investmentwatchblog--2020-04-27--Big Oil’s Dilemma: Cut Dividends Or Cut Operations

The oil majors are facing a financial vice like they never have before .
With oil prices hovering around $ 20 per barrel and no end in sight for the global pandemic , the financial pain has only just begun .
Norway ’ s Equinor became the first large oil company to cut its dividend , slashing it by 67 percent .
It may not be the last .
On Friday , Italy ’ s Eni reported a 94 percent decline in profit in the first quarter , a period that did not capture the full brunt of the current @ @ @ @ @ @ @ percent and lowered its production guidance for this year by 100,000-125,000 bpd .
“ The period since March has been the most complex period the global economy has seen for more than 70 years , ” Eni CEO Claudio Descalzi said .
“ Like everyone , we expect a complicated 2020.
” When asked whether or not the company would cut its dividend , Descalzi demurred .
“ We ’ ll see how COVID-19 evolves in the next few months… In July , we can update on the dividend front , ” he @ @ @ @ @ @ @ largest U.S. and European oil companies are in danger of burning through $ 175 billion in cash if Brent averages $ 38 per barrel over the next two years , according to the FT and Wood Mackenzie .
The majors have typically guarded dividends at almost all costs .
When unable to cover capex and also shareholder payouts – as has consistently been the case over the past decade – the majors have resorted to some combination of spending cuts , asset sales and taking on new debt .
That formula becomes more @ @ @ @ @ @ @ .
With a massive surplus of oil and the prospect of a persistent slump in demand , selling off assets isn ’ t really a strategy they can rely on .
For one , there are going to be very few buyers for anything , at least not at prices the majors would want .
Also , would-be buyers are probably in worse financial shape and don ’ t have billions of dollars lying around that they can throw at the majors for their unwanted projects .
That leaves spending cuts and debt @ @ @ @ @ @ @ use .
ExxonMobil has already taken on an additional $ 18 billion in debt in March and April alone , after $ 7 billion in bonds issued in all of last year .
Shell has taken out $ 20 billion in new debt in the past few weeks .
It ’ s unclear how long that strategy can last .
ExxonMobil has already seen its credit downgraded by two different ratings agencies since March .
Exxon ’ s cash flow trajectory was “ already relatively weak entering 2020 , as very high growth @ @ @ @ @ @ @ gas prices and low [ earnings in its downstream and chemicals segments ] resulted in substantial negative free cash flow and rising debt in 2019 , ” Moody ’ s analysts wrote in early April .
Royal Dutch Shell has postponed two large oil and gas projects in the Gulf of Mexico and the North Sea because of the unfolding downturn .
Many more projects will be delayed or cancelled altogether .
Independent U.S. shale companies are in even worse shape .
An estimated 2,500 oil and gas workers lost their jobs in @ @ @ @ @ @ @ Resources has shut in most of its production in North Dakota because of low prices .
In March , Occidental Petroleum cut its dividend by 86 percent .
Occidental is in a much more serious financial predicament than the oil majors , largely unable to take on new debt after its unfortunately timed takeover of Anadarko Petroleum last year .
The oil majors have a much better ability to survive the crisis than independent shale drillers , but they may survive in a smaller , more indebted form compared to before the pandemic @ @ @ @ @ @ @ will be felt over the long-term .
According to Rystad Energy , global oil supply will be 6 percent lower in 2030 than it otherwise would have been due to the current cutbacks in spending .
Roughly $ 195 billion in non-shale projects have been delayed , Rystad said .

By Nick Cunningham
The oil majors are facing a financial vice like they never have before. With oil prices hovering around $20 per barrel and no end in sight for the global pandemic, the financial pain has only just begun. Norway’s Equinor became the first large oil company to cut its dividend, slashing it by 67 percent. It may not be the last.
On Friday, Italy’s Eni reported a 94 percent decline in profit in the first quarter, a period that did not capture the full brunt of the current slump. Eni cut spending by 30 percent and lowered its production guidance for this year by 100,000-125,000 bpd. “The period since March has been the most complex period the global economy has seen for more than 70 years,” Eni CEO Claudio Descalzi said. “Like everyone, we expect a complicated 2020.”
When asked whether or not the company would cut its dividend, Descalzi demurred. “We’ll see how COVID-19 evolves in the next few months… In July, we can update on the dividend front,” he said, according to Reuters.
The largest U.S. and European oil companies are in danger of burning through $175 billion in cash if Brent averages $38 per barrel over the next two years, according to the FT and Wood Mackenzie.
The majors have typically guarded dividends at almost all costs. When unable to cover capex and also shareholder payouts – as has consistently been the case over the past decade – the majors have resorted to some combination of spending cuts, asset sales and taking on new debt.
That formula becomes more challenged in today’s crisis environment. With a massive surplus of oil and the prospect of a persistent slump in demand, selling off assets isn’t really a strategy they can rely on. For one, there are going to be very few buyers for anything, at least not at prices the majors would want. Also, would-be buyers are probably in worse financial shape and don’t have billions of dollars lying around that they can throw at the majors for their unwanted projects.
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That leaves spending cuts and debt as the main instruments the majors will use. ExxonMobil has already taken on an additional $18 billion in debt in March and April alone, after $7 billion in bonds issued in all of last year. Shell has taken out $20 billion in new debt in the past few weeks.
It’s unclear how long that strategy can last. ExxonMobil has already seen its credit downgraded by two different ratings agencies since March. Exxon’s cash flow trajectory was “already relatively weak entering 2020, as very high growth capital investment combined with muted oil and gas prices and low [earnings in its downstream and chemicals segments] resulted in substantial negative free cash flow and rising debt in 2019,” Moody’s analysts wrote in early April.
Royal Dutch Shell has postponed two large oil and gas projects in the Gulf of Mexico and the North Sea because of the unfolding downturn. Many more projects will be delayed or cancelled altogether.
Independent U.S. shale companies are in even worse shape. An estimated 2,500 oil and gas workers lost their jobs in Texas in a 10-day span. Continental Resources has shut in most of its production in North Dakota because of low prices. In March, Occidental Petroleum cut its dividend by 86 percent. Occidental is in a much more serious financial predicament than the oil majors, largely unable to take on new debt after its unfortunately timed takeover of Anadarko Petroleum last year.
The oil majors have a much better ability to survive the crisis than independent shale drillers, but they may survive in a smaller, more indebted form compared to before the pandemic.
The effects of the current crisis will be felt over the long-term. According to Rystad Energy, global oil supply will be 6 percent lower in 2030 than it otherwise would have been due to the current cutbacks in spending. Roughly $195 billion in non-shale projects have been delayed, Rystad said.
By Nick Cunningham of Oilprice.com


investmentwatchblog--2020-04-27--Is This The Most Innovative Power Company In The World?

We came to the conclusion that the future is a separate line of business when perusing the graphically flashy 2019 annual report issued by Enel S.p.A. the Rome-based energy company .
Enel ’ s is an unfamiliar name to most Americans ( investors and consumers ) .
It is listed and traded on the Milan stock exchange .
But they are the world ’ s second largest producer of power , after the State Grid of China , and serve more than 60 million customers mainly in Italy , Spain and Latin America .
And they are Europe ’ s @ @ @ @ @ @ @ they underwent privatization in the 1990s .
However the Italian government still owns about one quarter of the company .
We ’ re not sure whether to call this a privatized company or not .
Yes they have shareholders , a dividend policy and publish financial data in an appropriate manner .
But as students of corporate finance know , owning 25 % of the equity permits the exercise of disproportionate influence on management and corporate affairs .
This funny post-war European relationship with capitalism reminds us of the story of the senior @ @ @ @ @ @ @ who also regularly attended Catholic Mass on Sundays .
But corporate structure aside , Enel is different for another reason .
When many electric utilities in the US were still planning to add new coal fired base load power generation , Enel ’ s name was added to the Dow Jones Sustainability Index in 2004 .
Around the turn of the last century their management was very early in embracing the twin concepts of sustainability and decarbonization .
At present the largest percentage of their power generation comes from hydro with significant additional @ @ @ @ @ @ @ reduced coal fired generation by a third in the last year and its elimination is a priority .
In addition Enel has been at the forefront of digitization and smart meter installation .
In the US , the closest comparison with Enel is to imagine a fully privatized TVA or BPA with a progressive , tech savvy management focus .
Compared to other electric companies with clunky names whose annual reports are pedestrian compilations of legalese , environmental platitudes which might be more convincing if the company were not hanging on to those @ @ @ @ @ @ @ pictures of executives trying to look informal by not wearing ties , the Enel report is like an Alfa Romeo next to a dump truck .
Enel divides its business into four sectors : generation , infrastructure , retail and Enel X .
The first three are self-evident for readers of this website and constitute 99 % of Enel ’ s operating income .
Enel X is a platform to reach consumers for new uses of electricity and its focus is very broad : cities , homes , businesses , and electric mobility @ @ @ @ @ @ @ electric vehicles , demand response and energy storage .
They intend to deliver these products on a world wide basis and their reach certainly spans several continents .
What strikes us is Enel ’ s focus on this modest business venture now when it seems to matter little .
Most investors won ’ t pay much attention to tiny lines of business especially in a corporation this large .
But Enel ’ s management is making a public statement and also taking a risk .
If this venture flops , as many new @ @ @ @ @ @ @ will know and the failure will be rather public .
Whereas if they entered these new areas discreetly and with little fanfare , a failure here coupled with a modest write off would barely be cause for concern even among the most diligent analysts .
Innovation of this type is often smothered in large , bureaucratic organizations .
However , Enel ’ s senior management has clearly bought into a green future involving smart grids and two way power usage and have made it a mainstay of their corporate identity .
They are @ @ @ @ @ @ @ not a fig leaf .
But they also have an advantage over comparable US utilities in scale and diversity of the customer base .
They can experiment in different jurisdictions too .
Their strategy seems to boil down to this .
Overall energy demand will grow slowly but decarbonized electricity can continue to take market share from coal , gas and diesel/gasoline in transportation .
To ensure this transition the electric company must provide sustainably sourced electricity while helping consumers to use it more easily and efficiently .
There is nothing we find @ @ @ @ @ @ @ s corporate message .
But like seeing a tiny daffodil growing between a crack in the sidewalk , we would not have expected the most progressive utility policies emanating from a giant , Rome-based Italian electric holding company .
And besides in addition to being early they might also be right .
Ciao .

By Leonard Hyman and William Tilles
We came to the conclusion that the future is a separate line of business when perusing the graphically flashy 2019 annual report issued by Enel S.p.A. the Rome-based energy company. Enel’s is an unfamiliar name to most Americans (investors and consumers). It is listed and traded on the Milan stock exchange. But they are the world’s second largest producer of power, after the State Grid of China, and serve more than 60 million customers mainly in Italy, Spain and Latin America. And they are Europe’s largest utility. Like most European utilities they underwent privatization in the 1990s. However the Italian government still owns about one quarter of the company. We’re not sure whether to call this a privatized company or not. Yes they have shareholders, a dividend policy and publish financial data in an appropriate manner. But as students of corporate finance know, owning 25% of the equity permits the exercise of disproportionate influence on management and corporate affairs. This funny post-war European relationship with capitalism reminds us of the story of the senior Italian politician, a devout communist, who also regularly attended Catholic Mass on Sundays.
But corporate structure aside, Enel is different for another reason. When many electric utilities in the US were still planning to add new coal fired base load power generation, Enel’s name was added to the Dow Jones Sustainability Index in 2004. Around the turn of the last century their management was very early in embracing the twin concepts of sustainability and decarbonization. At present the largest percentage of their power generation comes from hydro with significant additional generation from wind and solar. Management reduced coal fired generation by a third in the last year and its elimination is a priority.
In addition Enel has been at the forefront of digitization and smart meter installation. In the US, the closest comparison with Enel is to imagine a fully privatized TVA or BPA with a progressive, tech savvy management focus.
Compared to other electric companies with clunky names whose annual reports are pedestrian compilations of legalese, environmental platitudes which might be more convincing if the company were not hanging on to those coal plants for dear life, and pictures of executives trying to look informal by not wearing ties, the Enel report is like an Alfa Romeo next to a dump truck.
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Enel divides its business into four sectors: generation, infrastructure, retail and Enel X. The first three are self-evident for readers of this website and constitute 99% of Enel’s operating income. Enel X is a platform to reach consumers for new uses of electricity and its focus is very broad: cities, homes, businesses, and electric mobility. This means developing charging stations for electric vehicles, demand response and energy storage. They intend to deliver these products on a world wide basis and their reach certainly spans several continents.
What strikes us is Enel’s focus on this modest business venture now when it seems to matter little. Most investors won’t pay much attention to tiny lines of business especially in a corporation this large. But Enel’s management is making a public statement and also taking a risk. If this venture flops, as many new lines of business often do, everyone will know and the failure will be rather public. Whereas if they entered these new areas discreetly and with little fanfare, a failure here coupled with a modest write off would barely be cause for concern even among the most diligent analysts.
Innovation of this type is often smothered in large, bureaucratic organizations. However, Enel’s senior management has clearly bought into a green future involving smart grids and two way power usage and have made it a mainstay of their corporate identity. They are saying: this is a business, not a fig leaf. But they also have an advantage over comparable US utilities in scale and diversity of the customer base. They can experiment in different jurisdictions too.
Their strategy seems to boil down to this. Overall energy demand will grow slowly but decarbonized electricity can continue to take market share from coal, gas and diesel/gasoline in transportation. To ensure this transition the electric company must provide sustainably sourced electricity while helping consumers to use it more easily and efficiently.
There is nothing we find particularly new or surprising about Enel’s corporate message. But like seeing a tiny daffodil growing between a crack in the sidewalk, we would not have expected the most progressive utility policies emanating from a giant, Rome-based Italian electric holding company. And besides in addition to being early they might also be right. Ciao.


investmentwatchblog--2020-04-27--Fund manager who called 2008 crisis says a stock sell signal is coming soon

In our call of the day , former Goldman Sachs hedge-fund manager Raoul Pal said the dollar was the world ’ s “ biggest problem ” and that the signal to sell equities was coming soon .
He said the narrative that the Fed printing money would causes a dollar collapse was “ very wrong.
” The chief executive of Global Macro Investor , who predicted the 2008 financial crisis , said : “ You see the biggest problem the world faces is the dollar .
We are in a viscous doom loop where slowing growth causes the dollar to @ @ @ @ @ @ @ which causes the dollar to rise , as all borrowers play musical chairs to get access to the dollar to service debts .
“ Dollar swap lines , QE , jawboning , etc .
have done nothing to stop this , ” he added in a post on Twitter .
He said no printing of money — by the Federal Reserve — would solve what he described as a “ structural ” problem .
“ All attempts to create more money to solve the dollar standard issue tend to devalue all fiat versus @ @ @ @ @ @ @ deflation probabilities.
” “ My guess is that the next debt deflation signal will come when bonds begin to price in negative interest rates .
That day is coming soon… and that will be the signal to sell equities and the insolvency phase will begin .
”

via MarketWatch
In our call of the day, former Goldman Sachs hedge-fund manager Raoul Pal said the dollar was the world’s “biggest problem” and that the signal to sell equities was coming soon.
He said the narrative that the Fed printing money would causes a dollar collapse was “very wrong.”
The chief executive of Global Macro Investor, who predicted the 2008 financial crisis, said: “You see the biggest problem the world faces is the dollar. We are in a viscous doom loop where slowing growth causes the dollar to rise, which causes slower growth, which causes the dollar to rise, as all borrowers play musical chairs to get access to the dollar to service debts.
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“Dollar swap lines, QE, jawboning, etc. have done nothing to stop this,” he added in a post on Twitter.
He said no printing of money — by the Federal Reserve — would solve what he described as a “structural” problem. “All attempts to create more money to solve the dollar standard issue tend to devalue all fiat versus gold. Gold is rallying on debt deflation probabilities.”
This year alone has been a blood bath of currencies versus the USD. pic.twitter.com/zsPidRQ7ci — Raoul Pal (@RaoulGMI) April 25, 2020
“My guess is that the next debt deflation signal will come when bonds begin to price in negative interest rates. That day is coming soon… and that will be the signal to sell equities and the insolvency phase will begin.”
My guess is that the next Debt Deflation signal will come when bonds begin to price in negative interest rates. That day is coming soon… Here are 2 year yields: pic.twitter.com/TuQiPjCC6U — Raoul Pal (@RaoulGMI) April 25, 2020


investmentwatchblog--2020-04-28--If This Is What “The New Normal” Is Going To Look Like, It Is Going To Be Horrible

Are we going to allow fear of COVID-19 to fundamentally reshape social behavior for many years to come ?
It is hard to imagine a world where we are all afraid to shake hands with one another and where getting close enough to someone to actually have a conversation is deemed a “ major risk ” .
Yes , this virus spreads incredibly easily , but eventually this pandemic will fade and hopefully a lot of the measures that were instituted to help prevent the spread of COVID-19 will fade away too .
For example , I really don ’ @ @ @ @ @ @ @ I have to go down the aisle .
If I am in serious shopping mode , I want to be able to go up and down a particular aisle as much as I please .
If I get kicked out of a store someday for “ going against the arrows ” I am going to be really upset .
And I really , really don ’ t want to have my temperature checked when I go to eat at a restaurant , but that is apparently starting to happen all over the nation… @ @ @ @ @ @ @ the spread of this virus , because people can spread it long before they are showing any symptoms at all .
So that needs to stop right now .
If you try to check my temperature when I enter your establishment , I will promptly turn around and go get a burger somewhere else .
And it isn ’ t just businesses that are giving in to the hysteria .
For example , a North Carolina woman named Erin Strine burst into tears when she realized that people would be sitting next to @ @ @ @ @ @ @ taking… I have a really easy solution for her .
If you feel your life is at risk , don ’ t get on the plane .
Her story caused me to recall one particular horrid flight that I once had to endure .
Like her , I was in the middle seat , and two extremely overweight individuals were stationed on either side of me .
And just when I thought it couldn ’ t get any worse , the person directly in front of me decided to recline their seat all @ @ @ @ @ @ @ like a baby , I took my ordeal like a man .
Look , I am not trying to minimize the threat of COVID-19 one bit .
In fact , I was warning about the danger that this virus posed all the way back when the very first reports were coming out of China .
Anyone that follows my work on a regular basis can easily verify this .
At this point , there are more than a million confirmed cases in the United States and more than 56,000 people have died .
@ @ @ @ @ @ @ been particularly nightmarish in New York… Other areas of the country have been hit very hard as well .
In fact , the Boston Globe published 21 pages of obituaries on Sunday… This is the biggest public health crisis that our generation has experienced so far , and anyone that is not taking it seriously is just being stupid .
But it isn ’ t the end of the world .
Much , much worse things are coming , and it is important to understand that .
If we are not able to @ @ @ @ @ @ @ possibly going to deal with all of the stuff that we are going to have to face in the future ?
On Monday , I was absolutely horrified to learn that a top emergency room doctor in New York City had committed suicide… I can ’ t even imagine the horrors that she witnessed on a daily basis , but suicide is never , ever , ever the answer to anything .
And nothing is ever so bad that it should make you want to kill yourself .
No matter how difficult it @ @ @ @ @ @ @ her story never should have ended this way… There is always hope .
And in her case , she could have certainly walked away from being a doctor and done something else .
Life is such a precious gift , and to see it thrown away so needlessly is absolutely heartbreaking .
Yes , this pandemic is going to be with us for a while .
And yes , a lot more Americans are going to get sick and a lot more Americans are going to die .
But at this point nothing @ @ @ @ @ @ @ to prevent the virus from spreading , and an increasing number of Americans are simply not going to follow restrictions anyway… If you are elderly , have a compromised immune system or are in some other high risk group , you will need to quarantine yourself for the foreseeable future .
But the rest of us are going to have to try to start resuming normal activities .
Unfortunately , the “ new normal ” is likely to look a whole lot different from the “ old normal ” , and many people @ @ @ @ @ @ @ all .

by Michael Snyder
Are we going to allow fear of COVID-19 to fundamentally reshape social behavior for many years to come? It is hard to imagine a world where we are all afraid to shake hands with one another and where getting close enough to someone to actually have a conversation is deemed a “major risk”. Yes, this virus spreads incredibly easily, but eventually this pandemic will fade and hopefully a lot of the measures that were instituted to help prevent the spread of COVID-19 will fade away too. For example, I really don’t want Walmart telling me which direction I have to go down the aisle. If I am in serious shopping mode, I want to be able to go up and down a particular aisle as much as I please. If I get kicked out of a store someday for “going against the arrows” I am going to be really upset. And I really, really don’t want to have my temperature checked when I go to eat at a restaurant, but that is apparently starting to happen all over the nation…
With staff wearing masks, checking customers’ temperatures and using disposable paper place mats, some of the nation’s restaurants reopened for dine-in service Monday as states loosened more coronavirus restrictions. But many eateries remained closed amid safety concerns and community backlash.
Checking temperatures is not going to stop the spread of this virus, because people can spread it long before they are showing any symptoms at all.
So that needs to stop right now. If you try to check my temperature when I enter your establishment, I will promptly turn around and go get a burger somewhere else.
And it isn’t just businesses that are giving in to the hysteria.
For example, a North Carolina woman named Erin Strine burst into tears when she realized that people would be sitting next to her on a flight that she was taking…
Strine said she was alarmed by how little social distancing was taking place on the packed flight. She expressed concern for her health when she realized she was placed in a middle seat. ‘I really felt like my life and the life of everyone around me was at risk,’ she said. ‘I just sat there silently crying into my mask because I was really overwhelmed by how unsafe I felt.’
I have a really easy solution for her.
If you feel your life is at risk, don’t get on the plane.
This isn’t rocket science.
Her story caused me to recall one particular horrid flight that I once had to endure. Like her, I was in the middle seat, and two extremely overweight individuals were stationed on either side of me. And just when I thought it couldn’t get any worse, the person directly in front of me decided to recline their seat all the way.
But instead of whining like a baby, I took my ordeal like a man.
Look, I am not trying to minimize the threat of COVID-19 one bit.
In fact, I was warning about the danger that this virus posed all the way back when the very first reports were coming out of China. Anyone that follows my work on a regular basis can easily verify this.
At this point, there are more than a million confirmed cases in the United States and more than 56,000 people have died.
That is serious.
And things have been particularly nightmarish in New York…
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Nearly half of all New Yorkers say they know somebody who has died of coronavirus, a new poll finds, shedding a stunning light on just how deeply the pandemic has hit the Big Apple. The state-wide survey, carried out by Siena College, discovered that 46 percent of New York City residents personally knew someone killed by COVID-19, as do 36 percent of respondents living in the suburbs, and 13 percent of those living upstate.
Other areas of the country have been hit very hard as well. In fact, the Boston Globe published 21 pages of obituaries on Sunday…
As the total confirmed COVID-19 cases approach one million this week, including over 55,000 deaths — the vast majority of these concentrated in American east coast cities, especially in the tri-state area — newspaper obituaries in the same cities are expanding to unheard of numbers of pages. As a stunning case in point, The Boston Globe on Sunday included an unprecedented 21 total pages of death notices due to the coronavirus pandemic. The newspaper said its archives showed on the same day last year, the obit section was at its usual seven pages.
This is the biggest public health crisis that our generation has experienced so far, and anyone that is not taking it seriously is just being stupid.
But it isn’t the end of the world. Much, much worse things are coming, and it is important to understand that.
If we are not able to handle this pandemic, how are we possibly going to deal with all of the stuff that we are going to have to face in the future?
On Monday, I was absolutely horrified to learn that a top emergency room doctor in New York City had committed suicide…
The head of the emergency department at a Manhattan hospital committed suicide after spending days on the front lines of the coronavirus battle, her family said Monday. “She tried to do her job, and it killed her,’’ Dr. Philip Breen told the New York Times of his physician daughter, Dr. Lorna Breen, who had been medical director of the NewYork-Presbyterian Allen Hospital amid the pandemic.
I can’t even imagine the horrors that she witnessed on a daily basis, but suicide is never, ever, ever the answer to anything.
And nothing is ever so bad that it should make you want to kill yourself.
No matter how difficult it was to deal with dying patients, her story never should have ended this way…
In the days leading up to her death, the 48-year-old reportedly recounted to family members a series of traumatic scenes she’d witnessed working in the Manhattan hospital, including an onslaught of patients dying in front of her before they could even be removed from ambulances. Breen had recently contracted COVID-19 but had returned to work at Allen after a week-and-a-half of rest. After the hospital sent her home, she re-located to Charlottesville to recuperate under the instructions of her father, Dr. Philip C. Breen.
There is always hope. And in her case, she could have certainly walked away from being a doctor and done something else.
Life is such a precious gift, and to see it thrown away so needlessly is absolutely heartbreaking.
Yes, this pandemic is going to be with us for a while.
And yes, a lot more Americans are going to get sick and a lot more Americans are going to die.
But at this point nothing that we can do will be able to prevent the virus from spreading, and an increasing number of Americans are simply not going to follow restrictions anyway…
Data shows that Americans are suffering from ‘quarantine fatigue’ and are venturing out of the house more often as the coronavirus pandemic continues – as researchers say that 44 states are actually going backwards when it comes to social distancing. A COVID‑19 mobility trends tool created by Apple shows that an increasing number of people in various major cities are now leaving the house more compared to the beginning of the month.
If you are elderly, have a compromised immune system or are in some other high risk group, you will need to quarantine yourself for the foreseeable future. But the rest of us are going to have to try to start resuming normal activities.
Unfortunately, the “new normal” is likely to look a whole lot different from the “old normal”, and many people are not going to like that at all.


investmentwatchblog--2020-04-28--PPP Loans To Run Out In Days…. Are You Surprised?

On Saturday , Congress approved another $ 310 billion in Small Business Administration Paycheck Protection Program loans after the original @ @ @ @ @ ran out in just a matter of days .

On Saturday, Congress approved another $310 billion in Small Business Administration Paycheck Protection Program loans after the original $349 billion in funding ran out in just a matter of days.
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investmentwatchblog--2020-04-28--It Has Begun, Those [Knowingly] Who Tried To Remove POTUS, Treason

The event is failing , states are now opening up , people are taking to the streets .
Now here @ @ @ @ @ FISA will kick it all off .
Flynn will be exonerated , Muellers team has @ @ @ @ @ it up , tick tock .
Once this shot is heard , those [ knowingly @ @ @ @ @ POTUS will be brought up on charges for treason .
It has begun .

The event is failing, states are now opening up, people are taking to the streets. Now here comes the storm, the FISA will kick it all off. Flynn will be exonerated, Muellers team has no case, they made it up, tick tock. Once this shot is heard, those [knowingly] who tried to remove POTUS will be brought up on charges for treason. It has begun.
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investmentwatchblog--2020-04-28--The Crash Has Only Just Begun

The Crash Has Only Just Begun

Everything , including a rational , connected-to-reality , effective financial system , is on back-order and unlikely to ship any time soon .
While the stock market euphorically front-runs the Fed and a V-shaped recovery , the reality is the crash has only just begun .
To understand why , look at income and debt .
Income–earned and unearned–is in free-fall , while debt–which must be serviced by income–is exploding higher .
Bailouts are not a permanent substitute for income .
In the short-term , bailouts–in the form of payments to everyone who ’ s lost their source of earned @ @ @ @ @ @ @ necessary substitute for lost income .
But longer term , subsidizing income with borrowed money weakens the currency and the economy , as productivity stagnates .
As for servicing debt–the unemployed working class is getting an extra $ 600 a week not out of kindness but to make sure these households can continue to service their debts : auto and truck loans , student loans , credit cards , etc .
Absent a federal bailout , millions of unemployed would cease making loan payments , creating a financial crisis for lenders .
Investment @ @ @ @ @ @ @ dividends and stock market gains dry up .
Oil exporters are facing a $ 1.2 trillion cut in annual income , and institutional property owners are facing steep declines as tenants stop paying rent and structural declines in employment will pressure rents lower in housing and commercial properties .
As the housing market implodes , capital gains from flipping houses will also collapse .
As Corporate America realizes it no longer needs vast office spaces for its ( reduced ) workforce as millions are working from home , the demand for commercial properties @ @ @ @ @ @ @ the rental income generated by commercial property will also fall off a cliff .
Even if interest rates fall to zero , the interest paid by borrowers will not be zero .
But even if borrowers get very low rates , they still have to make the monthly principal payments , which can each run into the hundreds of dollars .
Lowering interest rates doesn ’ t reduce the principal payments or reduce the interest due to zero .
Indeed , the student loan and credit card rackets are experts at sucking borrowers @ @ @ @ @ @ @ rates than initially advertised .
Capital isn ’ t flowing into productive investments ; it ’ s front-running the Federal Reserve ’ s free money for financiers in grossly overvalued stocks and seeking “ dead money ” safe havens .
The money that ’ s being sent to unemployed workers is borrowed , and small businesses are being offered loans , much of which will be forgiven if the funds are used to pay wages .
In other words , all of these trillions of dollars being substituted for earned income are borrowed @ @ @ @ @ @ @ overvalued Big Tech stocks and “ dead money ” safe havens , there are no capital flows which will support a return to commerce and productivity that will pay wages or generate investment income ( unearned income ) .
Bulls can argue that “ this time it ’ s different , ” that debt doesn ’ t matter and earnings don ’ t matter , but where is the history to support their claim that capital flowing into overvalued stocks is going to generate earned income that can service the exploding debt load @ @ @ @ @ @ @ .
Everything , including a rational , connected-to-reality , effective financial system , is on back-order and unlikely to ship any time soon .

by Charles Hugh-Smith
Everything, including a rational, connected-to-reality, effective financial system, is on back-order and unlikely to ship any time soon.
While the stock market euphorically front-runs the Fed and a V-shaped recovery, the reality is the crash has only just begun. To understand why, look at income and debt. Income–earned and unearned–is in free-fall, while debt–which must be serviced by income–is exploding higher.
Bailouts are not a permanent substitute for income. In the short-term, bailouts–in the form of payments to everyone who’s lost their source of earned income, i.e. their job–is a necessary substitute for lost income. But longer term, subsidizing income with borrowed money weakens the currency and the economy, as productivity stagnates.
As for servicing debt–the unemployed working class is getting an extra $600 a week not out of kindness but to make sure these households can continue to service their debts: auto and truck loans, student loans, credit cards, etc. Absent a federal bailout, millions of unemployed would cease making loan payments, creating a financial crisis for lenders.
Investment income is also crashing as companies slash dividends and stock market gains dry up. Oil exporters are facing a $1.2 trillion cut in annual income, and institutional property owners are facing steep declines as tenants stop paying rent and structural declines in employment will pressure rents lower in housing and commercial properties.
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As the housing market implodes, capital gains from flipping houses will also collapse. As Corporate America realizes it no longer needs vast office spaces for its (reduced) workforce as millions are working from home, the demand for commercial properties will fall off a cliff, and the rental income generated by commercial property will also fall off a cliff.
Even if interest rates fall to zero, the interest paid by borrowers will not be zero. But even if borrowers get very low rates, they still have to make the monthly principal payments, which can each run into the hundreds of dollars. Lowering interest rates doesn’t reduce the principal payments or reduce the interest due to zero. Indeed, the student loan and credit card rackets are experts at sucking borrowers dry with late fees and much higher rates than initially advertised.
Capital isn’t flowing into productive investments; it’s front-running the Federal Reserve’s free money for financiers in grossly overvalued stocks and seeking “dead money” safe havens.
The money that’s being sent to unemployed workers is borrowed, and small businesses are being offered loans, much of which will be forgiven if the funds are used to pay wages. In other words, all of these trillions of dollars being substituted for earned income are borrowed, and with capital going to grossly overvalued Big Tech stocks and “dead money” safe havens, there are no capital flows which will support a return to commerce and productivity that will pay wages or generate investment income (unearned income).
Bulls can argue that “this time it’s different,” that debt doesn’t matter and earnings don’t matter, but where is the history to support their claim that capital flowing into overvalued stocks is going to generate earned income that can service the exploding debt load?
The crash has only just begun. Everything, including a rational, connected-to-reality, effective financial system, is on back-order and unlikely to ship any time soon.


investmentwatchblog--2020-04-28--Are You Ready For The Great Depression Of The 2020s?

For those of you that were expecting just a “ deep recession ” , I am afraid that you are going to be very disappointed .
It took years for the U.S. economy to fully unravel in the 1930s , but now we have witnessed a similar level of economic devastation in just a matter of weeks .
More than 26 million Americans have already lost their jobs , economic activity has come to a standstill , people are lining up for miles at food banks all over the nation , and businesses are being permanently shuttered at a staggering @ @ @ @ @ @ @ that some states will attempt to “ reopen ” their economies in the weeks ahead .
In most instances , there will be several stages before all of the restrictions are finally lifted , and that means that economic suffering will be stretched out for an extended period of time .
And of course if cases and deaths start spiking again we could see another wave of strict lockdowns all over the country , and needless to say that would greatly escalate this economic downturn .
At this moment , so many hard @ @ @ @ @ @ @ hurting .
I personally know people that have lost their jobs , and you probably do too .
And because virtually nobody is hiring right now , it is going to be exceedingly difficult for newly unemployed workers to find other jobs .
Because it has an economy that is so dependent on the entertainment industry , Nevada is being hit particularly hard by this downturn .
The New York Times spoke to one Nevada resident named Valicia Anderson , and she hardly knows anyone that is still actually working… It has been @ @ @ @ @ @ @ the state is “ about 25 percent ” , and that number is almost certainly going to go higher in the months ahead .
Down in Texas , they are also dealing with an oil crash at the same time that they are wrestling with this coronavirus pandemic , and this has created the worst budget crisis that the city of Houston has ever seen… On the same day that the price for U.S. crude oil fell to about $ 30 below zero — a mind-bending concept and the first time oil prices @ @ @ @ @ @ @ Turner of Houston , the self-proclaimed energy capital of the world , stood before reporters .
His words were grim and muffled by the black mask covering his face .
The mayor announced that city employees would soon be furloughed , but he declined to say how many .
The Houston Zoo , he said , could expect to see funding deferred under what he called “ the worst budget that the city will deal with in its history.
” The high paying energy industry jobs that fueled an incredible real estate boom @ @ @ @ @ @ @ thousands , and it is being reported that many of those that are being laid off are learning the news “ during painful Zoom sessions from home ” … By the way , when did Zoom become such a big thing ?
It seems like so many people are using it now , and I don ’ t understand why it is so popular .
Perhaps my readers will help me to understand this .
Getting back to the economy , at this point even the Trump administration is admitting that the unemployment @ @ @ @ @ @ @ “ we saw during the Great Depression ” … Let ’ s put that into perspective for a moment .
During the last recession , we thought that things were really , really bad when the unemployment rate got up to about 10 percent .
But back in 1933 the unemployment rate peaked at 25 percent , and now we are being told that we should expect something similar here in 2020 .
And of course low income Americans are being hit harder than anyone else .
Just check out these numbers… Hopefully @ @ @ @ @ @ @ it will help to slow down this enormous tsunami of unemployment .
But as I pointed out the other day , millions of Americans are now making much more money being unemployed than they did when they were working , and so that is going to provide an incentive for millions of Americans to stay unemployed for the foreseeable future .
And even if all of the coronavirus restrictions in the entire country were lifted tomorrow , fear of the coronavirus would cause economic activity to be greatly depressed for many months to @ @ @ @ @ @ @ the meat processing industry is a perfect example of this .
Meat processing facilities are being shut down all over the nation , and one expert just told NBC News that we should expect shortages of meat in our grocery stores “ around May 1″… So many of the things that we have been warning about for a long time are starting to happen , but most Americans still do not grasp the seriousness of this crisis .
All of the economic dominoes are starting to fall , and even if the remainder @ @ @ @ @ @ @ than anticipated , it will not fundamentally alter our current economic trajectory .
The “ Everything Bubble ” lasted far longer than it should have , but now that it has burst the pain is going to be absolutely immense .
And it is those at the bottom of the economic food chain that are going to be hit the hardest .

by Michael Snyder
For those of you that were expecting just a “deep recession”, I am afraid that you are going to be very disappointed. It took years for the U.S. economy to fully unravel in the 1930s, but now we have witnessed a similar level of economic devastation in just a matter of weeks. More than 26 million Americans have already lost their jobs, economic activity has come to a standstill, people are lining up for miles at food banks all over the nation, and businesses are being permanently shuttered at a staggering pace. But the good news is that some states will attempt to “reopen” their economies in the weeks ahead. In most instances, there will be several stages before all of the restrictions are finally lifted, and that means that economic suffering will be stretched out for an extended period of time. And of course if cases and deaths start spiking again we could see another wave of strict lockdowns all over the country, and needless to say that would greatly escalate this economic downturn.
At this moment, so many hard working people all over America are deeply hurting.
I personally know people that have lost their jobs, and you probably do too. And because virtually nobody is hiring right now, it is going to be exceedingly difficult for newly unemployed workers to find other jobs.
Because it has an economy that is so dependent on the entertainment industry, Nevada is being hit particularly hard by this downturn. The New York Times spoke to one Nevada resident named Valicia Anderson, and she hardly knows anyone that is still actually working…
When Valicia Anderson starts to count the people she knows in Las Vegas who have lost their jobs, she runs out of fingers fast. Her husband, the breadwinner of her family and a restaurant worker in the Rio casino. All 25 of his co-workers. Her grown son, in a temp agency. The technician who does her nails. The barber who cuts her husband’s hair. Her best friend, a waitress. The three servers and a manager at the TGI Friday’s that is her family’s favorite treat.
It has been estimated that the current unemployment rate in the state is “about 25 percent”, and that number is almost certainly going to go higher in the months ahead.
Down in Texas, they are also dealing with an oil crash at the same time that they are wrestling with this coronavirus pandemic, and this has created the worst budget crisis that the city of Houston has ever seen…
On the same day that the price for U.S. crude oil fell to about $30 below zero — a mind-bending concept and the first time oil prices had ever turned negative — Mayor Sylvester Turner of Houston, the self-proclaimed energy capital of the world, stood before reporters. His words were grim and muffled by the black mask covering his face. The mayor announced that city employees would soon be furloughed, but he declined to say how many. The Houston Zoo, he said, could expect to see funding deferred under what he called “the worst budget that the city will deal with in its history.”
The high paying energy industry jobs that fueled an incredible real estate boom in Texas are now disappearing by the thousands, and it is being reported that many of those that are being laid off are learning the news “during painful Zoom sessions from home”…
Thousands of energy workers, some of whom only lately moved to the region to take advantage of the recent prosperity, have been laid off. Many of them were told the bad news during painful Zoom sessions from home. Warning letters from energy companies have been flooding the Texas Workforce Commission about layoffs and furloughs: 3,500 at Halliburton, 223 at Tenaris, 184 at Baker Hughes, 102 at Diamond Offshore Drilling, 95 at Energy Transfer.
By the way, when did Zoom become such a big thing?
It seems like so many people are using it now, and I don’t understand why it is so popular.
Perhaps my readers will help me to understand this.
Getting back to the economy, at this point even the Trump administration is admitting that the unemployment rate will soon be approaching levels that “we saw during the Great Depression”…
White House senior advisor Kevin Hassett says US economy is in “grave situation” and the unemployment rate could be hitting the same numbers seen during the Great Depression due to the Covid-19 pandemic. “We’re going to be looking at an unemployment rate that approaches rates that I think we saw during the Great Depression,” Hassett told ABC’ ‘The Week’ on Sunday.
Let’s put that into perspective for a moment.
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During the last recession, we thought that things were really, really bad when the unemployment rate got up to about 10 percent.
But back in 1933 the unemployment rate peaked at 25 percent, and now we are being told that we should expect something similar here in 2020.
Wow.
And of course low income Americans are being hit harder than anyone else. Just check out these numbers…
Most Americans support stay-at-home restrictions to protect public health. And yet the burden of the country’s shutdown is disproportionately falling on those least prepared to handle it: About 52 percent of low-income Americans say they or someone in their household has experienced job upheaval, compared to 43 percent of the broader adult population, the Pew Research Center found. Only 23 percent of low-income Americans say they have enough emergency funds to last them three months.
Hopefully as some states attempt “reopenings” it will help to slow down this enormous tsunami of unemployment.
But as I pointed out the other day, millions of Americans are now making much more money being unemployed than they did when they were working, and so that is going to provide an incentive for millions of Americans to stay unemployed for the foreseeable future.
And even if all of the coronavirus restrictions in the entire country were lifted tomorrow, fear of the coronavirus would cause economic activity to be greatly depressed for many months to come.
As I discussed yesterday, the meat processing industry is a perfect example of this. Meat processing facilities are being shut down all over the nation, and one expert just told NBC News that we should expect shortages of meat in our grocery stores “around May 1″…
Beef, chicken and pork could be as scarce as toilet paper soon because so many meat processing plants have been temporarily shut down amid the coronavirus pandemic, industry experts are warning. “We’ve just completed our third week of reduced slaughter and production,” Dennis Smith, a commodity broker/livestock analyst with Archer Financial Services in Chicago, said. “My guess is that about one week out, perhaps around May 1, shortages will begin developing at retail meat counters.”
So many of the things that we have been warning about for a long time are starting to happen, but most Americans still do not grasp the seriousness of this crisis.
All of the economic dominoes are starting to fall, and even if the remainder of this pandemic goes much more smoothly than anticipated, it will not fundamentally alter our current economic trajectory.
The “Everything Bubble” lasted far longer than it should have, but now that it has burst the pain is going to be absolutely immense.
And it is those at the bottom of the economic food chain that are going to be hit the hardest.


investmentwatchblog--2020-04-28--FHFA: No Lump Sum Required at the End of Forbearance on Mortgages

Just saw this released from the FHFA , and wanted to share for anyone else experiencing financial hardship right now : “ During this national health emergency , no one should be worried about losing their home , ” said Director Mark Calabria .
“ No lump sum is required at the end of a borrower ’ s forbearance plan for Enterprise-backed mortgages .
To help homeowners navigate the forbearance process , FHFA partnered with CFPB on the Borrower Protection Program to provide homeowners accurate information about forbearance and address concerns noted in some consumer complaints .
While today ’ @ @ @ @ @ @ @ Freddie Mac mortgages , I encourage all mortgage lenders to adopt a similar approach.
” In response to the COVID-19 national emergency , the Enterprises permitted borrowers with a financial hardship due to the pandemic a forbearance option , which is a pause or reduction in their monthly mortgage .
The missed payments will have to be paid back by the borrower .
For those borrowers who opt for forbearance , their mortgage servicer will contact them about 30-days before the end of the forbearance plan to see if the temporary hardship has @ @ @ @ @ @ @ repayment options .
If the hardship has not been resolved , the forbearance plan can be extended .
If the hardship has been resolved , the servicer will work with the borrower to : – Modify the loan so the borrower ’ s payments are added to the end of the mortgage ; or – Set up a modification that reduces the borrower ’ s monthly mortgage payment .

by 3a5m
Just saw this released from the FHFA, and wanted to share for anyone else experiencing financial hardship right now:
“During this national health emergency, no one should be worried about losing their home,” said Director Mark Calabria. “No lump sum is required at the end of a borrower’s forbearance plan for Enterprise-backed mortgages. To help homeowners navigate the forbearance process, FHFA partnered with CFPB on the Borrower Protection Program to provide homeowners accurate information about forbearance and address concerns noted in some consumer complaints. While today’s statement only covers Fannie Mae and Freddie Mac mortgages, I encourage all mortgage lenders to adopt a similar approach.”
In response to the COVID-19 national emergency, the Enterprises permitted borrowers with a financial hardship due to the pandemic a forbearance option, which is a pause or reduction in their monthly mortgage. The missed payments will have to be paid back by the borrower. For those borrowers who opt for forbearance, their mortgage servicer will contact them about 30-days before the end of the forbearance plan to see if the temporary hardship has been resolved and discuss a variety of repayment options. If the hardship has not been resolved, the forbearance plan can be extended. If the hardship has been resolved, the servicer will work with the borrower to:
– Set up a repayment plan;
– Modify the loan so the borrower’s payments are added to the end of the mortgage; or
– Set up a modification that reduces the borrower’s monthly mortgage payment.


investmentwatchblog--2020-04-28--“The damage to the household sector is so severe that it is going to impair living standards for mos

“ The damage to the household sector is so severe that it is going to impair living standards for most @ @ @ @ @

“The damage to the household sector is so severe that it is going to impair living standards for most of the decade.” t.co/KTsHgIMFuZ
— Lisa Abramowicz (@lisaabramowicz1) April 27, 2020


investmentwatchblog--2020-04-28--Silicon Valley Bank to Donate all Fees from PPP to Pandemic Relief

Lots of bigger banks are receiving a lot of criticism right now , so I wanted to highlight Silicon Valley Bank .
While the majority of their clients are in tech , many of them are also small startups with only a few employees or just the founder ( s ) .
Despite a few initial hiccups in the system they set up for PPP causing applications to be delayed by a week , they were still able to submit and fund their clients during the first round .
We ’ re a small startup ( small PPP loan ) @ @ @ @ @ @ @ acceptance the day the first round ran out , and received our wire last week .
A few minutes ago SVB announced they are donating all fees from CARES to COVID-19 relief efforts .
It would be great to see other big banks do the same .
Full e-mail from the CEO below : Last Thursday , we announced our Q1 2020 earnings and held our annual shareholder meeting .
Following these events , I am reflecting on the changes we have all experienced since just the beginning of this year and wanted @ @ @ @ @ @ @ some of our relief efforts and reinforce our commitment to doing everything we can to increase your probability of success .
In good times and in challenging times , this is our mission .
Like you , we are moved by heart-wrenching hardships impacting companies and communities worldwide .
We are inspired by the brave people who show up every day to provide us all essential services .
SVB considers it our responsibility to support them and the larger community as well as we possibly can during this exceptionally tough time .
None @ @ @ @ @ @ @ efforts would be possible without our solid financial foundation , which allows us to invest in our business , offer immediate relief to clients and respond in robust ways to community needs .
Our long history of working with high-growth companies and their investors , private equity firms , premium wineries and private banking clients positions us well to help navigate adversity and help our clients manage successfully through this difficult time .
Together , we are making a difference .
There are SVB clients that are developing vaccines , contact tracing methods @ @ @ @ @ @ @ employees and locally-funded charities are helping students and seniors adapt to lockdowns and getting healthcare providers access to life-saving equipment and nourishment .
Consistent with our long tradition of supporting and giving back to our communities , we initially committed $ 5.5 million to local , regional and global COVID-19 relief activities in the eight countries and 15 states where we have offices .
We just announced that we will also donate all net fees we receive from the US CARES Act Paycheck Protection Program ( PPP ) to support pandemic relief efforts @ @ @ @ @ @ @ some of the highlights of our COVID-19 Response & Community Support Initiatives to date : SVB Debt ReliefOur teams have worked with many of our clients to find some funding and payment relief to support their challenging situations .
Since the beginning of April , our venture debt principal deferral program has enabled more than 1,000 startups to defer their principal payments for six months on loans of $ 10 million or less for a combined $ 2.1 billion in funded debt .
The Premium Wine Division is enabling a majority of clients @ @ @ @ @ @ @ six months , and we have created a wine gifting program to support wine sales .
In addition , SVB Private Bank clients have also been given the option to defer mortgage payments for 90 days .
Government ReliefSVB is actively working with industry groups and government leaders in the US , UK and other nations to help design and implement small-business economic relief programs to create stability and then prepare for recovery .
In the first round of the PPP , SVB received more than 5,500 applications , of which more than @ @ @ @ @ @ @ online system , representing approximately $ 2.2 billion in relief , as of April 16 .
We will continue to support this program given new fund availability and will process as many previously received applications as possible .
We continue to review other government programs for client eligibility .
Additional Startup and Small Business ResourcesSVB is supporting emergency small business grants of $ 10,000 each for qualified applicants through Hello Alice ’ s Business for All initiative .
Hello Alice hosts a free COVID-19 Business Resource Center that is focused on linking women- @ @ @ @ @ @ @ funding opportunities , mentors and other support programs .
To learn more and apply for emergency grants , go to www.covid19businesscenter.com .
Engaging Community SupportWe have identified three primary focus areas for our philanthropic efforts : health , food security and shelter , and small business relief .
The $ 5.5 million we committed to COVID-19 charitable relief initiatives , was accomplished through corporate contributions to global and national or regional charities , direct community-based giving and a 3:1 match for employees ’ donations to relevant causes in their local area .
We @ @ @ @ @ @ @ loan origination fees we receive from the SBA program when they become available .
In partnership with Founders Pledge , SVB also developed the COVID-19 Global Impact & Innovation Fund , which we seeded with a $ 1 million contribution .
The goal of the fund is to identify and consolidate into a single fund , high-impact organizations that are now focused on activities to help slow COVID-19 ’ s spread and provide immediate relief to those affected .
The fund is open for donations from the public .
Supporting Our EmployeesWe hear @ @ @ @ @ @ @ employees are our greatest asset .
I agree .
Their resilience and perseverance during this crisis has been remarkable .
We know if we take care of our employees , only then can they take care of you .
SVB is supporting our employees and their families with health , well-being and financial support programs .
Our employees are pulling together to serve you .
For updates on SVB COVID-19 Response & Community Support efforts , please visit www.svb.com/covid-relief .
For more than 35 years , SVB has supported our clients through up @ @ @ @ @ @ @ there may be many unknowns , but we believe that the hallmark resilience of our clients will continue .
We are honored to be able to assist you and we are working hard to improve your chances of managing successfully through this crisis .
We remain optimistic , and we are here to help you .

by letssail
Lots of bigger banks are receiving a lot of criticism right now, so I wanted to highlight Silicon Valley Bank. While the majority of their clients are in tech, many of them are also small startups with only a few employees or just the founder(s).
Despite a few initial hiccups in the system they set up for PPP causing applications to be delayed by a week, they were still able to submit and fund their clients during the first round. We’re a small startup (small PPP loan). and received our notice of SBA acceptance the day the first round ran out, and received our wire last week.
A few minutes ago SVB announced they are donating all fees from CARES to COVID-19 relief efforts.
It would be great to see other big banks do the same.
Full e-mail from the CEO below:
To Our Clients:
Last Thursday, we announced our Q1 2020 earnings and held our annual shareholder meeting. Following these events, I am reflecting on the changes we have all experienced since just the beginning of this year and wanted to share with you the status of some of our relief efforts and reinforce our commitment to doing everything we can to increase your probability of success. In good times and in challenging times, this is our mission.
Like you, we are moved by heart-wrenching hardships impacting companies and communities worldwide. We are inspired by the brave people who show up every day to provide us all essential services. SVB considers it our responsibility to support them and the larger community as well as we possibly can during this exceptionally tough time. None of our debt relief or community support efforts would be possible without our solid financial foundation, which allows us to invest in our business, offer immediate relief to clients and respond in robust ways to community needs.
Our long history of working with high-growth companies and their investors, private equity firms, premium wineries and private banking clients positions us well to help navigate adversity and help our clients manage successfully through this difficult time. Together, we are making a difference. There are SVB clients that are developing vaccines, contact tracing methods and faster healthcare delivery models. Our employees and locally-funded charities are helping students and seniors adapt to lockdowns and getting healthcare providers access to life-saving equipment and nourishment.
Consistent with our long tradition of supporting and giving back to our communities, we initially committed $5.5 million to local, regional and global COVID-19 relief activities in the eight countries and 15 states where we have offices. We just announced that we will also donate all net fees we receive from the US CARES Act Paycheck Protection Program (PPP) to support pandemic relief efforts.
I want to share with you some of the highlights of our COVID-19 Response & Community Support Initiatives to date:
SVB Debt ReliefOur teams have worked with many of our clients to find some funding and payment relief to support their challenging situations. Since the beginning of April, our venture debt principal deferral program has enabled more than 1,000 startups to defer their principal payments for six months on loans of $10 million or less for a combined $2.1 billion in funded debt. The Premium Wine Division is enabling a majority of clients to defer principal payments for three to six months, and we have created a wine gifting program to support wine sales. In addition, SVB Private Bank clients have also been given the option to defer mortgage payments for 90 days.
Government ReliefSVB is actively working with industry groups and government leaders in the US, UK and other nations to help design and implement small-business economic relief programs to create stability and then prepare for recovery. In the first round of the PPP, SVB received more than 5,500 applications, of which more than 3,600 were processed through SBA’s online system, representing approximately $2.2 billion in relief, as of April 16. We will continue to support this program given new fund availability and will process as many previously received applications as possible. We continue to review other government programs for client eligibility.
Additional Startup and Small Business ResourcesSVB is supporting emergency small business grants of $10,000 each for qualified applicants through Hello Alice’s Business for All initiative. Hello Alice hosts a free COVID-19 Business Resource Center that is focused on linking women- and minority-owned businesses to relief programs, funding opportunities, mentors and other support programs. To learn more and apply for emergency grants, go to www.covid19businesscenter.com.
Engaging Community SupportWe have identified three primary focus areas for our philanthropic efforts: health, food security and shelter, and small business relief. The $5.5 million we committed to COVID-19 charitable relief initiatives, was accomplished through corporate contributions to global and national or regional charities, direct community-based giving and a 3:1 match for employees’ donations to relevant causes in their local area. We will expand donations with the net PPP loan origination fees we receive from the SBA program when they become available.
In partnership with Founders Pledge, SVB also developed the COVID-19 Global Impact & Innovation Fund, which we seeded with a $1 million contribution. The goal of the fund is to identify and consolidate into a single fund, high-impact organizations that are now focused on activities to help slow COVID-19’s spread and provide immediate relief to those affected. The fund is open for donations from the public.
Supporting Our EmployeesWe hear from our clients every day that our employees are our greatest asset. I agree. Their resilience and perseverance during this crisis has been remarkable. We know if we take care of our employees, only then can they take care of you. SVB is supporting our employees and their families with health, well-being and financial support programs. Our employees are pulling together to serve you.
For updates on SVB COVID-19 Response & Community Support efforts, please visit www.svb.com/covid-relief.
For more than 35 years, SVB has supported our clients through up and down cycles. Short term, there may be many unknowns, but we believe that the hallmark resilience of our clients will continue. We are honored to be able to assist you and we are working hard to improve your chances of managing successfully through this crisis. We remain optimistic, and we are here to help you.
Wishing you well,
Greg Becker
CEO
Silicon Valley Bank


investmentwatchblog--2020-04-28--Buying a house responsibly is really hard.

I make $ 130k – After taxes , mandatory retirement contributions , and health insurance , I take home about $ 7,050/mo .
My household expenses ( 2 adults , 2 young children ) including $ 1,300/mo in rent amounts to $ 4,300/mo .
We ’ ve been saving for a house , and have about $ 34k so far for downpayment + emergency fund .
My income will likely go up in the next few years , but let ’ s assume it won ’ t .
Following the “ rule of thumb ” that your home cost less @ @ @ @ @ @ @ I should be looking to spend no more than $ 1,762/mo on mortgage , insurance , taxes , maintenance , and PMI ( if applicable ) .
If we are able to save a 20 % downpayment , following the rule of thumb above , we would be able to afford a $ 214k house on a 15-year note , or a $ 278k house on a 30-year note .
If we only save a 5 % downpayment ( and have to pay PMI ) we would would only be able to afford @ @ @ @ @ @ @ year note , or a $ 232k house on a 30 year note .
Houses in our area ( MCOL ) that interest us are in the $ 350k – $ 450k range , so even if we do save the 20 % downpayment we are going to have to ‘ break the rules.
’ Assuming we buy a $ 400k house with 20 % down ( which would take us another 18-24 months of saving… ) on a 30 year note , we would be spending roughly 40 % of our take-home @ @ @ @ @ @ @ actually make this work ?
Before doing the math , I was under the impression that we would easily be able to afford a house in the range that we ’ re looking .
After we buy , I would like to be more aggressive with saving for retirement , and we would like to take a vacation each year , so I definitely don ’ t want to stretch too far on housing expenses .
Any thoughts or insights would be much appreciated .

by redoran
I make $130k – After taxes, mandatory retirement contributions, and health insurance, I take home about $7,050/mo. My household expenses (2 adults, 2 young children) including $1,300/mo in rent amounts to $4,300/mo. We’ve been saving for a house, and have about $34k so far for downpayment + emergency fund. My income will likely go up in the next few years, but let’s assume it won’t.
Following the “rule of thumb” that your home cost less than 25% of your take-home, I should be looking to spend no more than $1,762/mo on mortgage, insurance, taxes, maintenance, and PMI (if applicable).
If we are able to save a 20% downpayment, following the rule of thumb above, we would be able to afford a $214k house on a 15-year note, or a $278k house on a 30-year note.
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If we only save a 5% downpayment (and have to pay PMI) we would would only be able to afford a $179k house on a 15 year note, or a $232k house on a 30 year note.
Houses in our area (MCOL) that interest us are in the $350k – $450k range, so even if we do save the 20% downpayment we are going to have to ‘break the rules.’ Assuming we buy a $400k house with 20% down (which would take us another 18-24 months of saving…) on a 30 year note, we would be spending roughly 40% of our take-home on housing expenses.
How do people actually make this work? Before doing the math, I was under the impression that we would easily be able to afford a house in the range that we’re looking. After we buy, I would like to be more aggressive with saving for retirement, and we would like to take a vacation each year, so I definitely don’t want to stretch too far on housing expenses.
Any thoughts or insights would be much appreciated.


investmentwatchblog--2020-04-28--US Economy in August 2019 vs April 2020 – a Comparison

On August 19 , 2019 the US unemployment rate sat near a record low of 3.8 % .
Almost all industries were full steam ahead with investment .
Carnival was building their largest ship to date , new US shale oil wells were coming online all over the country , and even GE looked like they were on the mend with their new CEO .
The worst news in corporate America was around Boeing forgetting that they should train pilots when they design a new plane .
Our president was in the news for saying things like we were going @ @ @ @ @ @ @ markets that recession fears were unfounded .
That day the S & P 500 closed at 2847.11 Fast forward 9 months to April 27 , 2020 .
The US unemployment rate is likely already higher than 20 % and is in spitting distance of the record 24.9 % that was set in 1933 during the great depression .
A pandemic ravages our cities and the elderly , a pandemic caused by a germ we know so little about that our president suggested injecting bleach into our veins to treat it .
The travel @ @ @ @ @ @ @ nearly all humans stopped traveling or leaving their house .
Oil was priced at negative $ 40 and projections of June delivery have been forecasted as low as negative $ 100 , the entire US oil industry is effectively bankrupt .
Our basic food supply chains have been so taxed by the virus that shortages are projected to begin within two weeks .
From a business perspective a near worst case scenario has occurred .
In response , bank ’ s capital requirements have been cut to 0 , The Fed has employed @ @ @ @ @ @ @ recession at faster speed and greater depth , and congress has passed unprecedented levels of aid .
Despite these steps , it doesn ’ t change the fact that companies will fail , jobs will not return quickly , and we are now in the steepest recession in US history .
What little forward looking guidance companies are willing to offer is all negative and even the rosiest analysis indicates negative worldwide GDP growth .
Today , April 27 , 2020 , the S & P 500 hits 2879 or 1 % higher @ @ @ @ @ @ @ information is only for educational purposes .
Do not make any investment decisions based on the information in this article .
Do you own due diligence .

by tedchambers1
On August 19, 2019 the US unemployment rate sat near a record low of 3.8%. Almost all industries were full steam ahead with investment. Carnival was building their largest ship to date, new US shale oil wells were coming online all over the country, and even GE looked like they were on the mend with their new CEO. The worst news in corporate America was around Boeing forgetting that they should train pilots when they design a new plane. Our president was in the news for saying things like we were going to buy Greenland but ultimately reassured the markets that recession fears were unfounded. That day the S&P 500 closed at 2847.11
Fast forward 9 months to April 27, 2020. The US unemployment rate is likely already higher than 20% and is in spitting distance of the record 24.9% that was set in 1933 during the great depression. A pandemic ravages our cities and the elderly, a pandemic caused by a germ we know so little about that our president suggested injecting bleach into our veins to treat it. The travel and entertainment industries sit in ruin as nearly all humans stopped traveling or leaving their house. Oil was priced at negative $40 and projections of June delivery have been forecasted as low as negative $100, the entire US oil industry is effectively bankrupt. Our basic food supply chains have been so taxed by the virus that shortages are projected to begin within two weeks. From a business perspective a near worst case scenario has occurred.
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In response, bank’s capital requirements have been cut to 0, The Fed has employed all emergency programs used during the great recession at faster speed and greater depth, and congress has passed unprecedented levels of aid. Despite these steps, it doesn’t change the fact that companies will fail, jobs will not return quickly, and we are now in the steepest recession in US history. What little forward looking guidance companies are willing to offer is all negative and even the rosiest analysis indicates negative worldwide GDP growth. Today, April 27, 2020, the S&P 500 hits 2879 or 1% higher than August 2019.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.


investmentwatchblog--2020-04-28--Why Beyond ($BYND) is skyrocketing and why the meat shortage is worse than you think.

At least 12 meatpacking plants in the US have closed with at least 2460 workers testing positive and 17 deaths .
A single Smithfield plant in South Dakota “ has reported 518 infections in employees ” .
The situation is so bad that about a quarter of American pork production and 10 % of beef output has halted .
Meat processing plants are a hotspot for virus because of the close working conditions and a constant spray of water on the lines .
Masks are basically useless once they get wet .
Meat workers are 4x more likely to become @ @ @ @ @ @ @ no way for these factories to operate safely or adhere to social distancing .
100 U.S. Department of Agriculture inspectors have tested positive for the coronavirus .
These inspectors are very likely to spread the virus to other plants that may not be impacted before they realize they are sick .
Tyson ( $ TSN ) has already closed 4 of their meat processing plants because of Covid-19 cases while 6 more are dealing with Covid outbreaks but haven ’ t shut down yet .
So how is Tyson protecting its workers ?
@ @ @ @ @ @ @ up to work .
At the Tyson plant in Camilla , Ga , the company offered its 2,100 workers a $ 500 bonus if they worked in April , May and June without missing a day .
Which may have led to at least 3 deaths including a longtime 15 year employee named Annie Grant .
She tried to call in sick but was told that she “ had to work to feed America.
” How about the Department of Agriculture ?
What are they doing to help ?
“ Rather than increase @ @ @ @ @ @ @ of Agriculture relaxed it in the midst of the pandemic .
Just this month , the agency allowed 15 poultry plants to exceed federal limits on how many birds workers can process in a minute.
” Even our Vice President is putting pressure on workers to continue coming to work even without proper protection in place .
“ You are vital , ” Vice President Mike Pence said on Tuesday .
“ You are giving a great service to the people of the United States of America and we need you to continue @ @ @ @ @ @ @ call critical infrastructure , to show up and do your job.
” These closures are now affecting ranchers trucks full of hogs and cattle are being turned away at these factories .
When pigs/cattle have to stay on a ranch too long they end up running out of both feed and space .
Grocers are now struggling to secure meat which will lead to rising costs of meat .
Disclaimer : This information is only for educational purposes .
Do not make any investment decisions based on the information in this article .
@ @ @ @ @ @

by dontcreepmyusername
What is happening?
At least 12 meatpacking plants in the US have closed with at least 2460 workers testing positive and 17 deaths. A single Smithfield plant in South Dakota “has reported 518 infections in employees”. The situation is so bad that about a quarter of American pork production and 10% of beef output has halted.
Meat processing plants are a hotspot for virus because of the close working conditions and a constant spray of water on the lines. Masks are basically useless once they get wet. Meat workers are 4x more likely to become ill than other manufacturing workers There is no way for these factories to operate safely or adhere to social distancing.
100 U.S. Department of Agriculture inspectors have tested positive for the coronavirus. These inspectors are very likely to spread the virus to other plants that may not be impacted before they realize they are sick.
Tyson ($TSN) has already closed 4 of their meat processing plants because of Covid-19 cases while 6 more are dealing with Covid outbreaks but haven’t shut down yet.
Workers Protection?
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So how is Tyson protecting its workers? By offering them bonuses to keep showing up to work. At the Tyson plant in Camilla, Ga, the company offered its 2,100 workers a $500 bonus if they worked in April, May and June without missing a day. Which may have led to at least 3 deaths including a longtime 15 year employee named Annie Grant. She tried to call in sick but was told that she “had to work to feed America.”
How about the Department of Agriculture? What are they doing to help? “Rather than increase safety and oversight, the U.S. Department of Agriculture relaxed it in the midst of the pandemic. Just this month, the agency allowed 15 poultry plants to exceed federal limits on how many birds workers can process in a minute.”
Even our Vice President is putting pressure on workers to continue coming to work even without proper protection in place. “You are vital,” Vice President Mike Pence said on Tuesday. “You are giving a great service to the people of the United States of America and we need you to continue, as a part of what we call critical infrastructure, to show up and do your job.”
Aftermath
These closures are now affecting ranchers trucks full of hogs and cattle are being turned away at these factories. When pigs/cattle have to stay on a ranch too long they end up running out of both feed and space.
Grocers are now struggling to secure meat which will lead to rising costs of meat.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.


investmentwatchblog--2020-04-28--FED’s term sheet: infinite QE is FED’s lie and bubble

Asset backed security loan facilities : 0 ( look under Credit extended thru FED.. , look at that blue term @ @ @ @ @ what FED ’ s doing is giving the market false hope that it will actually @ @ @ @ @ what , they ’ re not actually doing it .
It ’ s almost like @ @ @ @ @ .
Take it what you may .
Bulls , you may be thinking , good @ @ @ @ @ t even gotten started yet .
Bears , like me , I think this bubble @ @ @ @ @ soon .
Disclaimer : This information is only for educational purposes .
Do not make @ @ @ @ @ the information in this article .
Do you own due diligence .

by onfallen
Fed’s SMCCF balance: 0 (look under secondary credit) www.federalreserve.gov/releases/h41/20200416/
Asset backed security loan facilities: 0 (look under Credit extended thru FED.., look at that blue term line) www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
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Basically, what FED’s doing is giving the market false hope that it will actually do infinite QE, guess what, they’re not actually doing it. It’s almost like a pump and dump scheme.
Take it what you may. Bulls, you may be thinking, good news, they haven’t even gotten started yet. Bears, like me, I think this bubble is gonna burst real soon.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.


investmentwatchblog--2020-04-28--We are reaching peak retail retardation

We are reaching peak retail retardation

Right , own-up , who was it ?
This happens with TSLA and TLSA all the time .
Imagine believing @ @ @ @ @ when investors are this retarded .

by DongusMcLongus
Right, own-up, who was it?
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This happens with TSLA and TLSA all the time.
Imagine believing in the efficient market hypothesis when investors are this retarded.


investmentwatchblog--2020-04-28--The Tokyo Whale is hungry again!

The Tokyo Whale is hungry again!

A new week has started with something which we will find awfully familiar although not everyone will as I will explain .
But first let me give you something of a counterpoint and indeed irony to the news .
SINGAPORE ( Reuters ) – Oil prices fell on Monday on signs that worldwide oil storage is filling rapidly , raising concerns that production cuts will not come fast enough to fully offset the collapse in demand from the coronavirus pandemic .
U.S. oil futures led losses , falling by more than $ 2 a barrel on fears that storage at @ @ @ @ @ @ @ capacity soon .
U.S. crude inventories rose to 518.6 million barrels in the week to April 17 , near an all-time record of 535 million barrels set in 2017 .
[ EIA/S ] In ordinary times this would be a case of let ’ s get this party started in Japan .
This is because it is a large energy importer and thus it would be getting both and balance of payments and manufacturing boost .
In itself it would have been extremely welcome because you may recall that its economy had seen @ @ @ @ @ @ @ So the land of the rising sun or Nihon was already in what Taylor Swift would call “ trouble , trouble , trouble ” , The raising of the Consumption Tax ( what we call VAT ) had in an unfortunate coincidence combined with the 2019 trade war .
The former was rather like 2014 as we mull all the promises it would not be .
Also let me give you a real undercut , Japan acted to improve its fiscal position just in time for it to be considered much less important @ @ @ @ @ @ @ for newer readers may come as a shock .
Yes the Bank of Japan is buying equities and has just suggested it will double its annual purchases of them .
Those who follow me will be aware it has been buying more as for example it is now buying around 120 billion Yen on the days it buys ( nine so far in April ) as opposed to the previous 70 billion or so having bought over 200 billion when equity markets were hit hard .
The detail is that it buys via @ @ @ @ @ @ @ avoid the embarrassment of having to vote at AGMs and the like .
Oh and in another familiar theme upper limits are not always upper limits .
Also the , you may note that the limit for commercial property purchases has been doubled too .
I do sometimes wonder why they bother with the commercial property buys although now we have an extra factor which is that in so many places around the world commercial property looks under a lot of pressure .
For example if there is more working from home as @ @ @ @ @ @ @ interest-rate of -0.1 % but not for quite everybody .
Yes the banks and as you can see they will be a “ double-bubble ” gain from lending under the new Bank of Japan scheme .
I wonder if the Japanese taxpayer has noted that extension of operations to the private debt sphere as well ?
I have highlighted another risk being taken on behalf of the Japanese taxpayer .
Should there be a default there might be trouble .
Surely at any sign of trouble everyone will simply sell to the Bank @ @ @ @ @ @ @ buyer of more like first than last resort .
This is something we have been expecting and just as a reminder the previous target was between 70 and 80 trillion Yen a year .
It is hard to get too worked up about that as we have been expecting it to be along .
In theory the plan remains the same , although there is a slight shuffle as in the past they have indicated a range between 0 % and -0.1 % .
The first issue is that the Japanese economy is @ @ @ @ @ @ @ problems and the PMI business survey suggested a GDP decline of the order of 10 % .
With its “ face ” culture that is likely to be an underestimate .
In response there has been this .
They tried something like this back in the 90s and I remember calculating it as £142 as compared to £752 this time .
As to adjusting for inflation well in the Lost Decade era Japan has seen so little of that .
So we see that the Bank of Japan is underwriting the spending plans @ @ @ @ @ @ @ is the same Japanese government which underwrites the bond buying of the Bank of Japan !
It seems set to make sure that the Japanese government can borrow for free in terms of yield as I note this .
In fact just like a parent speaking to a child you can indulge in the JGB market but only if you play nicely .
You will find many cheering “ Yield Curve Control ” although more than a few of those will be hoping that there claims that the Bank of Japan will need @ @ @ @ @ @ @ Actually there have been phases where it has kept yields up rather than down .
In the future will the Bank of Japan own everything ?
I have done some interviews for it recently and here is one on the benefits of lower oil prices

by Shaun Richards
A new week has started with something which we will find awfully familiar although not everyone will as I will explain. But first let me give you something of a counterpoint and indeed irony to the news.
SINGAPORE (Reuters) – Oil prices fell on Monday on signs that worldwide oil storage is filling rapidly, raising concerns that production cuts will not come fast enough to fully offset the collapse in demand from the coronavirus pandemic. U.S. oil futures led losses, falling by more than $2 a barrel on fears that storage at Cushing, Oklahoma, could reach full capacity soon. U.S. crude inventories rose to 518.6 million barrels in the week to April 17, near an all-time record of 535 million barrels set in 2017. [EIA/S]
In ordinary times this would be a case of let’s get this party started in Japan. This is because it is a large energy importer and thus it would be getting both and balance of payments and manufacturing boost. In itself it would have been extremely welcome because you may recall that its economy had seen a reverse before the present pandemic.
The contraction of Japan’s 4Q 2019 GDP was worse than expected, coming in at -1.8% q/q (- 7.1% annualized rate) versus the first estimate of -1.6% q/q (-6.3% annualized rate) as the contraction in business spending was deeper than what was first reported in February, ( FXStreet )
So the land of the rising sun or Nihon was already in what Taylor Swift would call “trouble, trouble,trouble”, The raising of the Consumption Tax ( what we call VAT) had in an unfortunate coincidence combined with the 2019 trade war. The former was rather like 2014 as we mull all the promises it would not be. Also let me give you a real undercut, Japan acted to improve its fiscal position just in time for it to be considered much less important.
The Tokyo Whale
Let me open with something which for newer readers may come as a shock.
The Bank will actively purchase ETFs and J-REITs for the time being so that their amounts outstanding will increase at annual paces with the upper limit of about 12 trillion
yen and about 180 billion yen, respectively.
Yes the Bank of Japan is buying equities and has just suggested it will double its annual purchases of them. Those who follow me will be aware it has been buying more as for example it is now buying around 120 billion Yen on the days it buys ( nine so far in April) as opposed to the previous 70 billion or so having bought over 200 billion when equity markets were hit hard. The detail is that it buys via Exchange Traded Funds ( ETFs) to avoid the embarrassment of having to vote at AGMs and the like.
Oh and in another familiar theme upper limits are not always upper limits.
With a view to lowering risk premia of asset prices in an appropriate manner, the Bank may increase or decrease the amount of purchases depending on market conditions.
Also the ,you may note that the limit for commercial property purchases has been doubled too. I do sometimes wonder why they bother with the commercial property buys although now we have an extra factor which is that in so many places around the world commercial property looks under a lot of pressure. For example if there is more working from home as seems likely.
The Precious! The Precious!
Japan has an official interest-rate of -0.1% but not for quite everybody.
(3) apply a positive interest rate of 0.1 percent to the outstanding balances of current accounts held by financial institutions at the Bank that correspond to the amounts outstanding of loans provided through this
operation.
For whom?
Twice as much as the amounts outstanding of the loans will continue to be included in the Macro Add-on Balances in current accounts held by financial institutions at the Bank.
Yes the banks and as you can see they will be a “double-bubble” gain from lending under the new Bank of Japan scheme. I wonder if the Japanese taxpayer has noted that extension of operations to the private debt sphere as well?
expand the range of eligible collateral to private debt in general, including household debt (from about 8
trillion yen to about 23 trillion yen as of end-March 2020),
Corporate Bonds and Commercial Paper
I have highlighted another risk being taken on behalf of the Japanese taxpayer.
The Bank decided, by a unanimous vote, to significantly increase the maximum amount
of additional purchases of CP and corporate bonds and conduct purchases with the upper
limit of the amount outstanding of about 20 trillion yen in total. In addition, the maximum amounts outstanding of a single issuer’s CP and corporate bonds to be purchased will be raised substantially.
Should there be a default there might be trouble.
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The Bank will increase the maximum share of the Bank’s holdings of CP and corporate
bonds within the total amount outstanding of issuance by a single issuer from the current
25 percent to 50 percent and 30 percent, respectively.
Surely at any sign of trouble everyone will simply sell to the Bank of Japan which will then be a buyer of more like first than last resort.
Who will provide the grand design?
What is yours and what is mine?
‘Cause there is no more new frontier
We have got to make it here ( The Eagles )
Japanese Government Bonds
This is something we have been expecting and just as a reminder the previous target was between 70 and 80 trillion Yen a year.
The Bank will purchase a necessary amount of JGBs without setting an upper limit so that 10-year JGB yields will remain at around zero percent.
It is hard to get too worked up about that as we have been expecting it to be along. In theory the plan remains the same, although there is a slight shuffle as in the past they have indicated a range between 0% and -0.1%.
Comment
The first issue is that the Japanese economy is doing extremely badly. It already had problems and the PMI business survey suggested a GDP decline of the order of 10%. With its “face” culture that is likely to be an underestimate. In response there has been this.
The Japanese government has outlined details of its plan to hand out 100,000 yen, or more than 900 dollars, in cash to all residents as part of its economic response to the coronavirus outbreak. The cash handouts will go to every person listed on Japan’s Basic Resident Register, regardless of nationality. ( NHK)
They tried something like this back in the 90s and I remember calculating it as £142 as compared to £752 this time. As to adjusting for inflation well in the Lost Decade era Japan has seen so little of that.
So we see that the Bank of Japan is underwriting the spending plans of the Japanese government which of course is the same Japanese government which underwrites the bond buying of the Bank of Japan! It seems set to make sure that the Japanese government can borrow for free in terms of yield as I note this.
In case of a rapid increase in the yields, the Bank will purchase JGBs promptly and appropriately.
In fact just like a parent speaking to a child you can indulge in the JGB market but only if you play nicely.
While doing so, the yields may move upward and downward to some extent mainly depending on developments in economic activity and prices.
You will find many cheering “Yield Curve Control” although more than a few of those will be hoping that there claims that the Bank of Japan will need to intervene less have been forgotten. Actually there have been phases where it has kept yields up rather than down.
In the future will the Bank of Japan own everything?
The Express
I have done some interviews for it recently and here is one on the benefits of lower oil prices
www.express.co.uk/finance/city/1272278/coronavirus-news-oil-prices-negative-inflation-uk-wages-spt
Podcast on central bank equity purchases