washingtonpost--2020-03-23--Analysis | SoftBank May Erode Alibaba Stake in Fire Sale

Make no mistake , this is a fire sale .
Son ’ s most likely source of cash over the next few years was supposed to be his $ 100 billion Vision Fund , but with the Covid-19-spurred global stock meltdown adding to his ill-advised investment in The We Co. ( better known as WeWork ) , that spigot won ’ t be flowing any time soon .
Meanwhile , activist shareholder Elliott Management Co. is pushing the SoftBank boss to buy back shares , and there are at least 1 trillion yen in bond redemptions between now and the @ @ @ @ @ @ @ trauma worse : Shares of Alibaba are off 21 % .
SoftBank ’ s 25.2 % stake in the Chinese e-commerce giant is now worth at least $ 33 billion less than in mid-January , highlighting the cold reality that an upward trajectory for Son ’ s most beloved investment isn ’ t assured .
Not only is Alibaba SoftBank ’ s largest asset — 54 % of holdings at the end of December — it ’ s a chief source of both net income and cash flow .
The stake in Alibaba @ @ @ @ @ @ @ ’ s “ for sale ” list .
Son has had trouble making successful deals lately , so it undermines his reputation to see the crown jewel also lose its shine .
Yet it ’ s partly because of the details of Alibaba ’ s contributions that SoftBank is vulnerable and those shares need to be sold .
Almost half of SoftBank ’ s pre-tax net income for the nine months to Dec. 31 were pure paper profits tied to Alibaba .
A quarter came from a revaluation of its stake when Alibaba @ @ @ @ @ @ @ Another portion came when Alibaba took equity in its fintech unit , Ant Small and Micro Financial Services Group Co .
If not for these one-time gains , SoftBank ’ s pre-tax profit would have dropped 34 % .
While Son proudly notes that Alibaba enjoys an A+ credit rating and churned out 900 billion yen ( $ 8.2 billion ) in free cash flow in the second half of last year , none of that money went to SoftBank , the single-biggest shareholder .
Alibaba doesn ’ t pay dividends .
To @ @ @ @ @ @ @ most valuable company , SoftBank has been forced to take out margin loans with Alibaba shares as collateral .
In the last three quarters of 2019 , it boosted borrowing against Alibaba shares by $ 4.4 billion , or an additional 83 % .
That takes the total to over 1 trillion yen .
Another 179 billion yen came from settling a derivative contract tied to that stake .
SoftBank has managed to rustle up more cash by selling stakes in some companies to the Vision Fund , which it manages .
But @ @ @ @ @ @ @ of cash flow has been to continually tap debt markets with its own assets as collateral .
With more than $ 100 billion of Alibaba shares on hand , it ’ s possible that SoftBank will try once again to tap this vein .
But it ’ s also likely that wary creditors will already be gun shy about taking on more equity as collateral as global markets post some of their worst declines of the last few decades .
An interesting twist is that SoftBank ’ s loans against Alibaba shares are @ @ @ @ @ @ @ pay back the debt or the value of the pledged shares falls ( by an amount not publicly specified ) , then creditors have an early settlement clause that could see them take ownership .
If push comes to shove , the message from creditors will be : If you don ’ t sell Alibaba shares , then we will .
But there ’ s a complication .
According to its Hong Kong listing prospectus , Alibaba has the right to defer any attempts by SoftBank to sell its stake by up to @ @ @ @ @ @ @ directors determines in good faith that such registration and offering would be seriously detrimental to us and our shareholders.
” With the global economy plunging toward recession , it ’ s not a stretch to think that unloading a chunk of shares would be seen as bad for Alibaba .
That makes for a high-priced game of hot potato .
Creditors won ’ t be keen to take on more SoftBank debt , and Alibaba ’ s board surely won ’ t want to approve the sale of more shares , especially with @ @ @ @ @ @ @ listing price .
If Son is to pull off this cash-raising plan , he ’ s going to need to swallow his pride and accept letting go of at least some of his Alibaba stake .
Certainly he , and his investors , would have preferred doing so when shares were trading 20 % higher .
But better to start now than get caught another 20 % lower .


washingtonpost--2020-03-23--Analysis | Emirates Is Grounded, and Global Aviation With It

The shutdown of that vast network is a hammer-blow not just for the industry but for people around the world .
There ’ s a reason so many airlines are ( like Emirates ) state-owned , or have special rights and duties to their home countries written into their constitutions .
They aren ’ t just a leisure service , they ’ re a piece of vital national and international infrastructure that can provide an airlift service in an emergency .
Emirates ’ initial announcement of a complete suspension of flights Sunday was subsequently updated to say that some destinations @ @ @ @ @ @ @ from governments and customers to support the repatriation of travellers.
” Businesses that thrive on bustling cross-border traffic are inevitably going to struggle in current conditions .
Cathay Pacific Airways Ltd. , another carrier that , like Emirates , has no domestic aviation market , last week announced it was cutting 96 % of capacity in April and May , which is as close as you can get to shutting down .
Qantas Airways Ltd. is also ending international flights and Emirates ’ local rival Etihad Airways PJSC has made drastic cuts to @ @ @ @ @ @ @ something like this before .
Pan Am went bankrupt amid the collapse in air travel that accompanied the 1991 Gulf War ; its competitor Trans World Airlines Inc. entered the first of many Chapter 11 processes around the same time .
Another wave of bankruptcies and rescue takeovers followed after the Sept. 11 attacks , and again after the 2008 financial crisis .
More than a decade on from that , we ’ re probably overdue for another shakeout .
That certainly looks like what we ’ re going to get .
“ @ @ @ @ @ @ @ be bankrupt by the end of May at current rates of cash burn , according to consultants CAPA Centre for Aviation .
The industry needs about $ 200 billion in bailout money if it ’ s to survive , according to the International Air Transport Association , the largest group representing airlines .
Emirates has some serious weaknesses as it approaches this perfect storm .
Dubai ’ s status as the preeminent hub in the global network of transfer passengers , and its fleet of capacious twin-aisle jets , are as much a @ @ @ @ @ @ @ globalization as Pan Am ’ s fleet of gas-guzzling early-model 747s were a product of the era before the 1973 oil crisis .
On an immediate level , that means it lacks even the meager domestic aviation cashflows that rivals in the U.S. , China and elsewhere can fall back on .
In the longer term , there ’ s the risk that Covid-19 and the Trump-driven trade wars that preceded it raise drawbridges across the world , leaving behind a dark mentality of xenophobia as gates are closed to outsiders .
In @ @ @ @ @ @ @ catalog-tinged vision of a multicultural world shaking hands at Dubai airport looks as outdated as , well , shaking hands .
Even if things return to a semblance of normalcy at some point , Emirates ’ golden years are behind it – a fact that neatly coincides with the upcoming retirement of Tim Clark , who led the airline since its inception .
Rivals with bigger domestic markets have already been looking to use longer-haul 787s and A350s to skip past hub airports like Dubai altogether .
The A320neo and the 737 MAX @ @ @ @ @ @ @ woes , will also bite off pieces of medium-haul traffic with budget carrier-style prices , undermining key routes into Europe and South Asia .
Emirates still has some advantages in facing the coming conflagration .
Unlike Etihad and Qatar Airways , it has never reported a loss in financial reports dating back to 1989 .
That ’ s a fairly extraordinary result for an airline that ’ s been around for so long — although there ’ s still a week still to go on its current financial year .
Most importantly , @ @ @ @ @ @ @ to are Dubai ’ s ruling Al Maktoum family .
For decades , they ’ ve regarded the carrier as a crucial element of their oil-poor emirate ’ s strategy for a long-term economic future .
With crude prices currently south of $ 30 and Gulf monarchies edging alarmingly close to burning through their own petrocash piles , that bet looks as sound as it ’ s ever been .
If aviation is about to be crippled by a virus-driven resurgence of nationalism , it ’ s the carriers most closely bound up @ @ @ @ @ @ @ chance of survival .

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washingtonpost--2020-03-23--Stay-Home Decrees Crush Small Business, Erasing Millions of Jobs

Large swathes of the U.S. are under confinement orders that are becoming stricter by the day as authorities try to contain the coronavirus outbreak .
Among the hardest hit are clothing shops and other mom-and-pop stores that are the engine of the economy .
The impact is hard to overstate .
The restaurant industry alone is set to lose 7.4 million jobs , consulting firm Challenger , Gray & Christmas Inc. estimates .
The shutdowns across the country could send the jobless rate spiraling to 30 % in the second quarter , Federal Reserve Bank of St. Louis President James @ @ @ @ @ @ @ the way .
It ’ s just not fast and sweeping enough for many .
Congress has yet to pass a rescue package that could include about $ 350 billion in loans for small businesses that would convert into grants if they retain most of their workforce .
Those companies can apply for low-interest disaster loans from the Small Business Administration .
The catch : it can take as long as 21 days to process an application .
Once approved , it might take another week to go through , the agency says @ @ @ @ @ @ @ , it ’ s been a constant stream of emails and phone calls to everyone in the office , ” Robert H. Nelson , the SBA ’ s Massachusetts district director , said Thursday .
“ Are we in uncharted waters ?
Maybe so , ” said Bill Koontz , an agency spokesman in Sacramento , California .
Industry advocates say loans aren ’ t enough , especially for the smallest outfits .
An instant cash injection is the only way to save them from failing , according to the Small Business Majority @ @ @ @ @ @ @ network of more than 58,000 small-business owners nationally , is calling for $ 500 billion of support split equally between cash grants and low-interest loans .
Julie Verratti , co-founder of Denizens Brewing in Silver Spring , Maryland , had to furlough 30 employees a few days ago .
While her company may be able to operate for the time being , others won ’ t .
She ’ s urging Congress to take immediate action by calling a temporary halt to rent , mortgage and commercial-debt payments .
The SBA may be @ @ @ @ @ @ @ small businesses during this crisis .
Banks aren ’ t set up to make fast working-capital loans , said Kurt Chilcott , chief executive of San Diego-based SBA lender CDC Small Business Finance .
Such loans would be too risky , especially when no one knows when businesses will rebound , and federal regulators would need to relax all kinds of rules , he said .
In some cases , emergency funds set up by states could provide some “ bridge ” funding until the company gets its disaster loan from the SBA @ @ @ @ @ @ @ program , for example , offers as much as $ 50,000 generally , or $ 100,000 in certain cases .
However , the mix of state and federal money probably won ’ t cover the overwhelming need .
Small businesses employ almost half of the private workforce in the U.S. , and contributed about two-thirds of net employment gains in the U.S. since 2011 , according to the SBA .
The tiniest firms , of 20 or fewer people , account for about 20 million employees .
Their collapse under the current stay-at-home @ @ @ @ @ @ @ In the U.S. , many are seeking creative ways to generate sales .
Kimberly Anderson , who had to shut down her fashion boutique in Philadelphia a week ago , took pictures of her inventory and reached out to clients via Facebook , Instagram and text messages .
She contacted designers to try to get light spring looks for her customers .
“ I ’ ve been so overwhelmed , ” Anderson said .
“ I know there ’ s a list of things I have to do , like looking into funding @ @ @ @ @ @ @ is offering right now , if anything.
” In Atlanta , Amy Wilson closed her Zone of Light Studio last Monday .
The eight-year-old business , which offers after-school programs for children and event space for weddings and parties , generated $ 300,000 in revenue last year .
It is now taking in nothing , while monthly bills for rent , insurance and utilities total $ 11,000 .
“ I have a little bit saved up , but that will last two or three months , ” Wilson said .
“ If it @ @ @ @ @ @ @ $ 70,000 , but I will be OK .
If it goes through July , it will be awful for me .
I will be in big trouble.
” For Choi , the owner of the party-equipment business in the Bay Area , the week has been tough .
After initially being told her county didn ’ t qualify for a disaster loan , she was able to apply .
A few days later , she was told her loan was moving forward and could possibly close in a few weeks .


washingtonpost--2020-03-23--Analysis | Why Virus Woes Have Put Bond ETFs Under a Microscope

Mutual funds allow small investors to pool their money and benefit from the expertise of professional money managers .
Index funds and traditional ETFs take a different approach .
Instead of hiring managers to actively buy and sell stocks , they seek to replicate the performance of a basket of securities ( although a small sliver of the ETF market is actively managed ) .
That allows investors who want some emerging-market or small-cap stocks in their portfolio to avoid the cost , hassle or risk of picking individual companies .
Index funds try to replicate the performance of a @ @ @ @ @ @ @ by buying all the stocks that comprise the index .
In an ETF , investors are buying a share in a bundle of the same securities , and that ETF share can be bought and sold much like a share of stock .
The ETFs themselves engage in less trading of assets , because the underlying securities don ’ t have to be bought or sold when a share changes hands .
That smaller turnover means a lower tax bill .
ETFs currently have $ 3.7 trillion in assets , down from their @ @ @ @ @ @ @ February , as investors have pared back holdings in the flight to cash over fears of the economic damage caused by the coronavirus pandemic .
Equity funds hold about $ 2.49 trillion , while those focused on bonds contain $ 770 billion .
The most popular ETFs are the simplest , those that track the broad stock market .
But these days ETFs come in thousands of flavors and are popular with hedge funds and institutional investors as well as moms and pops .
An increasing number track less-traded markets such as junk @ @ @ @ @ @ @ to enhance returns , or laser-in on niche segments of the investable universe .
That has made regulators consider whether the more exotic versions need to be reined in lest they damage investors and markets alike .
Critics and regulators have long voiced concerns that fixed-income ETFs , whose shares are much more liquid than the assets the funds hold , may exacerbate a sell-off as investors scramble to redeem their holdings during periods of market stress.The likes of Mohamed El-Erian of Allianz SE and Scott Minerd at Guggenheim Partners have suggested they @ @ @ @ @ @ @ in illiquid credit markets where they have an outsized trading share .
After finding that fixed-income ETFs fueled volatile trading during August 2015 ’ s stock-market rout , regulators have long planned to closely watch the funds ’ activity and performance during the next downturn .
That time is now here .
Bond ETFs have exhibited signs of liquidity stress , with share prices trading at persistent and deep discounts to the value of the underlying assets .
The historical volatility plaguing American bond markets has created unprecedented dislocations in the ETFs that @ @ @ @ @ @ @ makers who normally step in to repair price inconsistencies .
In theory , the price of all of an ETF ’ s shares should be exactly the same as the value of its net assets .
In practice , it ’ s not uncommon for what ’ s known as the Net Asset Value ( or NAV ) to drop below the share prices , but such small discrepancies are usually quickly wiped away .
In normal market environments , such a gap is an arbitrage opportunity for middlemen known as authorized participants @ @ @ @ @ @ @ of the ETF as its price drops and redeem these shares with the issuer in return for the underlying bonds .
The authorized participant will then sell those securities to capture a relatively risk-free profit .
By reducing the supply of ETF shares , the fund ’ s price typically returns to tracking the fund ’ s net asset value .
As the coronavirus outbreak unleashes historical turbulence in financial markets and liquidity dries up , ETFs spanning the bond spectrum are trading at steep discounts .
Some of the hardest hit are @ @ @ @ @ @ @ ETF , or LQD , and iShares 20+ Year Treasury Bond , ticker TLT .
There are worries that investors scramble to redeem their holdings will overwhelm the managers , or the traders that channel bonds into and out of the funds .
As credit spreads blow out now and investors rush for the exit , fixed-income ETFs are being put to the test .
Some fear that investors rushing to redeem ETFs will exacerbate a sell-off in the underlying market , affecting anyone with holdings in it .
ETF investors could lose @ @ @ @ @ @ @ more , further worsening the situation .
Even so , while some ETFs have struggled , they ’ re holding up overall .
A major reason trading remains orderly is that virtually all of the action is happening in the secondary market , between buyers and sellers of ETF shares .
Trading in ETF shares , which acts as a liquidity valve in times of stress , has been soaring versus primary market activity , according to Bloomberg Intelligence .
The fact that the ETFs are trading at modest discounts to their net @ @ @ @ @ @ @ point .
In a relatively illiquid market , the price of the fund may be the most accurate one the market has got .


washingtonpost--2020-03-23--Analysis | Streaming Apps Suddenly Face the Coronavirus Test

Because this moment is so unprecedented , it ’ s hard to foresee the economic impact , other than that it will be painful , a pain that will be felt most severely by hourly workers .
That can make conversations about what ’ s on Netflix feel tone-deaf .
And still , it ’ s a very big part of how our consumption habits will change in the ensuing weeks and months .
It doesn ’ t take a survey to know that when people are stuck home , TV viewership will go up .
The closest Nielsen can @ @ @ @ @ @ @ look at the aftermath of a natural disaster such as Hurricane Harvey , which devastated the Houston area in August 2017 .
It found that total television usage surged 56 % in that market after that storm .
Likewise , when a January 2016 blizzard dumped more than two feet of snow on New York , usage rose 45 % and produced a 61 % increase in streaming via TV .
At the same time , the surge in demand may expose more of the industry ’ s problems .
Sports programming is @ @ @ @ @ @ @ traditional cable TV , but for the moment there aren ’ t any live sports to watch .
The NBA , NHL , MLB and other leagues have all postponed or canceled games because of the virus ( and so ESPN is having to get creative ) .
The pandemic may in turn drive more households to ditch the $ 100-plus cable bundle and switch to streaming-TV services such as Disney+ , Apple TV+ and ( soon ) HBO Max .
But as much as these services brag about the thousands of hours @ @ @ @ @ @ @ which sounds like a lot , the truth is that people may grow bored with any of these apps relatively quickly when forced to spend so much extra time with one .
All of the media giants have been spending like mad during the last year on content to stock their new streaming apps , including expensive rights deals for access to re-runs of old favorites such as “ Seinfeld ” and “ Friends.
” That there isn ’ t enough to watch will be more of a feeling than a reality , @ @ @ @ @ @ @ with the new TV ecosystems that are being created independent of one another .
In my own 11 days of isolation , much of it under the weather , I ’ ve run out of Netflix titles — not literally , but after endless scrolling and previewing , there doesn ’ t seem to be anything left that I want to see or can force myself to sit through .
More content is being added to Netflix all the time , and normally that ’ s enough , but the five-day wait for @ @ @ @ @ @ @ suddenly feels like torture .
Disney+ subscribers who signed up for and finished the first season of “ The Mandalorian ” are probably getting antsy , too , given that there ’ s not much else like it on the service .
It announced Friday , though , that Pixar ’ s “ Onward ” was made available early on demand for $ 20 and that it will be added to the Disney+ library April 3 .
Meanwhile , the outbreak has forced studios to halt production of upcoming programs .
Comcast ’ @ @ @ @ @ @ @ releases “ The Invisible Man , ” “ Emma ” and “ The Hunt ” available to rent on demand for $ 20 each since theaters are closed or closing .
Those who can afford Amazon Prime at $ 119 a year have access to another bucket of content , and the free shipping may come in handy in the online hunt for toilet paper and antibacterial wipes .
But in a recession , the already tense pricing dynamics of the streaming industry will be put to the test .
In theory , @ @ @ @ @ @ @ cable .
The problem , as ever , is that everyone ’ s favorite content is being spread out behind different paywalls , and that won ’ t be much help for families feeling financial strain .
Those facing the prospect of lost jobs or lost work hours won ’ t have the luxury of subscribing to everything .
It could be that the extra time to binge on content leads to higher churn than the companies were previously expecting .
Perhaps it increases the appeal of free , ad-supported apps such as @ @ @ @ @ @ @ ) , Tubi ( which just sold to Fox Corp. ) and Comcast ’ s soon-to-come Peacock .
Was it a mistake for other streaming services not to pursue free , ad-supported viewing options given that there ’ s now an even bigger captive audience ?
Or is some advertiser demand drying up because people will be doing far less shopping while trapped indoors on tighter budgets ?
For now , there are more questions than answers .
But consumer behavior will be interesting to observe as the streaming experiment meets the social-distancing @ @ @ @ @ @ @ to wipe down the remote every so often .


washingtonpost--2020-03-23--Virus Hurting Business at Three-Fourths of Small U.S. Companies

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washingtonpost--2020-03-23--Analysis | Will Coronavirus Take Out the 2020 Tokyo Olympics?

It ’ s happened before .
Canceling the Tokyo Games is the least appealing option for organizers , competitors and sponsors , but could come about if the virus showed no sign of abating .
It would be the first scrapping of an Olympics for a reason other than a war : The summer games were canceled in 1916 , 1940 and 1944 as were the winter games in 1940 and 1944 .
Japan has spent an estimated $ 26 billion on preparations and cancellation could knock about 1.4 % from gross domestic product , Nikko Securities Inc. Chief Economist @ @ @ @ @ @ @ note .
A large part of the economic stimulus may have already been delivered by the massive infrastructure spending laid out to get Tokyo ready for the games .
Several , such as going ahead but banning spectators .
The World Health Organization and sports federations have discussed the possibility , the New York Times reported .
The Tokyo Olympic Committee said it has already sold 4.48 million of its initial 7.8 million tickets to residents of Japan .
Keeping fans out in this way has never happened at an Olympics , but @ @ @ @ @ @ @ wrestling have in recent weeks gone ahead “ behind closed doors.
” This would probably be the best option if they can ’ t be held as planned in July and a spectator-free event is unfeasible .
The three most likely dates would until around October of this year , 2021 or 2022 .
At this point , there are no signs that the pandemic will end by July and prevention measures put in place in many parts of the globe have already wrecked training schedules for athletes .
A delay of a @ @ @ @ @ @ @ likely option but it would also mean that some athletes who qualified for Tokyo 2020 will miss out on the games because they may not be make the cut a year or two later .
The July start had raised worries about the summer heat in Tokyo and prompted the IOC to move the marathon and race walking events to the northern city of Sapporo , which isn ’ t as hot or humid .
The last time Tokyo hosted in 1964 , the games were held in the cooler month of October @ @ @ @ @ @ @ to watch the action , some athletes who have played in empty venues said the silence deflates their competitive spirit .
It remains to be seen whether viewers would find it off-putting , a huge concern for media groups such as U.S. network NBC .
It has already sold $ 1.25 billion in ads , more than any other games it has covered .
Just a few months ago , Japan showed it can fill stadiums for major sporting events when it hosted the 2019 Rugby World Cup , which saw a record @ @ @ @ @ @ @ sold .
But in-person fans are a diminishing source of revenue .
When Atlanta hosted the 1996 summer games , tickets accounted for 25 % of the budget .
In Tokyo , they are half that .
Highly unlikely , since there are few major cities , if any , free of risk from the virus .
And even if a willing host were found , the bill to ready venues , security and medical infrastructure would be astronomical , and the logistical challenge overwhelming .
The host committee has already sold some @ @ @ @ @ @ @ companies .
( Remember too that the Paralympics are held a month after the Olympics in the same host city . )
It has happened before , but there was ample time for a handover and that was for a smaller-scale winter Olympics : The 1976 games were moved to Innsbruck , Austria from Denver , Colorado after locals protested spiraling costs .


washingtonpost--2020-03-19--Trump Says U.S. Bailouts May Require Equity Stakes, Buyback Bans

He answered “ I do , I really do ” when asked whether he supports the U.S. taking equity stakes in companies that receive assistance , an idea that his top economic adviser Larry Kudlow publicly suggested on Wednesday .
Asked if he would ban buybacks and bonuses as a condition of a stimulus bill under development in Congress , Trump said : “ It takes many , many people -- in this case -- to tango .
Conditions like that would be O.K .
with me.
” Trump later hinted that some companies now asking for the government ’ @ @ @ @ @ @ @ , suggesting he ’ d be less willing to help them .
Trump has been criticized for a wave of buybacks that followed his 2017 corporate income tax cut .
“ People are coming in for money , in some cases no fault of their own but in some cases where they did certain things over the course of the years including buying back stock , ” Trump said .
“ You know , they bought back stock and they paid a high price for it , as it turned out .
Maybe @ @ @ @ @ @ @ differently than somebody that didn ’ t , than somebody that built plants all over the United States -- of which there were plenty of them too.
” Some of Trump ’ s Republican allies in Congress have begun to object to plans to provide grants to companies as part of the stimulus , characterizing them as corporate bailouts .
Trump said he aims to help workers , not companies .
“ We don ’ t want to pick winners and losers , ” he said .
“ We want everybody to benefit.
@ @ @ @ @ @ @ the airline , cruise ship and hotel industries .
The president ’ s company , the Trump Organization , operates hotels in Washington , D.C , New York , Las Vegas and elsewhere .
“ Where jobs are created , you don ’ t want to lose industries like this .
These are incredible industries , you can ’ t lose them .
So we ’ ll be focused on many industries , ” he said .
For more articles like this , please visit us at bloomberg.com


washingtonpost--2020-03-23--Analysis | 5G Won’t Help Rural Americans Shelter in Place

Only 63 % of rural Americans have a broadband internet connection at home , compared with 75 % of Americans overall , according to a survey conducted by the Pew Research Center early last year .
That gap is only a slight improvement on the 16-percentage-point difference that existed 13 years ago .
In a separate Pew study in 2018 , about a quarter of rural respondents cited access to high-speed internet as a major problem , a far higher proportion than people living in urban areas or suburbs .
The digital divide tends to be talked about in terms @ @ @ @ @ @ @ it absolutely is .
But in rural communities , frustration over internet access is also notably shared across different income and education levels , Pew has found .
So even as parts of the country are given no choice but to work from home , many that should have the ability don ’ t .
In a similar vein , suburban kids using iPads to attend digital classes or learn from online tutors won ’ t have the same interruption to their education as children in rural or less well-off areas , where @ @ @ @ @ @ @ placed on parents .
There ’ s also a problem within the problem : Nobody really knows exactly how many rural Americans are without high-speed internet , leaving it to guesswork through surveys .
That ’ s due to a lack of useful coverage maps showing what areas have broadband access .
During a panel last July about rural broadband challenges , Eric Koch , a Republican state senator from Indiana , said that when a broadband provider “ serves ” an area , that might mean one customer or a thousand .
@ @ @ @ @ @ @ what “ access ” even means .
The Federal Communications Commission measures it in terms of those with minimum internet download speeds of 25 megabits per second and at least 3 megabits per second for uploads .
About 21 million Americans couldn ’ t access such connections as of 2017 , the latest data available from the FCC .
Faster speeds of 100 Mbps — which is what households using multiple devices really need — were deployed to only 58.6 % of the rural population , compared with 88.5 % of the U.S. @ @ @ @ @ @ @ more maddening is that the country ’ s broadband problem has been willfully overshadowed by the fascination of late with 5G , the faster next generation of wireless networks that is being rolled out by carriers such as Verizon Communications Inc. , AT & T Inc. and T-Mobile US Inc. FCC Chairman Aji Pai was giddy in throwing his support behind T-Mobile ’ s takeover of Sprint Corp. last year , citing the 5G possibilities and asking for weak concessions in return .
The deal brings together the two low-cost carriers in an @ @ @ @ @ @ @ trying to regain pricing power over consumers .
“ Carriers and the FCC are so obsessed with the next thing ( 5G ) , they ’ ve not ensured that everyone who needs access to the network can get it or afford it , ” Gigi Sohn , a distinguished fellow with the Georgetown Institute for Technology Law & Policy and a former FCC official , said in an email Thursday .
Even with 5G , more densely populated areas are being prioritized , where there are more structures upon which to affix @ @ @ @ @ @ @ towers .
Delivering 5G to smaller towns is more costly and cumbersome relative to the amount of customers that would be served , which means there ’ s little incentive to build there .
The FCC will say there has been much progress made in closing the digital divide and that lots more work is being done .
But it hasn ’ t been happening nearly quickly enough , and now a pandemic has paralyzed the country .
Where you live could determine how you come out on the other side of it @


washingtonpost--2020-03-11--Analysis | Fancy Sneakers Won’t Top Shopping Lists Anytime Soon

Adidas , which also makes Kanye West ’ s Yeezy line and Beyonce ’ s Ivy Park collection , said first-quarter revenue in Greater China would be between 800 million euros ( $ 906 million ) and 1 billion euros lower than in 2019 because of the effect of the outbreak .
It expects operating profit in the region to decline by as much as 500 million euros in the quarter .
This reflects Chinese store closures and a drop in visits to locations that were open .
China accounted for 23 % of Adidas ’ s sales in 2019 @ @ @ @ @ @ @ picking back up in China since the end of February , with stores and factories reopening , the danger is that there is more pain to come as the virus spreads .
Just how bad it could get , nobody can say for sure .
Underlining the threat , rival Puma SE said it wasn ’ t possible to quantify the coronavirus ’ s effect on its full-year results .
Consequently , it retracted its Feb. 19 outlook that was based on expectations for a quick recovery from the virus .
From Adidas @ @ @ @ @ @ @ declining in its stores in Japan and South Korea , which will hurt first-quarter sales by 100 million euros .
Kasper Rorsted , Adidas ’ s chief executive officer , acknowledged that sneakers and sportswear won ’ t be high on people ’ s shopping lists as they emerge from quarantine .
But he argued that the company is on solid footing to weather the crisis .
The company is forecasting an increase in group sales excluding currency movements of between 6 % and 8 % for 2020 , with the operating margin @ @ @ @ @ @ @ 2019 to between 11.5 % and 11.8 % .
But that does not reflect any impact from the coronavirus outbreak .
With the virus spreading to the U.S. and Europe , there is a serious risk that consumers there also take fright .
Footfall across the market is already suffering on both sides of the Atlantic .
If the illness continues to spread , shoppers ’ reluctance to hit the mall will only increase .
Governments moving to stem large gatherings , employees increasingly working from home and plunging stock markets could all @ @ @ @ @ @ @ , avoiding the gym for fear of infection means less need for new workout gear .
Meanwhile , the risk of sporting events such as the UEFA Euro 2020 soccer tournament and the Olympic Games , is particularly severe for Adidas .
If these events were to be canceled , it would hurt sales by about 50 million to 70 million euros , it said , with the bigger impact from Euro 2020 .
Shares in Adidas fell as much as 8.8 % on Wednesday .
Even without the warning on the coronavirus @ @ @ @ @ @ @ about the fourth-quarter performance from 2019 .
While sales excluding currency movements rose 10 % in the final three months of the year , the gross margin declined by 3.2 percentage points , hurt by adverse currency movements and a less favorable mix of products sold .
But right now , the illness is the focus of investors ’ attention .
Rorsted likens the situation to a football match .
The company had a great first half .
The break has been longer than expected , but the second half will also come @ @ @ @ @ @ @ ’ t know when normal play will resume , and what else might transpire before the kick-off .


washingtonpost--2020-03-11--Analysis | Understanding Putin’s Moves to Keep His Hold on Power

Yes and no .
Putin has been maneuvering to stay in power but had repeatedly ruled out repealing presidential term limits ( an approach taken by Chinese leader Xi Jinping in 2018 ) .
A surprise series of constitutional amendments in his Jan. 15 state-of-the-nation speech appeared intended to allow a post-presidential Putin to keep control without letting him skirt the ban on serving more than two consecutive terms .
Then on March 10 , Valentina Tereshkova , the first woman in space and a lawmaker for the ruling United Russia party , made a seemingly scripted appeal to reset @ @ @ @ @ @ @ amendments in the lower house of parliament .
An hour later , Putin made an unscheduled address to the chamber and backed the plan provided Russia ’ s Constitutional Court -- packed with the four-term president ’ s nominees -- declared it to be legal .
The lower house gave final approval to the constitutional changes including the last-minute addition on March 11 .
Putin ’ s advisers had floated a number of ideas for months that were aimed at allowing him to maintain his unrivaled authority after the end of his presidency @ @ @ @ @ @ @ another post , such as heading the State Council , an advisory body that Putin established in 2000 and currently leads .
Another option was to try to merge Russia and its much smaller neighbor Belarus so that Putin could lead the new unified state and thereby sidestep term limits .
The plans were either too difficult to pull off or lacked sufficient guarantees of Putin ’ s continued supremacy , and some hard-liners lobbied instead for him to stay on as president indefinitely .
The amendments were originally billed as a way @ @ @ @ @ @ @ to parliament and the State Council .
But many of the substantive changes were stripped from the latest drafts and replaced by populist measures such as a ban on gay marriage and the addition of a reference to God .
As long as Putin remains in office , it is hard to imagine an emboldened legislature .
What was initially interpreted as an attempt to transition away from a super-presidential state now appears to be an excuse to remove term limits as one of the few constraints on Putin ’ s power .
@ @ @ @ @ @ @ Russian government that began almost immediately after Putin ’ s January speech .
His loyal prime minister , Dmitry Medvedev , announced the government ’ s resignation and was replaced hours later by Mikhail Mishustin , the head of the Federal Tax Service .
Putin is already the longest-serving Kremlin leader since Soviet ruler Josef Stalin .
But until now he seemed to want to avoid emulating autocrats in former Soviet republics of central Asia who rode roughshod over constitutional term limits .
After finishing his first two terms in 2008 , Putin @ @ @ @ @ @ @ prime minister for four years , during which time the constitution was amended to extend the presidential term to six years from four .
Putin returned to the presidency in 2012 and was re-elected with a carefully-choreographed landslide in 2018 .
The Constitutional Court must now rule on whether Putin is eligible to run again before Russians vote on the constitutional package in an April 22 referendum .
Assuming Russia ’ s tightly controlled political system delivers for the Kremlin , Putin could potentially rule until he is 83 , a reign of @ @ @ @ @ @ @ Ivan the Terrible ruled from 1547 to 1584 ) .
Russia ’ s stunted opposition submitted a request to stage a 50,000-person protest in central Moscow on March 21 , but city authorities quickly announced a ban on meetings of more than 5,000 people , ostensibly as a measure to protect against the spread of coronavirus .
Polls show that more than two-thirds of Russians support Putin , even if his popularity has sunk recently to levels last seen before he annexed Crimea from Ukraine in 2014 .
In his two decades in @ @ @ @ @ @ @ s swagger as a global power by rebuilding the military , deepening ties with China and reasserting Russian influence in the Middle East .
Russia has a budget surplus ( at least when oil ’ s above $ 42 a barrel ) , low levels of debt and one of the world ’ s biggest foreign currency reserves .
Putin ’ s Achilles heel may be that he never tackled corruption .
A small clique of his friends from his native St. Petersburg have gained vast fortunes under his rule , and opposition @ @ @ @ @ @ @ the lavish lifestyles of people close to power .


washingtonpost--2020-03-11--Analysis | Why Virus Fight Shifts to Mitigation, Social Distance

Shutting down society completely might be the fastest way to end the epidemic , but would create its own public health crisis , and devastate the economy .
The more realistic alternative is social distancing , an effort to slow transmission by reducing human contact and limiting opportunities for the virus to spread from community to community -- but one that stops short of a full-scale quarantine .
For example , in China , about 280 million students across the country from the elementary to university level have been at home for weeks watching their teachers live-stream classes , interacting @ @ @ @ @ @ @ Nightclubs livestream DJ sets on social media for at-home dancers , who can comment and even leave a tip .
Tech companies are rolling out contactless delivery , even using self-driving vehicles , to spare customers direct contact with human couriers .
In Seattle , the site of the first U.S. cluster , social distancing also was promoted by closing schools , canceling public events including the St. Patrick ’ s Day Parade and postponing concerts and other large gatherings such as Emerald City Comic Con .
The area ’ s biggest employers @ @ @ @ @ @ @ thousands of employees to work from home .
New York Governor Andrew Cuomo said the state would use the National Guard to help set up a mile-square containment zone in a New York City suburb .
Spain banned large gatherings and closed schools in its hardest-hit regions .
Some European sporting events were played before empty stands .
Health officials everywhere urged those who can work from home to do so .
Expanded testing allows officials to determine how widely the disease , Covid-19 , has spread and where the risk of outbreaks @ @ @ @ @ @ @ only important for arranging treatment , but for getting them out of contact with others to reduce their risk of spreading the virus .
Testing kits were rapidly developed after China provided access to the genetic fingerprint of the virus , though countries including China , Japan and the U.S. stumbled in providing enough of them quickly .
At the start of March , the WHO said the world had the capacity to produce more than 1.6 million testing kits per week .
Patients infected with coronavirus who are at greatest risk of @ @ @ @ @ @ @ wards where health care workers use greater levels of protection .
Other patients are asked to isolate themselves at home –- something that was described as common in Wuhan and other hard-hit parts of China , where hospitals were initially unable to keep up with the patient load .
Health officials acknowledge that this practice can put family members in danger , and recommend precautions to reduce the risk of infection .
Some places are working to set up special areas for patients who don ’ t have a safe place to recover @ @ @ @ @ @ @ a motel to quarantine infected homeless people who don ’ t need hospitalization .
Quarantines that restrict the healthy along with the sick in a given area are the oldest method of containment .
In China , the government imposed the most extensive quarantine in known history : more than 60 million people were largely confined to their homes in Wuhan and the surrounding Hubei province .
As a containment strategy it failed , but it had value as a mitigating tactic , slowing the virus ’ s spread around the country and @ @ @ @ @ @ @ , according to the WHO .
Italy has attempted to quarantine the northern region of the country where its outbreak first began , but acknowledged that the purpose is more mitigation than containment , given the extent of the spread .
It ’ s imposed a looser set of rules on the rest of the country , further blurring the line between quarantine and social distancing .
The rules require schools and universities to close , all public events to be canceled , and residents to desist from traveling without a business or @ @ @ @ @ @ @ health authorities try to track down everyone a new patient may have exposed , to break a nascent chain of transmission .
Once the virus has spread through a community , that can become impractical to do for all cases .
Instead , people who have been told or think they ’ ve been exposed -- exposure is defined as being within 6 feet ( roughly 2 meters ) for at least 10 minutes -- are asked to “ self quarantine ” by voluntarily remaining at home or another isolated location for 14 @ @ @ @ @ @ @ In some cases , health workers are able to check in daily via telephone calls , texts or in-person visits .
Since most people self-quarantine at home , the risk to family members is highest .
Both they and the potentially infected person may be monitored for signs of a fever .
Several members of the U.S. Congress self-quarantined after being informed that they had been in contact at a political conference with someone who later was diagnosed with Covid-19 , including two who had interacted with President Donald Trump .


washingtonpost--2020-03-11--Wall Street Joins Trump in Urging Calm Amid Market Tumult

The group of executives pledged to help small businesses and consumers get through any economic damage as the virus continues to spread .
They also encouraged the government to support fiscal stimulus policies .
None of the bankers asked for regulatory relief .
Trump praised the attendees as “ the greatest bankers in the world ” and predicted that markets and the economy would soon rebound .
“ I think you ’ re going to see a tremendous pent-up demand , which hopefully won ’ t be in the too distant future.
” The president added that he plans to @ @ @ @ @ @ @ time on how he ’ ll deal with coronavirus , noting that “ we don ’ t need stimulus ” if it goes away quickly .
But even as the industry presented a unified sense of calm , fresh evidence emerged that the market tumult was growing .
The Dow Jones Industrial Average slipped into a bear market for the first time in 11 years and all but 10 stocks in the S & P 500 index were down in Wednesday trading .
And there are signs that executives see more trouble on @ @ @ @ @ @ @ the possibility of a drawn out slump -- started to tap funding sources .
Private equity giant Blackstone Group Inc. asked companies it controls to draw down their bank credit lines to help prevent liquidity shortfalls .
The firm ’ s CEO , Stephen Schwarzman , was among executives at the meeting with Trump .
“ The financial system of the U.S. is in great shape and is prepared to handle this problem , ” Schwarzman told the president .
Treasury Secretary Steven Mnuchin told the group that the president has “ quite @ @ @ @ @ @ @ any fallout and could roll out proposals “ quickly on that front.
” Before the meeting in the White House Cabinet Room was opened to the media , the bank executives were given an impromptu briefing by the officials leading the government ’ s coronavirus response , including Vice President Mike Pence and National Institute of Allergy and Infectious Diseases chief Anthony Fauci , attendees said .
Trump also took the CEOs on a tour of the Oval Office and posed for photos with them .
To contact the reporters on this story @ @ @ @ @ @ @ @ bloomberg.net ; Elizabeth Dexheimer in Washington at edexheimer @ bloomberg.net ; Jesse Hamilton in Washington at jhamilton33 @ bloomberg.net


washingtonpost--2020-03-11--Analysis | Boeing’s Max Crisis Meets Coronavirus

At a time when the coronavirus outbreak is damping demand for travel and sparking a raft of canceled flights , the last thing many carriers are going to want right now is extra capacity .
Separately – although hardly unrelated – Boeing is planning to draw down the full amount of a $ 13.825 billion loan obtained last month as early as Friday as a precaution amid the turmoil surrounding the epidemic , people familiar with the matter told Bloomberg News .
Boeing is also limiting discretionary spending and overtime payments and pausing some hiring in an effort to conserve @ @ @ @ @ @ @ after Boeing ’ s Max jet was grounded across the globe , the company ’ s equity investors for the most part were pricing in relatively minimal long-term financial and reputational damage .
That started to change as it became clear the reality was much darker .
Boeing ’ s timelines for the plane ’ s return were way too optimistic .
The concessions owed to frustrated customers have grown and are likely to continue to balloon , the accounting charges tied to production cutbacks have piled up and the legal bills are @ @ @ @ @ @ @ true financial penalty may be that the crisis has eroded Boeing ’ s cash cushion just when it needs it the most .
The bond market , which had remained relatively level-headed throughout Boeing ’ s troubles , is now starting to sound some alarms as well .
The cost to insure the company ’ s debt against default for five years widened 120 basis points on Wednesday to 280 basis points , the highest going back 11 years , according to ICE Data Services .
That level , up from just 60 @ @ @ @ @ @ @ a greater than 16 % chance of default over the next five years .
As for Boeing ’ s bonds , block trades Wednesday in its debt due in 2030 cleared at an average yield spread 278 basis points above benchmark Treasuries .
That ’ s up from just 208 basis points on Tuesday and more than double what it was as recently as last week .
To be fair , the moves in Boeing ’ s bonds and related CDS were part of a broader sell-off in triple-B corporate securities .
The @ @ @ @ @ @ @ : Investment-grade energy companies like Apache Corp. and Hess Corp. , and even retailers like Kohl ’ s Corp. and Macy ’ s Inc. , saw similarly large swings in their CDS .
In a broader economic slowdown , Boeing will hardly be the only one with a deteriorating bottom line .
But it ’ s nevertheless eye-opening , and the coronavirus outbreak seems like a perfectly targeted attack .
If Boeing thought it was too costly to tap the public markets back in January , when it first sought the loan , @ @ @ @ @ @ @ .
Boeing is already facing a significant curtailment in advance payments from customers on its Max , for which it has temporarily halted production .
That ’ s left it dependent on wide-body jets for cash flow , a precarious position to be in at a time when demand for planes capable of ferrying huge groups of people over international waters has been soft and is about to drop even more sharply .
And Boeing has had to announce two cuts to the production rate for its 787 Dreamliner amid a dearth of @ @ @ @ @ @ @ s worth mentioning that many airlines had shifted orders for the grounded Max jet to wide-body models .
Will they still keep those ?
Max cancellations and delivery deferrals further push out the prospect of getting cash-flow help from that model in the near term .
In addition to Air Canada , Gulf discounter Flydubai , the second-largest customer for the single-aisle jet , is reportedly seeking concessions from Boeing on price and delivery schedules for a 251-plane order .
Southwest Airlines Co. CEO Gary Kelly said in a video message to employees @ @ @ @ @ @ @ take deliveries of the Max beginning in the third quarter , but the airline has to “ maintain all options , ” according to the Wall Street Journal .
There were already doubts about whether Boeing could ever ramp back up to its pre-crash goal of 57 Max jets a month , even several years from now .
The coronavirus will likely throw a further wrench in those plans not just for Boeing but for its supply chain .
The company has been financially propping up suppliers such as Spirit AeroSystems Holdings Inc. @ @ @ @ @ @ @ regardless of the pace of plane deliveries to General Electric Co. and Safran SA ’ s CFM joint venture .
The draw-down of the loan is a sign of the times for Boeing : It needs cash and it ’ s clearer than ever it ’ s not going to get what it needs from the commercial jet business .


washingtonpost--2020-03-11--Mnuchin to Urge Trump to Extend April 15 Tax Deadline Over Virus

Treasury officials have been discussing the idea of extending the Internal Revenue Service ’ s payment deadline as the Trump administration considers measures to relieve economic pressure on citizens , businesses and government agencies dealing with the impact of the virus .
Mnuchin said his department can delay the payments without permission from Congress .
The delayed tax payment idea is part of discussions exploring how the Treasury Department can independently address the economic consequences of the virus .
Mnuchin also held discussions with House Speaker Nancy Pelosi on Wednesday about an economic stimulus package .
The April 15 deadline @ @ @ @ @ @ @ though it includes exceptions for when the 15th falls on a local holiday or weekend .
It also gives the Treasury secretary latitude to delay the deadline in disaster situations .
The IRS also routinely extends the deadline for victims of natural disasters .
For example , the agency granted victims of recent tornadoes in Tennessee until July 15 to file .
In 2018 , the IRS delayed the due date by a day when the computer system crashed on the filing deadline and taxpayers were unable to submit their returns .
“ @ @ @ @ @ @ @ may grant additional time to file returns and pay taxes , ” the agency says on its website .
“ Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster , especially when the federal government declares their location to be a major disaster area.
” “ The cleanest way to do this is for Congress to pass a law saying how long the delay would occur and what tax forms and tax liabilities are delayed , ” said Nicole Kaeding , an economist with the @ @ @ @ @ @ @ Congress does not do that , the Treasury secretary has broad authority.
” Taxpayers can already automatically request a six-month extension to file their returns , though that doesn ’ t postpone the deadline to pay any liability they may owe .
That bill would continue to accrue interest and penalties until it is paid .
“ I think it would help all taxpayers , ” Senate Finance Chairman Chuck Grassley said Wednesday .
“ People don ’ t have to take advantage of it but if they want to , it ’ @ @ @ @ @ @ @ s something that can be done right now.
” Mnuchin also indicated that he may keep the U.S. Treasury bills issuance at a steady level to fund a possible extension to the April 15 tax deadline .
Treasury bill issuance was set to fall in the second quarter as it historically does due to seasonal factors related to the April tax filing date .
Issuance drops as tax season approaches because the federal government can rely on incoming tax revenue to support funding needs .
“ We ’ re already working on funding @ @ @ @ @ @ @ an issue since we would have been downsizing our Treasury bills programs , ” Mnuchin said Wednesday to reporters on Capitol Hill .
Some taxpayers are also facing a tax deadline just days away .
Businesses organized as partnerships must file their returns by March 15 .
Many businesses and self-employed individuals also face a second April 15 deadline : they have to pay estimated quarterly taxes for this year , which could exacerbate cash-flow issues for businesses hard hit by a coronavirus-related downturn .
“ So while the simple idea of ‘ @ @ @ @ @ @ @ more time ’ may seem good and easy , the issue is one with many complex considerations on exactly how to do it and how long to do it , ” said Mark Steber , senior vice president and chief tax officer at Jackson Hewitt Tax Service Inc. More than 59 million individual tax returns had been filed as of the last week in February , the most recent statistics the IRS has available .
That ’ s approximately one-third of the tax returns the agency is anticipating to receive this year .


washingtonpost--2020-03-11--Analysis | Britain Reaches for the Coronavirus Bazooka

Some people might think Brexit Britain would be the last place to show the world how to manage this stuff .
But , as my Bloomberg News colleague David Goodman highlighted this week , the country is starting to look like a test case for joined-up economic action on tackling the outbreak ’ s financial impact .
Just look at Wednesday morning ’ s shock 50bps cut to interest rates by the Bank of England , and its package of other stimulus measures .
Unchained from the rest of the European Union , which has been leaden-footed in its coronavirus @ @ @ @ @ @ @ moment for Boris Johnson ’ s Tory government to show the benefits of a Treasury and a central bank that are in lockstep .
The U.K. Budget on Wednesday will also see the long-expected unveiling of the new government ’ s fiscal strategy , with extra impetus provided by Covid-19 .
It has already been augmented by Wednesday morning ’ s BOE action .
We may also see at some point a series of measures where the central bank and the finance ministry work together to ensure stability .
A fiscal bazooka was @ @ @ @ @ @ @ previous fiscal rules were relaxed by one percentage point to allow a budget deficit of up to 3 % of gross domestic product , creating room for 100 billion pounds ( $ 130 billion ) of investment spending over the next five years .
This might be relaxed even further and matched with up to 10 billion pounds of regular and emergency spending and tax cut measures .
It helps that both Chancellor of the Exchequer Rishi Sunak and incoming BOE Governor Andrew Bailey ( he joins on March 16 , but has @ @ @ @ @ @ @ are new kids on the block , so they ’ re open to novel approaches .
Bailey is moving across from the Financial Conduct Authority , and he was heavily involved in the BOE ’ s response to the global financial crisis when he worked there previously .
Mervyn King , a former BOE governor , said on Monday that more targeted measures were needed .
He was right about that .
A pause on people ’ s tax bills , and on mortgage and loan payments for households and corporates , would @ @ @ @ @ @ @ Group Plc has already said it will waive mortgage payments for three months for those impacted by the virus .
Italy is moving in this direction , as is Germany .
But there ’ s yet to be a unified EU response ; the silence from Brussels is deafening .
Payment holidays won ’ t be enough , though .
The BOE ’ s Term Funding Scheme — a package of cheap loans to banks — has been reopened and targeted at lending to small- and medium-sized companies .
Similarly , there has @ @ @ @ @ @ @ counter-cyclical capital buffer , ” which determines how much capital banks need to hold .
That will free up a lot of lending firepower .
There ’ s no time to set up new institutions .
The banking system is the most efficient transmission mechanism to the real economy .
The central bank will in effect be an agent for additional fiscal stimulus from the government .
This will blur its formal monetary role but it could set a vital precedent without compromising its independence .
Britain has the chance to create a @ @ @ @ @ @ @ together .
The interest rate cut was the inevitable first move .
But the other steps are the really interesting ones .


washingtonpost--2020-03-11--Analysis | Bankers Face a Harsh New Coronavirus Reality

The honeymoon didn ’ t last long .
Draconian , yet essential , measures to contain the coronavirus will deal an incalculable blow to the region ’ s economies .
A fresh wave of credit losses is inevitable as Italy enforces a nationwide lockdown and other parts of Europe follow suit .
Not every country will be hurt equally , but for many lenders the future ’ s bleak .
While the arrival of more government spending , cheap central bank funds and some regulatory forbearance will mitigate the strain , the latest setback puts renewed pressure on banks ’ @ @ @ @ @ @ @ back to post-crisis lows in recent days — for good reason .
An immediate strain on liquidity isn ’ t worrying investors yet .
Banks are flush with funds , in part bolstered by healthy growth in deposits : up 4.5 % in the 12 months through January in the euro area , according to estimates from Goldman Sachs Group Inc .
Temporary measures to give customers breaks on mortgage payments , as banks in Italy and elsewhere are weighing , should be manageable , especially if supported by government relief .
Banks @ @ @ @ @ @ @ strongest financial position in recent history .
The biggest lenders in Europe ended 2019 with an average ratio of common equity Tier 1 of 13.7 % , the highest ever reading , according to Bloomberg data .
Even in an extreme scenario that saw gross domestic product contract by 2.7 % across the European Union over three years , and house prices decline by about 20 % , about eight out of 10 of the largest banks should maintain capital levels that allowed them to keep paying dividends , according to analysts at @ @ @ @ @ @ @ ’ s the potential erosion to profitability that would hurt lenders for years to come .
In that stress scenario highlighted above , return on tangible equity ( ROTE ) would drop by about half from what analysts are expecting to an average of 4.2 % across the 35 lenders tracked by JPMorgan .
Profit would decline by 62 % .
Deutsche Bank AG , UniCredit SpA and ING Groep NV would see their ROTEs drop to between 2 % and 3 % ; at Societe Generale SA , it could fall to @ @ @ @ @ @ @ .
And this was calculated before the Saudis started an oil-price war .
The Bank of England has already cut interest rates by 50bps and the European Central Bank will probably have to follow .
Christine Lagarde is expected to cut rates by 10 basis points to -0.6 % on Thursday .
Even if she tries to shield lenders by offering further relief on their deposits , interest rates will probably stay low for years , eating into bank revenue .
Sure , banks could impose more charges on depositors .
And further @ @ @ @ @ @ @ .
But it also needs heavy spending to scrap outdated IT systems and to adapt to new technologies .
Upstart fintechs may come and go , but new competition will strip legacy lenders of revenue .
While Europe ’ s banks weren ’ t ready for another downturn , there ’ s something they could do — even if politicians would balk .
Out of 3 million bank employees in Europe , the industry could probably do with 1 million fewer , says Davide Serra of Algebris Investments , a fund manager .
@ @ @ @ @ @ @ Europe , but they ’ ve just become all the more pressing .


washingtonpost--2020-03-11--Analysis | If Muddy Waters Is Shocked, You’ve Really Been Bad

This is by no means the only ghastly disclosure that NMC has made in recent weeks but it ’ s by far the most damaging .
Apparently some of the money has been used for “ non-group purposes , ” which explains why instead of swimming in cash , the company seems to have all but run out of it .
NMC ’ s update confirmed it had met its payroll obligations in February .
That this wasn ’ t self-evident speaks volumes about its precarious financial condition .
As recently as last June the company reported $ 500 million @ @ @ @ @ @ @ sheet .
Needless to say , this is a shockingly bad time for a private hospital operator to suffer a gigantic financial scandal that calls into question its survival .
Like most countries , the UAE has registered scores of coronavirus infections .
While it seems likely that the UAE will find the funds from somewhere to bail out NMC and keep its clinics operating , any lingering hopes that NMC shareholders will recoup some value from a takeover look all but shot .
The shares are suspended pending full clarification of NMC @ @ @ @ @ @ @ ’ s $ 360 million , 1.875 % -coupon bonds maturing in 2025 are trading at just 22 cents on the dollar — bond-market parlance for “ will someone please get me out of here.
” The scale of possible financial misstatements at NMC make recent British corporate scandals such as the one affecting cake shop owner Patisserie Valerie Holdings Ltd look almost quaint .
But while the sums are several orders of magnitude larger , similar questions must be asked once again : Why were non-executive directors oblivious , what were the @ @ @ @ @ @ @ Young ) doing and how about the banks ?
NMC worked with Standard Chartered Plc , HSBC Holdings Plc , JPMorgan Cazenove and Barclays Plc to arrange financing , as well as local banks .
The company ’ s massively misleading disclosures are as devastating for them as they are for the reputation of London ’ s capital markets .
Doubtless , those involved will offer up various shades of “ how could we have known ?
” But it was no secret that NMC ’ s corporate governance was shoddy , and @ @ @ @ @ @ @ ’ s controlling shareholders were extensive .
Last year , NMC ’ s board appointed a special committee to oversee such transactions .
Somehow it failed to spot the $ 2.7 billion in additional debt that NMC appears to be on the hook for .
Even the preternaturally skeptical Block seems surprised by the extent of NMC ’ s debt omissions .
If Muddy Waters is shocked , imagine how minority shareholders feel .


washingtonpost--2020-03-30--Analysis | We Took Amazon’s Free, Fast Delivery for Granted. Will We Pay for It?

Demand for essential items is skyrocketing as people hunker down in their homes , and many are turning to delivery services , straining networks that even after years of growth in e-commerce weren ’ t built for such astronomical spikes .
With orders for things like thermometers and toilet paper getting canceled as inventory dries up , I ’ m less concerned these days about when my delivery shows up and just happy if it gets here at all .
And there are , of course , much bigger concerns about the health and safety of the employees that make @ @ @ @ @ @ @ Inc. workers at a Staten Island , New York fulfillment center plan to go on strike at noon on Monday .
They ’ re demanding the facility be closed for two weeks and sanitized amid the spread of the coronavirus and that workers continue to be paid .
It remains unclear how long such coronavirus-related disruptions will linger , but expectations for daily life are already being reset .
What if some of those changes stick ?
Wary of another pandemic , people may be more vigilant about stockpiling essentials at home , @ @ @ @ @ @ @ really not necessary to get a fresh pack of toilet paper delivered in two hours versus two days .
For those who do want fast service , Amazon , Walmart Inc. and other retailers will eventually be able to start putting packages on people ’ s doorsteps at their previous pace as the flow of goods starts to normalize .
But the perception of the value of that service seems to have changed .
I don ’ t think I ’ ll take it for granted in the way that I did before @ @ @ @ @ @ @ pay for it .
A 2019 report from the National Retail Federation found that 75 % of consumers surveyed expected to get free delivery even if their order total was less than $ 50 .
Meeting those expectations eats into profit margins for retailers , and even when a fee is assessed , it ’ s usually well below what it actually costs to ship the package .
And that ’ s before you think about the cost of shipping it back .
“ Retailers Gave You Free Returns and You Ruined It @ @ @ @ @ @ @ December 2019 story by Bloomberg News about how consumers were taking advantage of free-return policies by ordering a range of sizes or many more products than they ever intended on keeping .
U.S. consumers were expected to send back $ 100 billion worth of goods purchased last holiday season , according to forecasts from retail technology company Optoro cited by the Financial Times .
Retailers foot the bill for both the two-way logistics and the resulting pileups in inventory , some of which may be unsellable upon its return , but they seemed @ @ @ @ @ @ @ While some outlets such as Urban Outfitters Inc. ’ s Anthropologie had started charging fees for returns by mail in an effort to incentivize customers to bring items back into a store to ease the logistical challenges , this was far from a widespread process .
The whole history of e-commerce has been about making the process as easy for consumers as possible , and retailers weren ’ t keen to rock the boat .
In a way , the coronavirus crisis has done that for them .
While sales of food and @ @ @ @ @ @ @ retailers have been forced to shutter their stores and their e-commerce operations are fielding little interest for more discretionary products like clothing or home goods .
As they dig themselves out of that hole , the margin squeeze from free delivery and free returns may matter in ways it hasn ’ t before .
Maybe that means a small fee is assessed ; maybe that means incentivizing customers to use a buy-online , pick-up-in-store model .
If there was ever going to be a moment to adjust the expectations of the American consumer @ @ @ @ @ @


washingtonpost--2020-03-30--Analysis | What a Liquidity Trap Is and Why We’re Looking at One

“ Liquid ” means easy to spend , like cash .
Bonds aren ’ t as liquid , but they earn interest .
So in ordinary times , people keep some money in cash for spending and some money in bonds for investing .
But when the interest rate on bonds falls to zero , people might as well keep all their money in cash .
The notion goes back to British economist John Maynard Keynes in his path-breaking 1936 book The General Theory of Employment , Interest and Money , and to Keynes ’ s interpreter , John Hicks @ @ @ @ @ @ @ of a central bank to stimulate economic growth through interest rate cuts .
The goal is to stimulate spending by making borrowing cheaper and saving less attractive .
The trap opens up when the public ’ s demand for goods and services is so weak that even an interest rate of zero fails to juice activity .
In theory , a bank could have a bigger impact by cutting rates below zero – paying people and businesses to borrow .
In practice , negative rates have turned out to be more complicated .
@ @ @ @ @ @ @ .
If the interest rate paid on savings goes negative , it means that your money will shrink if you leave it in a savings account .
The goal of negative rates is to spur you to spend the money now , which would be good for economic growth .
But it also might cause you to take your money out of the bank and put it under a mattress or in a safe .
Banks can ’ t operate if they lose all their deposits .
Some key rates in Europe and @ @ @ @ @ @ @ slightly .
In the U.S. , the law that created the Federal Reserve may not allow the Fed to lower rates below zero , according to some interpretations , and Fed officials have said they ’ re not interested in the idea .
Rock bottom .
In the U.S. the target range for the federal funds rate , which is the interest that banks charge each other for overnight loans of reserves , was 2.25 % to 2.5 % in July 2019 when the Federal Reserve began reducing it .
To fight the @ @ @ @ @ @ @ Fed cut the target range by 1.5 percentage points in two emergency meetings in March alone , bringing it back to its floor of zero to 0.25 % .
If low interest rates can ’ t stimulate people to spend enough to keep the workforce at full employment , the risk is that a liquidity trap will set off a deflationary spiral in which prices fall , causing people to delay spending , which makes prices fall even more , and so on down .
Not necessarily .
The Federal Reserve has other @ @ @ @ @ @ @ it ’ s using all of them .
It ’ s buying long-term bonds in order to lower long-term interest rates , the program known as quantitative easing .
It ’ s steering market expectations with forward guidance , which is essentially a promise to keep rates low for a long time , even if that causes a jump in inflation .
The Fed went even further in March 2020 , announcing plans to provide direct support to U.S. employers , municipalities and households , which would traditionally be viewed as fiscal policy @ @ @ @ @ @ @ to add stimulus by spending more or cutting taxes .
That ’ s called fiscal policy .
Fortunately , while monetary policy becomes less effective in a liquidity trap , fiscal policy becomes more effective .
Interest rates don ’ t go up when the government spends more , so the new spending doesn ’ t “ crowd out ” private investment .
It ’ s a pure plus for growth .
It won ’ t prevent a recession , but combined with the Fed ’ s aggressive actions , it should shorten @ @ @ @ @ @ @ stuck in a liquidity trap .


washingtonpost--2020-03-30--Analysis | The World’s Biggest Wealth Fund Reaps an Ethical Bonus

None of that was too surprising .
Its equity returns act as a proxy for global stocks , which boomed last year and have plummeted in recent weeks .
What stands out , though , is how the fund is starting to reap the benefits of putting environmental , social and governance considerations at the forefront of its investment decisions , while the rest of the investing crowd starts to catch up with the need for capital allocation to serve a broader aim of ranges than just corporate profitability .
The details provided in the fund ’ s “ Return @ @ @ @ @ @ @ to discern a possible pathway to success .
The fund has two broad categories of companies it shuns and ejects from its benchmark calculations : Exclusions based on products discard weapons makers , tobacco companies and those that depend on coal production for their revenue ; exclusions based on corporate conduct cover firms guilty of corruption , environmental damage or human rights violations .
Overall , kicking miscreants out of the portfolio has boosted returns for the past two years .
The impact of that stance is evolving over time .
As the @ @ @ @ @ @ @ negative contributions are getting smaller .
When looked at since 2006 , returns have been 1.3 percentage points lower than they would have been without the exclusions , according to the fund ’ s calculations .
But the bulk of that underperformance is because of a rip-roaring performance by tobacco companies Philip Morris International Inc. and Altria Group Inc. for most of that time , although they ’ ve dipped recently .
As a result , the decision to exclude tobacco producers and makers of other potentially harmful products have subtracted 2.1 percentage @ @ @ @ @ @ @ and a half or so .
But that only tells part of the story .
By contrast , the decision to avoid companies on the basis of their conduct toward society has actually boosted returns by 0.8 percentage point since 2006 , the fund calculates .
Moreover , as environmental , social and governance issues have become more prevalent in portfolio construction across the industry as a whole and more fund managers adopt similar exclusion policies , the Norwegian fund is starting to see benefits from its stance on both categorizations .
Last @ @ @ @ @ @ @ that depend on coal for their revenue , whether by mining the fossil fuel or using it to generate power , added 8 basis points to returns ; shunning tobacco companies , which fell out of favor with investors last year relative to the broader market , added a further 4 basis points .
Those are small numbers given the amount of money involved .
But Norway ’ s sovereign fund has been a trailblazer in its willingness to withhold capital from companies deemed not to share its values .
If it can @ @ @ @ @ @ @ sacrificing returns , more of the asset management community might be persuaded to follow suit – for all of our sakes .
Mark Gilbert is a Bloomberg Opinion columnist covering asset management .
He previously was the London bureau chief for Bloomberg News .
He is also the author of “ Complicit : How Greed and Collusion Made the Credit Crisis Unstoppable .
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washingtonpost--2020-03-30--Fed’s Bullard Says U.S. Can Well Afford Trillions in Relief Debt

“ It is a big country .
We can carry 10 % more debt .
It is not ideal but we can certainly do it .
And if there was ever a time where you wanted to do something like this , now is that time.
” President Donald Trump on Friday signed a $ 2 trillion fiscal package to protect the economy as American households and businesses hunker down from the spreading virus .
On Sunday he warned the nation that 100,000 or more may may die as the White House extended guidelines on “ social distancing ” until @ @ @ @ @ @ @ interest rates to almost zero and pumped hundreds of billions of dollars into credit markets to ensure they continue to function and tide the economy over as it endures the pandemic .
Bullard , who has estimated the jobless rate would rise to around 30 % and GDP output would halve in the second quarter , said there is much uncertainty around that estimate .
Unemployment -- which matched a 50-year low of 3.5 % in February -- could surge to at least 10 % or go as high as 42 % , @ @ @ @ @ @ @ on the number of workers in industries vulnerable to virus-related shutdowns in which people work in close contact with each other , such as restaurants , hotels and many other service businesses .
Much depends on how many businesses retain workers by taking advantage of federal pandemic relief programs to ensure they keep their workers on the payroll for when the crisis is over , Bullard said .
By laying off employees , “ they might lose the connection with their workers , ” he said .
By applying for forgivable Small Business @ @ @ @ @ @ @ able to retain all of your workers and then when the startup occurs later , you will be able to have the same workers and you do not have to hire all over again .
“ If companies decide to do that , we will see lower unemployment and more uptake ” on small-business loans .


washingtonpost--2020-03-30--Analysis | China’s Finance World Opens Up to Foreigners, Sort Of

China is allowing full foreign ownership of life insurers , futures and mutual fund companies this year -- in stages .
Foreign ownership caps for securities firms come off April 1 as part of the trade agreement signed with the U.S. in January .
China also pledged to take no longer than 90 days to decide on applications from electronic-payment service providers , including for wholly foreign-owned operations .
Regulators cleared the way for full takeovers of local banks by foreigners in 2019 , a year after it eased ownership caps .
Foreign companies can now also be lead underwriters @ @ @ @ @ @ @ can control wealth management firms , pension fund managers and inter-dealer brokers .
The Shanghai-London Stock Connect officially kicked off in June 2019 , allowing companies listed on one bourse to trade shares on the other .
( Almost a year later , however , only a single company had taken advantage of it . )
An earlier program linked Hong Kong with the Shanghai and Shenzhen exchanges .
China ’ s $ 45 trillion financial services industry .
Even a sliver can be lucrative .
Bloomberg Intelligence estimates that -- barring a @ @ @ @ @ @ @ -- foreign banks and securities companies could be raking in profits of more than $ 9 billion a year in China by 2030 .
Wealth management firms are looking at a market poised to reach $ 30 trillion in assets by 2023 , according to consultancy Oliver Wyman .
Guo Shuqing , China ’ s chief banking regulator , sees significant room for foreign investors : They held just 1.6 % of banking assets and 5.8 % of the insurance market as of May 2019 , he said .
The percentages have fluctuated @ @ @ @ @ @ @ for example , the foreign share of Chinese banking assets was 2.3 % .
The threat of financial decoupling looms with the Trump administration looking at restrictions on U.S. investments in Chinese companies and financial markets , a possible new front in the trade war .
( China declared it would continue to open markets and encourage foreign investment . )
There are also plenty of hidden barriers , including the challenge of cracking a market dominated by government-controlled rivals that have longstanding relationships with clients .
The lengthy and often opaque application @ @ @ @ @ @ @ Visa , for example , has been waiting since 2015 .
On top of all that , China is expected to see the slowest economic growth in more than 40 years in 2020 as the world struggles with the pandemic .
They ’ re being slowly added to widely followed global benchmarks , including stock indexes by MSCI Inc. and FTSE Russell and , for bonds , the Bloomberg Barclays Global Aggregate Index and JPMorgan ’ s GBI-EM indexes .
That ’ s expected to draw tens of billions of dollars in purchases @ @ @ @ @ @ @ .
Bumpy .
In late 2019 MSCI said it wouldn ’ t add any more yuan-denominated shares until China fixed long-standing concerns over market access .
And not every opening is met with enthusiasm : Foreign investors had bought only a third of the total allotment at the time regulators scrapped the quota system for Chinese stocks and bonds in September .
Market turbulence in recent years , including major stock sell-offs , has dampened interest .
Some investors also worry about being unable to repatriate their money due to China ’ s @ @ @ @ @ @ @ long kept a tight grip on money flowing in and out so as to preserve the value of its currency , the yuan . )
The benefits may be twofold : U.S. President Donald Trump accuses China of being a one-sided beneficiary of global commerce , so opening up makes the trade seem more balanced .
And Chinese leaders have long described the moves as a useful way to improve the competitiveness of the domestic industry -- without challenging its dominance -- as well as to allocate capital more efficiently and attract foreign @ @ @ @ @ @ @ has described the moves as “ prudent , cautious , gradualist .
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washingtonpost--2020-03-30--Nobody Knows What Will Happen When the Rent Comes Due on April 1

Few in the industry are certain how things will play out .
Most agree that laid-off renters and shuttered retailers are suffering , and that the pain is going to spread as long as the economy is locked down .
“ The hardest thing right now is that nobody actually knows how bad it ’ s going to get , ” said Willy Walker , chief executive officer at commercial real estate lender Walker & Dunlop Inc. “ That ’ s driving everybody crazy.
” After a long economic boom in which tight housing inventory gave apartment landlords unprecedented power @ @ @ @ @ @ @ on the other foot as the calendar turns toward April .
Many local governments have placed temporary bans on evictions , and there ’ s a growing sense that even tenants who can afford to pay will skip rent .
Apartment owners collect more than $ 22 billion in rent in a typical month , roughly a quarter of the total landlords take in across major types of commercial property , according to CoStar Group Inc .
In an extreme scenario , more than 25 % of the households that rent in the @ @ @ @ @ @ @ of the coronavirus , requiring up to $ 12 billion a month in government support , according to research from Amherst Holdings .
Residential landlords aren ’ t the only ones worried .
Retail owners have little leverage , since a quarantine is a bad time to find new tenants .
Rental debt typically must be paid eventually , but uncertainty about the economic impact from the virus makes it hard to anticipate when people and businesses will be able to make up missed payments .
“ If tenants stop paying rent , @ @ @ @ @ @ @ t pay utilities , ” said Scott Rechler , chief executive officer at RXR Realty , a New York-based owner of offices , apartments , and other properties .
“ The municipalities don ’ t get their property taxes or mortgages aren ’ t paid and the banks get a spike in defaulting loans.
” Across credit markets , regulators are racing to prepare for missed rent to turn into late loan payments .
The apartment industry alone has more than $ 1.5 trillion in outstanding debt , said Dave Borsos , vice @ @ @ @ @ @ @ Multifamily Housing Council .
Last week , the Federal Housing Finance Agency said it would allow apartment owners who financed their properties through Fannie Mae and Freddie Mac to delay mortgage payments .
Real estate investor Tom Barrack argued in a series of tweets on Saturday that offering forbearance on interest owed by real estate owners and mortgage investors is central to providing relief to U.S. businesses – and that the U.S. Treasury could help stabilize debt markets by purchasing certain commercial mortgage backed securities .
American renters , meanwhile , are making @ @ @ @ @ @ @ a 28-year-old recruiter for tech companies in Austin , sent an anxious email to her landlord after social-distancing efforts cost her girlfriend her job as a hairdresser .
Their property manager dismissed a request to reduce or defer part of the monthly $ 1,400 payment , leaving Wade to worry she ’ ll have to use her credit card to make rent .
While the stimulus package passed by Congress should eventually put cash in the pockets of consumers and make emergency loans available to small business owners , the economic carnage is @ @ @ @ @ @ @ , with economists estimating that 3.3 million Americans filed for unemployment last week .
“ I ’ m less worried about April , ” said Bruce McNeilage , CEO of Kinloch Partners , which operates single-family rental homes .
“ I ’ m more worried about May 1 .
Once people miss three or four paychecks , that ’ s when things get bad .
”


washingtonpost--2020-03-30--Analysis | Why It’s a New, ‘Unlimited’ World for Central Banks

Because of the depth of the economic threat posed by the pandemic , and the weakness in this instance of the traditional tool of central banking , interest rate cuts .
The Fed tried that , bringing its main interest rate back to near zero , through two sets of emergency cuts in March .
The People ’ s Bank of China reduced the interest rate it charges on loans to banks by the biggest amount since 2015 .
The European Central Bank and Bank of Japan already have rates that are below zero .
But traditional monetary tools did @ @ @ @ @ @ @ rates usually works by making spending by companies and households more attractive .
But it isn ’ t the best kind of medicine to treat economies that are facing both a “ supply ” and a “ demand ” shock .
That is , cheaper borrowing costs won ’ t do much for factories that are starved of materials , or help locked-down consumers return to shopping or eating out .
Everything they can .
The Fed , for instance , reignited and expanded bond-buying programs from the 2008 financial crisis , while @ @ @ @ @ @ @ of liquidity to the system in recent weeks , with untold billions still to come .
Central banks are also coordinating or acting in consultation with their governments , as legislatures jump in with trillions of dollars in so-called fiscal spending and stimulus plans , including a U.S. plan to send a check to every adult for $ 1,200 , subject to income limits .
Buying time , in two ways .
Interventions in the financial markets were meant to keep credit markets from freezing up by having the central bank offer itself @ @ @ @ @ @ @ .
For the same reason , the Fed expanded its liquidity swaps for other central banks around the world three times to ease a global scramble for U.S. dollars that threatened to upend currency markets .
But the broader lending programs were meant to buy time for not just for the markets but for the larger economy , to tide companies and individuals over until the lockdowns forced by the pandemic are eased and business activity resumes .
Born in the 2008 crisis , the once unconventional idea of making huge bond purchases @ @ @ @ @ @ @ easing -- is now an established part of the central banks ’ armory .
Yet the strategy is being used for somewhat different purposes this time .
For one thing , QE is seen as less effective when long-term rates are already low , as they are now .
But bond buying is also a way of being a lender of last resort , which is why the Fed and other banks are expanding purchases beyond government and corporate bonds .
For instance , the Fed looks poised to gain the unprecedented power @ @ @ @ @ @ @ Bank of Japan is buying exchange-tradedfunds , as part of an effort to stabilize financial markets .
In mid-March the BOJ doubled its target for net purchases to 12 trillion yen ( $ 112 billion ) .
The ECB had resumed its bond purchases in 2019 and expanded it as the virus began to take a toll ; other central banks have indicated they would be prepared to take similar steps in the face of weakness .
The spiral of bad news about the pandemic and the economic upheaval that came with it @ @ @ @ @ @ @ investors sought safer places for their money .
Central banks around the world stepped in to prevent a vicious circle , in which difficulties obtaining credit led to more panicked selling .
• The Fed responded to signs of strain in markets for Treasury bonds and repurchase agreements by offering a cumulative $ 5 trillion in lending , in a signal that the bank was ready to do whatever it takes to keep short-term financing rates from spiking .
• The Fed also revived programs from the 2008 financial crisis that allowed it @ @ @ @ @ @ @ other securities from big banks and broker-dealers licensed to transact with the Fed .
Another new facility allows the Fed to purchase high-quality assets from U.S. money market mutual funds .
Easing up on some regulations , and asking others to ease up as well , in a practice known as forbearance .
For instance , regulators in China have asked banks to be more lenient on bad loans .
In the U.S. , the Fed is reducing reserve requirement ratios to 0 % , meaning banks can lend more aggressively without protest @ @ @ @ @ @ @ for smaller companies to pay into the social security system from February to June .
The rate of value-added tax for smaller companies has also been reduced temporarily to 1 % from 3 % between March and May .
To some observers , this massive infusion of money will inevitably lead to inflation later .
Others worry about the erosion of central bank independence that may come from actions that in some cases could be seen as effectively nationalizing parts of the economy .
Others see central banks as rightly focused on the @ @ @ @ @ @ @ lenders lending and businesses afloat for the next few months could be the difference between a steep recession and a depression , they say .


washingtonpost--2020-03-30--Analysis | Don’t Be a Prudent Saver When There’s a Crisis On

The People ’ s Bank of China is in discussions to lower the interest rate banks pay on deposits for the first time since 2015 and a decision could be announced within days , the Financial Times reported last week , citing people familiar with the deliberations .
A reduction would shore up banks ’ profitability , buying lenders breathing room as authorities lean on them to support companies that are struggling to stay afloat after a shutdown that affected two-thirds of the economy .
It can ’ t come a moment too soon .
The government is pushing banks @ @ @ @ @ @ @ , lowering loan rates and keeping credit lines open .
It has allowed them to refrain from collecting interest from virus-affected companies until June 30 and has loosened the criteria for classifying loans as nonperforming .
To encourage lending , regulators have also reduced the percentage of deposits that lenders must lodge with the central bank , known as the required reserve ratio .
All these measures will increase pressure on a state-controlled banking system that is already undercapitalized and having its net interest margins squeezed .
What will really help is a @ @ @ @ @ @ @ While the rate on demand deposits is a puny 0.35 % , the amount paid on time deposits is far higher — as much as 1.5 % on sums locked up for one year .
On Monday , the PBOC reduced the interest rate that it charges on loans to commercial banks by the most in five years .
The seven-day reverse repurchase rate was cut to 2.2 % from 2.4 % .
While that lowers funding costs , it also signals an impending reduction in lending rates .
Analysts say a cut @ @ @ @ @ @ @ lending facility rate , its main policy tool , isn ’ t far away .
That in turn will influence the loan prime rate , set by 18 banks once a month .
Smaller banks — outside the big four of Industrial & Commercial Bank of China Ltd. , Bank of China Ltd. , China Construction Bank Corp. and Agricultural Bank of China Ltd. — will be the biggest beneficiaries of lower rates for time deposits .
These account for a large portion of customer accounts at lenders such as Bank of Communications @ @ @ @ @ @ @ according to to CGS-CIMB Securities Ltd. analyst Michael Chang .
Such banks have more small and medium-size enterprises among their loan clients and also lend out more of their deposits .
Even the big four could do with some relief .
While they ’ re better capitalized and more profitable than the rest , they bear the burden of being the government ’ s principal policy tool , requiring them to hand out low-interest loans and help out struggling smaller banks .
The bigger question is how much difference even lower deposit rates @ @ @ @ @ @ @ challenge the economy faces .
A prolonged health emergency will cause the nonperforming loan ratio to triple to 6.3 % , S & P Global Inc. estimates .
In 2008 , China ’ s banks were still flush from recapitalizations and initial public offerings conducted earlier in the decade , and their shares were trading above book value .
Now , most are at discounts : Bank of China ’ s Hong Kong-listed stock trades at a price-to-book ratio of less than half .
At the same time , the financial system has @ @ @ @ @ @ @ .
The ratio of debt to gross domestic product jumped to 276 % at the end of 2018 from 162 % at the end of 2008 , according to Bloomberg Economics .
China ’ s banks “ make just enough in profits to keep pace with growth and keep capital ratios stable so they can ’ t afford to do a lot more than they ’ re doing now , ” said Grace Wu , Fitch Ratings head of Greater China bank ratings .
Regulators could relax capital ratios at mid-size lenders such @ @ @ @ @ @ @ Guangfa Bank Co .
Still , that would risk storing up bigger problems down the road .
Consumer defaults are already piling up , with overdue credit-card debt swelling last month to 50 % from a year earlier .
Qudian Inc. , a Beijing-based online lender , said its delinquency ratio jumped to 20 % in February from 13 % at the end of last year .
Cutting deposit rates also punishes consumers , the very people the government needs to help get the economy back up and running .
Lower rates could @ @ @ @ @ @ @ depositors to pull out money , though a crackdown on shadow banking has reduced the range of alternatives .
There are no easy answers .
Whatever their limitations or unwanted side effects , the need to keep banks in some semblance of health suggests lower deposit rates are coming soon .


washingtonpost--2020-03-30--Analysis | The 60/40 Investment Portfolio Should Expand Its Borders

When in doubt , tradition has it , investors should put 60 % of their portfolios in U.S. stocks and 40 % in bonds .
Why 60/40 ?
There ’ s no satisfying answer .
A common explanation is that stocks can be expected to outpace bonds over time , so tilting the portfolio in favor of stocks is an easy way to reach for extra return without excessive risk .
And why the U.S. ?
Well , there ’ s no place like home .
That tradition has paid off .
A 60/40 combination of the S & P @ @ @ @ @ @ @ has returned 8.9 % a year from 1926 to 2019 , including dividends , or 6 % a year after inflation .
The results were even better during the last decade .
The 60/40 portfolio returned 12.6 % a year from 2010 to 2019 , or 10.5 % a year after inflation .
Past isn ’ t prologue , however , and that admonition has never been more fitting for 60/40 portfolios .
A widely cited barometer of real expected returns from stocks is the cyclically adjusted earnings yield , which uses an @ @ @ @ @ @ @ 10 years .
That yield for the S & P 500 Index is 4.8 % , according to Bloomberg data .
Meanwhile , the yield on inflation-protected Treasuries is a negative 0.2 % .
A 60/40 combination of the two produces an expected return of 2.8 % a year after inflation .
Investors don ’ t appear to have grasped that reality .
In its most recent annual investor survey , French lender Natixis SA reported that U.S. investors expect their portfolios to generate returns of 10.9 % a year after inflation .
@ @ @ @ @ @ @ the 60/40 U.S. portfolio managed to equal or surpass that mark just 9 % of the time since 1926 over rolling 10-year periods , counted monthly .
And those periods were all clustered around the 1990s , a decade with an enchanted combination of bond yields that fell from record highs and stock valuations that climbed to records .
Suffice it so say , no one expects those tailwinds to return soon .
Those who want a preview of what the next decade might look like should consider the recent experience of investors @ @ @ @ @ @ @ , or the propensity to invest in one ’ s home country , is common to all investors .
A recent paper by FTSE Russell examined euro zone home bias in equity allocations from 2008 to September 2019 .
It found , for example , that French pension funds invested 88 % of their equity portfolios in French companies , which is 29 times France ’ s weight in the FTSE All-World Index .
In Spain , the equity allocation of pension funds to local companies was 67 times the country ’ s @ @ @ @ @ @ @ home paid off for a time .
The MSCI French Index outpaced the MSCI All Country World Index , or ACWI , by 2.6 percentage points a year in euros from 1999 to 2007 , including dividends , the earliest year for which numbers are available .
And the MSCI Spain Index outpaced ACWI by 5.2 percentage points a year over the same period .
But the cost of higher stock prices is lower earnings yields .
By the end of 2007 , the cyclically adjusted earnings yield was 4.2 % in France @ @ @ @ @ @ @ 2008 , French stocks have returned 4 % a year through February , lagging ACWI by 3.2 percentage points a year , and Spanish stocks have been flat , trailing ACWI by 7.3 percentage points a year .
France and Spain are hardly alone .
While the U.S. stock market has soared since the 2008 financial crisis , the rest of the world has floundered .
The cyclically adjusted earnings yield of the MSCI World ex USA Index , a basket of companies in developed countries outside the U.S. , has swelled to @ @ @ @ @ @ @ end of 2007 .
Similarly , the yield for the MSCI Emerging Markets Index has jumped to 7.2 % from 3.8 % over the same time .
Value-minded investors can find even higher yields .
The MSCI World ex USA Value Index offers an earnings yield of 9.5 % , while the MSCI Emerging Markets Value Index packs a yield of 11 % .
If there ’ s ever a time for Americans to start leaving home , this is it .
It won ’ t be easy .
Given 60/40 ’ s @ @ @ @ @ @ @ likely to look back than forward .
Also , overseas stocks have been laggards for years and have only tumbled further over time — and nothing repels investors like falling stock prices .
The timing isn ’ t great , either .
Everyone wants the comforts of home during a crisis .
Unfortunately , there ’ s not much investors can do about the 40 because the U.S. still boasts some of the highest bond yields in the developed world .
But when it comes to the 60 , the value is overseas @ @ @ @ @ @ @ hat to the old 60/40 — and then give it an upgrade .