atlantic Council acknowledges the deployment of NATO trainers to the Broader Middle East (Brussels, 13 February 2020).

On February 12 and 13, the Defence Ministers of the Atlantic Alliance noted the inevitable withdrawal of US forces and the forthcoming dissolution of the International Coalition Against Daesh. While stressing that they were not deploying fighting troops, they agreed to send their soldiers to train those of the Arab armies, i.e. to supervise the fighting on the ground.

NATO trainers will be deployed primarily to Tunisia, Egypt, Jordan and Iraq. For example:

Libya will be encircled in the west and east. The two rival governments of Fayez el-Sarraj -supported by Turkey, Qatar and already 5,000 jihadists from Syria via Tunisia- and Marshal Khalifa -supported by Egypt and the Emirates- will be able to kill each other forever. Germany, happy to regain the international role it has been deprived of since the Second World War, will play the gadfly by talking about peace to cover the moans of the dying.

Syria will be surrounded on all sides. Israel is already a de facto member of the Atlantic Alliance and bombs whoever it wants whenever it wants. Jordan is already NATO’s “best global partner”. King Abdullah II came to Brussels on January 14th for lengthy talks with the Secretary General of the Alliance, Jens Stoltenberg, and attended a meeting of the Atlantic Council. Israel and Jordan already have permanent offices at Alliance Headquarters. Iraq will also receive NATO trainers, although its parliament has just voted to withdraw foreign troops. Turkey is already a member of the Alliance and controls northern Lebanon through the Jamaa Islamiya . Together, they will be able to enforce the US ’Caesar’ law forbidding any company from anywhere to help in the reconstruction of this country.

Thus, the pillaging of the wider Middle East, which began in 2001, will continue. The martyred populations of this region, whose only fault is to have been divided, will continue to suffer and die en masse. The United States will keep its soldiers at home, warm and innocent, while the Europeans will have to take responsibility for the crimes of the US generals.

According to President Trump, the Alliance could change its name to NATO-Middle East (NATO-MO/NATO-ME). Its anti-Russian function would take a back seat to its strategy of destroying the non-globalized zone.

The question arises as to how Russia and China will react to this redistribution of the cards. China needs access to raw materials from the Middle East in order to develop. It should therefore oppose this Western takeover even though its military preparation is still incomplete. On the contrary, Russia and its huge territory are self-sufficient. Moscow has no material reason to fight. The Russians may even be relieved by NATO’s new orientation. It is likely, however, that, for spiritual reasons, they will not let Syria down and may support other peoples in the wider Middle East.

Tyler Durden

Sat, 02/22/2020 – 08:10


“Biggest Humanitarian Horror Story Of The 21st Century”: Up To A Million Refugees Trying To Flee Idlib

“Biggest Humanitarian Horror Story Of The 21st Century”: Up To A Million Refugees Trying To Flee Idlib

The ongoing final battle for Idlib could unleash the biggest refugee exodus the nine-year war has seen, United Nations officials are warning. 

Recent statements from the UN Office for the Coordination of Humanitarian Affairs puts the latest wave of civilian displacement since December 1 at 700,000. 

Turkey’s Erdogan is now petitioning the US and NATO to given military assistance against the rapidly advancing Syrian Army backed by Russian air power. International reports suggest up to one million internally displaced persons are now surging toward the Turkish border

Civilians fleeing Idlib, via Anadolu Agency 

The Wall Street Journal reports that “Families in northwestern Syria are trapped between the advancing Syrian military — backed by Russian airstrikes and pro-Iranian militias — and Turkey.”

The report notes Turkey has sealed the border using its military:

“The border is closed to refugees, secured by walls, trenches and guards who have shot people trying to cross without permission,” according to the WSJ.

However, the WSJ fails to mention that the US-designated terrorist organization which rules Idlib on the ground, al-Qaeda faction Hayat Tahrir al-Sham, has for years terrorized the local population and has prevented them from leaving.

Stillframe via WSJ

Estimates commonly put the total population of Idlib province at up to three million. 

Media pundits are using heart-wrenching footage of massive fleeing refugee columns to argue for Western military intervention — despite the likelihood this would actually make the crisis worse. 

So far the United States has ignored calls to intervene against Russia and the Syrian government, after for years covertly funding and supplying many of the very jihadists now occupying the province. 

But calls for US action are growing louder as the media has “rediscovered” the war in Syria after it long being out of the headlines, and as Assad has vowed to “liberate every inch” of the country.

Throughout the war, surviving al-Qaeda and ISIS-linked factions from all over Syria have poured into the northwest province as their forces have been rolled back by pro-government forces. In many cases the families of anti-Assad insurgent jihadists have ended up there too, as it’s the last so-called “rebel enclave”. 

This is why this week US coalition spokesman Col. Myles Caggins called Idlib “a magnet for terrorist groups” that are a “nuisance, a menace and a threat” to hundreds of thousands of civilians just “trying to make it through the winter.”

Thus the trapped civilian population is caught between a rock and hard place as they are under the bombs of a three-way war now involving the Syrian-Russian alliance fighting Turkey, as well as Turkish proxy jihadists as well as terror group Hayat Tahrir al-Sham.

Many civilians, including tragically many children, have also been documented as dying due to the extreme winter conditions of refugee camps. 

The WSJ has cited opposition sources to say that nearly 370 civilians have died in the fighting so far this year, in what United Nations emergency relief coordinator Mark Lowcock has described as fast becoming “the biggest humanitarian horror story of the 21st century.”

Tyler Durden

Sat, 02/22/2020 – 07:35


Will COVID-19 Lead To A Gold Standard?

Will COVID-19 Lead To A Gold Standard?

Authored by Alasdair Macleod via,

Even before the coronavirus sprang upon an unprepared China the credit cycle was tipping the world into recession. The coronavirus makes an existing situation immeasurably worse, shutting down China and disrupting global supply chains to the point where large swathes of global production simply cease.

The crisis is likely to be a wake-up call for complacent investors, who are content to buy benchmark bonds issued by bankrupt governments at wildly excessive prices. A recession turned by the coronavirus into a fathomless slump will lead to a synchronised explosion of debt issuance for which there are no genuine buyers and can only be monetised.

The adjustment to reality will be catastrophic for government finances, and their currencies. This article explains why the collapse in overpriced financial assets and fiat currencies is likely to be rapid, perhaps giving ordinary people in some jurisdictions an early prospect of a return to gold and silver as circulating money.


My last article suggested that both financial assets and currencies would collapse together. the basis of this supposition is twofold: first, central bank policies are binding together the rise in financial assets with the maintenance of value in fiat currencies. Therefore, if one falls, they both fall. And secondly there is historical precedence for this when one examines The Mississippi bubble 300 years ago.

The timing for such a collapse appears to be imminent. Every day, more and more data confirm that the global economy is sliding into recession. So far, people have been ignoring this important development, but now that it is becoming hard to ignore, no doubt the coronavirus will be blamed. This is a mistake because the factors leading to a slump, principally the end of the expansionary credit cycle combining with trade protectionism against Chinese imports by President Trump, echo developments leading up to the Wall Street crash in October 1929. If that point is accepted, then clearly the world could be on the edge of a very deep slump exacerbated but not caused by the virus.

The coronavirus has all but closed down China’s economy. It threatens to become a pandemic with serious consequences for all other national economies and their fiat currencies.

The central issue flowing from the upcoming monetary crisis centres on the rating of government debt. Almost all welfare-driven states are in debt traps. They think price inflation is under control, because their colleagues in the statistics departments tell them so, allowing them to continue to run increasing budget deficits with apparent impunity. Central banks do not realise that very soon they will be the only buyers of their governments’ debt which they will pay for with newly minted money. The irony of repeating the mistakes of Germany’s Reichsbank in 1918-23 will be completely lost to them and the path of escalating failure will only encourage the pace of printing to be accelerated.

The latest bombshell, coronavirus, is a trigger perhaps for the markets to regain control from the statist price riggers. This has to be the first step to fixing broken economies. The Panglossians in the ranks of the banking and investment communities will be rudely awakened to find themselves staring down the barrel of economic reality. Only then is there a chance that neo-Keynesian lies will be discarded by one and all, and a retreat towards sound money commence.

There is unlikely to be much time. Even without the downhill kick of coronavirus a bear market in bonds could be a devastating event on its own in a period of less than a year. Inflation of fiat currencies and interest rate suppression have been the principal agents for ramping bond prices, which tells us that their collapse will undermine currencies as well, giving complacent investors a double hit. But what are we to measure a decline of fiat currencies against? Sound money of course, gold and silver, with other stores of value, such as bitcoin, favoured by tech-savvy millennials, who will be quick to observe and understand the debauchment of fiat money. And the sooner we throw out fiat currencies, the sooner we can revert to sound money, which is gold.

Changing values for government bonds

We shall take as our primary example the US bond market, because fiat currency fans believe that other than individual time-values it is the risk-free investment yardstick. The ten-year US Treasury bond yields less than 1.6%, but its future pricing raises some serious issues.

Before addressing risk, we should note that time preference theory tells us that possession of cash is always worth more than its non-possession. The discount of that future value is not significant if you part with it to buy a ten-year UST with a view to trading it out in the next few days. But if you buy it with a view to holding it as an investment, then its discounted future value does become relevant. We cannot know what this time preference is, because it can only be realised in an unfettered market, not a market manipulated by the Fed’s actions. But with history as our guide an annualised discounted value of about two per cent for a 10-year bond can be used as a rough guide.

Figure 1, which is a long-term chart of the yield on this bond, appears to indicate there is a solid floor in the region of 1.4% represented by the horizontal line joining points at July 2012, July 2016 and August 2019. This floor is about half a per cent less than our estimated time preference value.

With its yield currently 1.56%, there appears to be very little upside in the price, and we can understand why. And if we accept government estimates of CPI-U all items index rising at 2.5% (year to January) the yield should be closer to 4% and must therefore be heavily suppressed at current levels.

That is not all. While the general level of prices is an economic concept, it is not measurable; a fact which allows the Bureau of Labour Statistics, along with all other nations who use “standardised” CPIs to effectively goal-seek an official figure for its rate of change. Two independent analysts, Chapwood Index and Shadowstats confirm each other that a more realistic rate for monetary depreciation of the US dollar is not 2%, but about 10% annually.

But for the moment, investors believe the price inflation lie because they want to. When they begin to realise the official rate is pure fiction, then one would expect government bonds to reflect a far higher redemption yield. In other words, any upside in bond prices is strictly limited while the downside is substantial. As an illustration, a 10-year bond at the current yield would have to fall from par to $47.40 to yield a more realistic gross 10% to redemption.

Clearly, the US Treasury market is badly mispriced. To estimate the likelihood of the Fed losing control of bond pricing, we should also take into account the state of the US Government’s finances, because we have not yet incorporated future currency debasement risks in our calculations. With a starting budget deficit in the current fiscal year estimated by the Congressional Budget Office at $1,027bn, a recession, let alone a slump, will make government finances considerably worse. For the years 2020-2022 the CBO expects real GDP to grow at an average 2% per annum. In the very near future, due to the coronavirus alone that is likely to be revised sharply downwards, if not by the CBO, but by market participants as further evidence of a looming slump becomes too hard to ignore.

All we need to know for now is the revision of economic prospects will be significant, based on recent evidence of recessionary trends and the potential impact of the coronavirus. The current stage of the credit cycle indicates the banks are in the process of withdrawing circulating credit, hitting SMEs particularly hard. Unemployment will rise, along with bankruptcies. And this assumes little or nothing for the effect of coronavirus.

But even if coronavirus is contained to China and East Asia, US corporations’ supply chains will cease to function, requiring both time and bank credit to relocate. Neither are available in the short term and in the current credit climate. And this is an election year, when any president’s financial and economic prudence are at their lowest ebb and his administration is most inclined to throw money at any and all economic problems.

Without a recession, other things being equal the CBO’s forecasting assumptions and the effect on government debt outstanding might be taken to be credible by gullible investors. But expressed in the economist’s jargon, not all else is equal and we can already see why these forecasts are going horribly wrong. The question then is what the effect on markets will be when these errors are realised and prices for financial assets are adjusted for reality.

The adjustment will follow the current period of complacency. US Treasury bond prices have recently risen, partly on a safe-haven basis, but certainly with an enduring belief in the state’s economic management. Equities are at or close to all-time highs on a relative value to bond yields argument, and an expectation that any recession will be shallow. Further monetary easing is expected to support the economy and maintaining the long-term prospect of a resumption to decent economic growth. Further monetary easing is seen to be bullish.

Concerns about the dollar are broadly absent. There is embedded in investor psychology Part One of Triffin’s dilemma, that concludes otherwise irresponsible fiscal policies will allow the provider of the world’s reserve currency to run deficits to increase its supply to foreigners, always hungry for scarce dollars, which they reinvest in US Treasuries. And if there is a recession, the argument goes, then there will always be a further flight to the safety of dollars and US Treasuries.

Part Two of Triffin’s dilemma ends in crisis, which broadly is what we now face. Investors are yet to take note.

Putting the effects of the coronavirus to one side for the moment, in their private capacity businessmen and their bankers are usually the first to see that economic optimism is misplaced. Businessmen are battling in deteriorating trading conditions, and bankers with their internal market intelligence and its impact on risk assessment. The authorities, particularly the Fed, who have made the mistake of believing in their own statistics, and of falling hook, line and sinker for Keynesian stimulation theories, will be next.

One can envisage the setup: having seen from its own internal information the economy is not performing as hoped, the Fed decides to call in the management of the G-SIB banks to hear their concerns, gather intelligence and reassure them they are on the case. Afterwards, we can imagine the following conversation:

Banker A. “Well, what did you make of that?”

Banker B. “The Fed must be worried to feel the need to reassure us. Things must be worse than we thought.”

Bankers A & B. (Thinking) I’ll report back to my Board that the Fed is very worried, and we must urgently reduce our loan book before our competitors do.

It has happened before. None of this would occur in an economy which is based on sound money and free markets, only susceptible to one-off disasters, such as war and the coronavirus. Instead, the US economy is managed on the basis of maintaining the crumbling confidence of consumers and the uninterrupted provision to them of credit. After many years of being bailed out, economic actors have become fully dependent on confidence being maintained and have no alternative plan in the case of its failure. But failure is now becoming evident.

The central question therefore devolves upon the future credit rating of the US Government. Assuming the Fed is losing control of the overall monetary situation and pricing returns to being set by markets, how do you rate a very large borrower with the following credit profile:

  • No surplus of income over expenses since 2001. Current trend is for further deterioration with no end in sight.

  • Net present value of future liabilities mandated by law is independently estimated (Kotlikoff) to be over $200 trillion. Current income (taxes etc.) of $3.6 trillion gives a ratio of income to future expense of well over 50 times. Tax income will almost certainly decline raising this ratio further.

  • Net interest cost at unrealistically low interest rates is 38% of last year’s deficit. A more realistic interest rate could have an immediate and catastrophic effect on finances.

  • Management seems unjustifiably optimistic that future revenue will pick up.

 In the absence of a management that agrees to radically alter course, there can only be one answer: do not lend it any money and eliminate all existing exposure. When they wake up, this should, and therefore will be, the reality facing not just the banks but all holders of US Treasuries, including foreigners without sound reasons to be invested in them.

Consequently, the switch from the current state of suppressive control to realistic pricing of government debt will be both vicious and rapid. The only foreigners likely to delay selling existing US Government debt are some governments, either under the US Government’s cosh, or not wishing to exacerbate the situation. With cross-border trade collapsing, others have no good reason to hold dollars and dollar-denominated debt, let alone extend their exposure. Furthermore, in recent years large hedge funds have made hay out of being short euros and yen and long dollars and US Treasury debt through fx swaps. Those trillion-dollar positions need to be unwound as well, which will put additional pressure on the dollar and the bond markets.

At anything close to these yields, the only buyer will be the Fed, which, as well as new issuance will have to absorb foreign sales and those of distressed hedge funds. For these reasons the monetisation of debt will almost certainly have to be on a far larger scale than following the Lehman crisis. There is no price for government debt in these circumstances, because the higher the interest rate, the worse the numbers become. Nor will there be any value in the currency used to buy it, because if the government is effectively bust its unbacked currency will also be worthless.

Other governments with substantial future welfare commitments are in a similar position. High debt to GDP ratios will become a debt trap on a combination of recession-fuelled budget deficits and realistic funding costs. In the EU and Japan, government funding costs have even further to travel from under the zero bound.

Meanwhile, there is an air of complacency with a general assumption that the next crisis will lead to yet lower rates, as has been the case with every credit crisis for the last forty years. But as Figure 1, the chart of the ten-year US Treasury above clearly showed, after a long decline in yields the world’s reserve currency benchmark yield is now struggling to go any lower. Zero or even negative dollar rates imposed by the Fed cannot alter that fact.

This is important, because central banks have tried everything that they can think of to restore economic growth and have run out of ideas. Led by the Bank for International Settlements, they are now pleading with their governments to borrow more while rates are cheap in the hope that greater budget deficits will stop the world from sliding into recession.

Other central banks are in the same boat

The debt devil tempts, and the weak follow, and debtor hell is the highest reward he can offer. The response by all G20 members to a sliding global economy will obviously be a BIS sanctioned coordinated burst of deficit spending leading to a synchronised expansion of government bond supply and fiat money to pay for it. It is proving impossible, even for a free trader like Boris Johnson, to resist the political imperative to build new hospitals, train thousands of new nurses and policemen and throw money at a new, wildly over-budget railway connecting the North of England to London. Which, incidentally, will probably empty the North of northerners seeking their fortunes in London, instead of spreading London’s wealth northwards. Most of this spending is classified as investment, but the fact is that without a commensurate increase in personal savings it is inflationary spending.

Perhaps the dollar will not be the first to slide, given the shutting down of China’s economy by the coronavirus. The yuan, surely, will be the first to suffer in the foreign exchanges, a process that appears to be starting. But this might galvanise the People’s Bank into positive action to stabilise the currency, which it can do by tying it to gold. In doing so, it would do humanity a favour by leading the way early towards a sound money solution to the unfolding financial and economic crisis, which with the coronavirus threatens to be potentially much worse than anything recorded in modern times.

The reason the dollar is likely to be next to slide is the exposure foreigners have to it, the equivalent of more than one year’s GDP. It is comprised of about $4 trillion in bank deposits, and $19.4 trillion of US securities, according to the last available TIC figures.

For the short-term, perhaps China’s imploding economy, taking Germany’s and others with it, encourages the investor’s myth that the dollar is a safe haven. The trade-weighted index has strengthened in recent weeks on the back of both the yuan and euro weakening, and US Treasury yields have declined as well. It is a situation unlikely to survive deteriorating economic conditions for much longer.

In addition to foreign sellers, speculative positions of perhaps several trillion dollars in currency swaps held by large hedge funds will have to be reversed if and when the dollar is undermined by foreign selling. That would lead to temporary buying of euros and yen. When that short-term effect is over, presumably these currencies will then suffer the combination of collapsing values for government bonds and stockmarket values at the same time as the currencies themselves fall measured against gold, silver and bitcoin.

Sound money alternatives signal the fiat crisis

An unfolding crisis from the combined effects of the turn of the credit cycle and the coronavirus can be expected to hit individual fiat currencies both sequentially and generally. This article has made some suggestions over a likely sequence: yuan, dollar, euro and yen. But how things actually unfold is for the moment a matter of speculation. From the turmoil ahead of us, the clear winners are likely to be gold and silver, and supply-constrained hedges such as bitcoin.

In real terms, gold is still under-priced relative to the dollar, based on their relative quantities. This is illustrated in Figure 2, which is of gold adjusted by the increase in the fiat money quantity.

This chart should contradict any thoughts that the recent increase in the price of gold might be overdone. The truth is that the devastating bear market in the gold price following the spike in 1980 has almost eliminated gold from investment portfolios in favour of inflation beneficiaries. If that long period is coming to an end, investors will attempt to switch their allocations from inflation beneficiaries and bonds with rising yields in favour of inflation protection. For this reason, the rise in the dollar gold price could be very dramatic, particularly when a further acceleration of global monetary debasement is taken into account. And this is before we see official CPI measures move much above their 2% goal-sought targets.

For both gold and silver, we can expect initial moves reflecting their eventual replacement of failing fiat as the trusted money in circulation. In the case of silver, it is worth mentioning that its original price relationship under bimetallic standards only become discarded when silver was generally dropped as money in favour of gold alone in the 1870s. When fiat fails, it is likely that silver will regain a secondary monetary role, and its remonetisation will have a substantial impact on its purchasing power. From a current gold/silver ratio of 87 times, a move towards the old ratio of approximately 15 times means that for speculators buying into the sound money argument, silver is likely to be the catch-up form of sound money.


During previous currency hiatuses, the problem of failing fiat money has always been evidenced in the rising prices of precious metals. Since the last financial crisis, there has arisen a new category of store of value in thousands of different cryptocurrencies. While most of them appear to be akin to quack monetary remedies, the first cryptocurrency to be devised with its innovative blockchain technology is sufficiently understood by a growing band of followers to be firmly established as a form of money.

Bitcoin is currently not ideally suited as a means of settling transactions, or for making value comparisons between one good against another. Settlements are severely restricted relative to the superior scalability offered by credit and debit cards. Where bitcoin scores is as a store of value.

In learning about bitcoin and why it works, a new generation of tech-savvy millennials have become aware of the way their governments debauch their currencies as a means of secretly transferring wealth from them as individuals to the state, the banks, and their favoured borrowers. Bitcoin supporters are an intelligent, educated mob angry at their governments’ abuse of their fiat currencies.

In all populations, there is therefore a marginally greater recognition of the fragility of state currencies, and therefore the abandonment of them by the general public is likely to develop over a shorter time period than experience of previous instances would suggest.


The straws in the wind listed in this article point to a more rapid collapse of financial asset values and currencies than generally thought by sound money theorists who have long anticipated this outcome. Doubts about the timing have been settled to a degree by the sudden development of the coronavirus, which has already imploded China’s economy, disrupting global supply chains and the provision of consumer goods.

To the extent the coronavirus has had a hand in the forthcoming destruction of fiat currencies and Keynesian mythology, we can take some comfort that it will have brought forward the eventual reintroduction of gold and gold standards. The path is not straightforward. There will be destruction of financial asset values and the economic consequences for ordinary people will be dire. We can expect widespread civil unrest and political instability.

Western governments and their advisers are not familiar with the arguments in favour of gold, having spent half a century dismissing it. This fact favours the new economies which have not discarded gold, which include Russia, China, and many other Asian nations. Some governments, such as India, might attempt to confiscate their citizens’ gold, but in general the collapse of western economic fallacies could lead to Asia’s economic superiority.

It will be a rough ride for the rest of us.

Tyler Durden

Sat, 02/22/2020 – 07:00