investmentwatchblog--2020-03-21--Do Saudi Arabia And Russia Really Want To Kill U.S. Shale?

Since 2016 , as an informal leader of the 13-strong non-OPEC group , Russia has been instrumental in the pricing of oil as Saudi Arabia , leading producer in the Organization of Petroleum Exporting Countries .
Now , both find themselves at odds as to how to respond to the global economic crisis caused by the fall in petroleum demand resulting from the COVID-19 outbreak .
The Saudis insisted on overall cuts to be shared by OPEC and non-OPEC with a 2:1 ratio .
Russia saw no need for any cuts because , in its view , earlier OPEC and @ @ @ @ @ @ @ oil industry to fill the gap .
With the sharp fall in oil prices , many small-scale shale oil drillers in the United States will go bankrupt as happened in late 2015 when the Saudis flooded the market with cheap oil .
Starting in 2014 , aided by high oil prices and technical advances , shale oil drillers boosted US crude oil production , accounting for a third of the onshore output .
This raised US oil production from 5.7 million barrels per day in 2011 to a record 17.94 million bpd in @ @ @ @ @ @ @ – transforming the United States into an oil-exporting country after President Barack Obama lifted the 40-year-old crude-oil export ban in December 2015 , following a congressional vote to that effect .
Frenzy : Russia refused to go along with a Saudi plan to reduce oil productions , both nations opened taps and prices soared ( Source : Oil and Gas 360 , Bloomberg ) By banding together such non-OPEC oil producers as Azerbaijan , Bahrain and Bolivia as well as Kazakhstan and Mexico , Russia broke new ground and sealed its leadership role @ @ @ @ @ @ @ groups agreed to production cuts to remove a global oil glut rising rapidly since early 2016 .
King Salman bin Abdulaziz , after his enthronement in January 2015 , decided to thaw relations with the Kremlin .
He sent his favorite son , Mohammad , 29 , deputy premier and defense minister , along with his foreign and oil ministers to Russia ’ s International Economic Forum in St. Petersburg in June .
During his meeting with Russian President Vladimir Putin , Prince Mohammad bin Salman discussed Saudi investments in Russia , then @ @ @ @ @ @ @ .
After the Kremlin ’ s September military intervention in the Syrian Civil War siding with President Bashar al Assad , the prince rushed to Sochi for a meeting with Putin and reassurance that Russia was not planning to forge a military alliance with Iran .
Related : How Chevron Could Win Big On “ The Worst Oil Deal Ever ” The return of Iran to the oil market in January 2016 , following its denuclearization deal with major powers , and US entry into the oil-export market created a glut .
Prices @ @ @ @ @ @ @ the peak of $ 115 in mid-2014 , before stabilizing around $ 50 a barrel .
That led Prince Salman and Putin to meet on the sidelines of the G20 summit in Hangzhou , China , on 5 September and agree to cooperate in world oil markets by limiting output , clearing the global glut and raising prices .
As a result OPEC and non-OPEC groups agreed to their first joint oil output cut in December 2016 : OPEC ’ s share was 1.2 million bpd and non-OPEC ’ s 558,000 bpd .
@ @ @ @ @ @ @ reduced production by 4.5 percent from 10.56 million bpd , and Russia curtailed its output by 300,000 bpd .
Immediately , the Brent crude price jumped 10 percent to nearly $ 52 a barrel , and US West Texas Intermediate , crude , WTI , rose 9 percent to $ 49.50 .
The launching of a mutually beneficial strategy in oil exports prepared the ground for widening Riyadh-Moscow links .
King Salman became the first reigning Saudi monarch to visit Moscow in October 2017 .
The two sides inked 15 cooperation agreements covering @ @ @ @ @ @ @ $ 3 billion arms deal and even space exploration .
Putin offered to sell versatile S-400 anti-aircraft missiles to the monarch who demurred .
Coinciding with the royal visit , the Council of Saudi Chambers organized a networking meeting in Moscow for Saudi and Russian business leaders .
As newly appointed Crown Prince of Saudi Arabia , Mohammad attended the inaugural ceremony of the World Cup tournament in Moscow in June 2018 as Putin ’ s guest .
After the devastating drone and missile attacks on Saudi Arabia ’ s oil facilities in @ @ @ @ @ @ @ of S-400 missiles to Riyadh during a 16 September news conference after a meeting on Syria with Turkish and Iranian counterparts : “ We are ready to help Saudi Arabia protect their people , ” he said .
“ They need to make clever decisions , as Iran did by buying our S-300 , as Mr. Erdo ?
an did by deciding to buy the most advanced S-400 air defense systems.
” Facing stiff US opposition to accepting Putin ’ s offer , Salman continued to dither .
Nonetheless , during his state @ @ @ @ @ @ @ brought most of his cabinet and around a hundred top Russian business executives .
He and his royal host oversaw the signing of 21 bilateral agreements involving billions of dollars of investment contracts in such sectors as aerospace , culture , health and advanced technology .
During a meeting with the Saudi crown prince , Putin mentioned that the Saudi Public Investment Fund allocated $ 10 billion for joint foreign direct investment projects in Russia .
On the oil front , Russia found its market share dwindling in the face of increasing US @ @ @ @ @ @ @ had started providing buyers to increase market share .
The 2019 cuts agreed to by OPEC and non-OPEC countries were due to expire 31 March , with a new agreement required to limit supply .
Between 1 January and early March , oil prices declined by 20 percent to $ 46 a barrel after the Northern Hemisphere ’ s warmest weather on record and the unexpected outbreak of the COVID-19 disease that originated in China .
OPEC developed a plan to slash output by 1 million bpd with Russia-led non-OPEC countries cutting 500,000 @ @ @ @ @ @ @ , he argued , earlier curtailments had allowed US shale-oil producers to increase market share to the extent that the United States had become a leading petroleum exporter .
Angered by this rejection , Crown Prince Mohammad ordered Saudi Aramco to give deep discounts on its oil after 1 April .
Saudi Aramco also announced that it would raise output to an unprecedented 12.3 million bpd from the current 9.8 million bpd .
Putin came up with an increase of 300,000 bpd for Russia .
By the end of the trading on 9 @ @ @ @ @ @ @ the American WTI each collapsed by about 25 percent to $ 34.36 a barrel and $ 31.13 a barrel , respectively .
Global markets went into a tailspin .
The US Federal Reserve injected billions into the financial system since 12 March and the market has been volatile since , with the Dow Jones Industrial Average down more than 30 percent for the year .
Double whammy : COVID-19 reduced oil demand , and failure of OPEC and non-OPEC groups to cut production levels halved prices ( Source : MacroTrends ) In the @ @ @ @ @ @ @ will blink first .
With a fiscal break-even petroleum price of $ 42.50 per barrel , Russia ’ s economy is more diversified than its Saudi counterpart , with a strong defense industry , the exports of which are second only to America ’ s .
For Saudi Arabia , the fiscal break-even oil price is $ 85 per barrel , reports the International Monetary Fund .
However , Riyadh ’ s foreign and gold reserves at $ 496.8 billion in September 2019 were higher than Moscow ’ s $ 419.6 billion .
@ @ @ @ @ @ @ exports account for 64 percent of total exports .
Its oil and gas sector covers 46 percent of total government expenditure and contributes about 30 percent to GDP .
In Saudi Arabia , the petroleum sector accounts for roughly 85 percent of the kingdom ’ s revenue , 90 percent of export earnings and 42 percent of GDP .
Following US and EU sanctions in 2014 , Russia suffered a recession that ended after 2017 with an upsurge in oil prides .
Since then , the economy has stabilized , but its recent @ @ @ @ @ @ @ s value to depreciate by 10 percent .
Earlier , pressured by cheap Saudi oil in 2015 , the US shale oil industry reduced its breakeven point from $ 65 to $ 46 a barrel .
With oil now selling for $ 30 a barrel , the industry faces a renewed challenge .
If this continues , history will repeat itself with many small , independent US drillers filing for bankruptcy because of their failure to repay loans from banks , which had accepted untapped oil reserves as collateral .
That development will @ @ @ @ @

by Yale Global
Since 2016, as an informal leader of the 13-strong non-OPEC group, Russia has been instrumental in the pricing of oil as Saudi Arabia, leading producer in the Organization of Petroleum Exporting Countries. Now, both find themselves at odds as to how to respond to the global economic crisis caused by the fall in petroleum demand resulting from the COVID-19 outbreak. The Saudis insisted on overall cuts to be shared by OPEC and non-OPEC with a 2:1 ratio. Russia saw no need for any cuts because, in its view, earlier OPEC and non-OPEC curtailments had allowed the US shale oil industry to fill the gap. With the sharp fall in oil prices, many small-scale shale oil drillers in the United States will go bankrupt as happened in late 2015 when the Saudis flooded the market with cheap oil. Starting in 2014, aided by high oil prices and technical advances, shale oil drillers boosted US crude oil production, accounting for a third of the onshore output. This raised US oil production from 5.7 million barrels per day in 2011 to a record 17.94 million bpd in 2018, outstripping Russia and Saudi Arabia – transforming the United States into an oil-exporting country after President Barack Obama lifted the 40-year-old crude-oil export ban in December 2015, following a congressional vote to that effect.
Frenzy: Russia refused to go along with a Saudi plan to reduce oil productions, both nations opened taps and prices soared (Source: Oil and Gas 360, Bloomberg)
By banding together such non-OPEC oil producers as Azerbaijan, Bahrain and Bolivia as well as Kazakhstan and Mexico, Russia broke new ground and sealed its leadership role in December 2016 when OPEC and non-OPEC groups agreed to production cuts to remove a global oil glut rising rapidly since early 2016.
King Salman bin Abdulaziz, after his enthronement in January 2015, decided to thaw relations with the Kremlin. He sent his favorite son, Mohammad, 29, deputy premier and defense minister, along with his foreign and oil ministers to Russia’s International Economic Forum in St. Petersburg in June. During his meeting with Russian President Vladimir Putin, Prince Mohammad bin Salman discussed Saudi investments in Russia, then under US and European Union economic sanctions. After the Kremlin’s September military intervention in the Syrian Civil War siding with President Bashar al Assad, the prince rushed to Sochi for a meeting with Putin and reassurance that Russia was not planning to forge a military alliance with Iran.
Related: How Chevron Could Win Big On “The Worst Oil Deal Ever”
The return of Iran to the oil market in January 2016, following its denuclearization deal with major powers, and US entry into the oil-export market created a glut. Prices plummeted to $27 a barrel from the peak of $115 in mid-2014, before stabilizing around $50 a barrel. That led Prince Salman and Putin to meet on the sidelines of the G20 summit in Hangzhou, China, on 5 September and agree to cooperate in world oil markets by limiting output, clearing the global glut and raising prices.
As a result OPEC and non-OPEC groups agreed to their first joint oil output cut in December 2016: OPEC’s share was 1.2 million bpd and non-OPEC’s 558,000 bpd. By slashing 500,000 bpd, Saudi Arabia reduced production by 4.5 percent from 10.56 million bpd, and Russia curtailed its output by 300,000 bpd. Immediately, the Brent crude price jumped 10 percent to nearly $52 a barrel, and US West Texas Intermediate, crude, WTI, rose 9 percent to $49.50.
The launching of a mutually beneficial strategy in oil exports prepared the ground for widening Riyadh-Moscow links. King Salman became the first reigning Saudi monarch to visit Moscow in October 2017. The two sides inked 15 cooperation agreements covering oil, military affairs, including a $3 billion arms deal and even space exploration. Putin offered to sell versatile S-400 anti-aircraft missiles to the monarch who demurred. Coinciding with the royal visit, the Council of Saudi Chambers organized a networking meeting in Moscow for Saudi and Russian business leaders. As newly appointed Crown Prince of Saudi Arabia, Mohammad attended the inaugural ceremony of the World Cup tournament in Moscow in June 2018 as Putin’s guest.
After the devastating drone and missile attacks on Saudi Arabia’s oil facilities in September 2019, Putin repeated his offer of S-400 missiles to Riyadh during a 16 September news conference after a meeting on Syria with Turkish and Iranian counterparts: “We are ready to help Saudi Arabia protect their people,” he said. “They need to make clever decisions, as Iran did by buying our S-300, as Mr. Erdo?an did by deciding to buy the most advanced S-400 air defense systems.” Facing stiff US opposition to accepting Putin’s offer, Salman continued to dither.
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Nonetheless, during his state visit to Riyadh in October, Putin brought most of his cabinet and around a hundred top Russian business executives. He and his royal host oversaw the signing of 21 bilateral agreements involving billions of dollars of investment contracts in such sectors as aerospace, culture, health and advanced technology. During a meeting with the Saudi crown prince, Putin mentioned that the Saudi Public Investment Fund allocated $10 billion for joint foreign direct investment projects in Russia.
On the oil front, Russia found its market share dwindling in the face of increasing US oil exports and discounts that Saudi Aramco had started providing buyers to increase market share. The 2019 cuts agreed to by OPEC and non-OPEC countries were due to expire 31 March, with a new agreement required to limit supply. Between 1 January and early March, oil prices declined by 20 percent to $46 a barrel after the Northern Hemisphere’s warmest weather on record and the unexpected outbreak of the COVID-19 disease that originated in China.
OPEC developed a plan to slash output by 1 million bpd with Russia-led non-OPEC countries cutting 500,000 bpd. Putin rejected any cuts because, he argued, earlier curtailments had allowed US shale-oil producers to increase market share to the extent that the United States had become a leading petroleum exporter.
Angered by this rejection, Crown Prince Mohammad ordered Saudi Aramco to give deep discounts on its oil after 1 April. Saudi Aramco also announced that it would raise output to an unprecedented 12.3 million bpd from the current 9.8 million bpd. Putin came up with an increase of 300,000 bpd for Russia. By the end of the trading on 9 March, the benchmarks Brent crude and the American WTI each collapsed by about 25 percent to $34.36 a barrel and $31.13 a barrel, respectively. Global markets went into a tailspin. The US Federal Reserve injected billions into the financial system since 12 March and the market has been volatile since, with the Dow Jones Industrial Average down more than 30 percent for the year.
Related: Oil Prices Retreat After Massive Rally
Double whammy: COVID-19 reduced oil demand, and failure of OPEC and non-OPEC groups to cut production levels halved prices (Source: MacroTrends)
In the Putin-Salman standoff, analysts ponder which man will blink first. With a fiscal break-even petroleum price of $42.50 per barrel, Russia’s economy is more diversified than its Saudi counterpart, with a strong defense industry, the exports of which are second only to America’s. For Saudi Arabia, the fiscal break-even oil price is $85 per barrel, reports the International Monetary Fund. However, Riyadh’s foreign and gold reserves at $496.8 billion in September 2019 were higher than Moscow’s $419.6 billion.
In Russia, fossil fuels and energy exports account for 64 percent of total exports. Its oil and gas sector covers 46 percent of total government expenditure and contributes about 30 percent to GDP. In Saudi Arabia, the petroleum sector accounts for roughly 85 percent of the kingdom’s revenue, 90 percent of export earnings and 42 percent of GDP.
Following US and EU sanctions in 2014, Russia suffered a recession that ended after 2017 with an upsurge in oil prides. Since then, the economy has stabilized, but its recent spat with Riyadh caused the ruble’s value to depreciate by 10 percent.
Earlier, pressured by cheap Saudi oil in 2015, the US shale oil industry reduced its breakeven point from $65 to $46 a barrel. With oil now selling for $30 a barrel, the industry faces a renewed challenge. If this continues, history will repeat itself with many small, independent US drillers filing for bankruptcy because of their failure to repay loans from banks, which had accepted untapped oil reserves as collateral. That development will undoubtedly please the Kremlin.


investmentwatchblog--2020-03-21--The Lockdown of America Begins

The Lockdown of America Begins

( Mar .
21 , 2020 ) On Thursday night , Governor Gavin Newsome took unprecedented action and locked down the entire state of California .
The following day , Governor Andrew Cuomo locked down the state of New York and Gov .
J.B. Pritzker locked down the state of Illinois .
Today , as of the time of publication , 70 million Americans are in mandatory isolation at home in the hopes of stopping – or at least slowing down – the Covid-19 virus that is beginning to spread exponentially across the country .
Borders between the US , @ @ @ @ @ @ @ closed by mutual consent between the three governments .
While this may be necessary to curb the virus so as not to overwhelm the medical system , many Americans are feeling distinctly uneasy about their movements being restricted .
Especially worrisome is the idea of the National Guard being brought in to enforce the lockdowns , as has been discussed .
Somewhere , there ’ s a fine line between maintaining our constitutional rights and the need to stop a global pandemic .
What do the lockdowns entail ?
In all three states @ @ @ @ @ @ @ residents have been ordered to stay in their homes unless they must leave for “ vital reasons.
” Many of our largest cities are encompassed in the lockdown : New York City , Chicago , Los Angelos , San Francisco , and San Diego .
All sorts of euphemisms are being used for the situation .
Cuomo prefers to call this a “ pause.
” California is referring to this as “ safer at home.
” And Illinois is calling it “ shelter in place.
” But for all the nice-sounding words , @ @ @ @ @ @ @ lockdown on a massive scale .
The most populous state in the country with 40 million residents , on March 19th , California was the first to lock down entirely and the situation will remain in effect “ indefinitely.
” Newsom is confident that Californians will be cooperative .
However , Newsom instructed the National Guard to be on alert and has activated about “ 500 guard personnel to help with humanitarian work and food distribution.
” Interestingly , only 3 days before locking down the state , Cuomo said that the effort @ @ @ @ @ @ @ March 20th , the day after California locked down , he changed his mind , saying , “ I want to be able to say to the people of New York — I did everything we could do .
And if everything we do saves just one life , I ’ ll be happy.
” Cuomo has banned all businesses except grocery stores , hospitals , laundromats , gas stations , veterinarians , and doctor ’ s offices .
Restaurants can operate on a take-out or delivery basis .
Residents can go outside @ @ @ @ @ @ @ must maintain a 6-foot distance from others .
And breaking the rules will have consequences .
In New York City , police officers will patrol and begin giving out warnings on Sunday evening .
The state of New York has a population of close to 20 million people .
In Illinois , Governor JB Pritzker instituted a “ stay at home ” order which will begin today , March 21st , and remain in effect until April 8 .
Pritzker has said that no matter how tight the lockdown becomes , “ interstate @ @ @ @ @ @ @ and pharmacies would remain open.
” He asked people to keep this in mind when stocking up .
Although Pritzker activated the National Guard earlier in the week , he says that they will not be taking quarantine enforcement roles .
Illinois has a population of about 12.6 million people .
Where and when will the lockdowns spread ?
Other states already have strict rules in place but are not quite “ locked down.
” Maryland was the first state to order “ drastic actions.
” Pennsylvania has closed down all non-essential businesses @ @ @ @ @ @ @ curfews .
It ’ s really only a matter of time before this spreads across the country , whether by state mandates or on the federal level .
Last week , I wrote an article about when the lockdowns would occur based on the patterns established by China and Italy .
The first lockdowns occurred right on cue , on the 19th and 20th .
We have already had some small regional lockdowns and people in quarantine after traveling , but the quarantining of large groups of people has not yet occurred in @ @ @ @ @ @ @ on day 50 since the initial case was diagnosed in the United States .
However , the first case of community spread was on February 26 , and this may be a more important marker than the first case in a country the size of ours .
“ Community spread ” means the illness was not contracted through traceable means , like a family member with the virus or travel history to places where the illness was running rampant .
So if we ’ re counting from the first day of community spread @ @ @ @ @ @ @ .
If massive lockdowns are occurring on about day 22-23 in other countries , that means we may have 7-8 days before we see major lockdowns and quarantines here .
That would put us at March 19th or 20th .
We may see some early lockdowns of cities or regions where the virus is rapidly spreading like Seattle and New York City .
The lockdowns in other countries expanded in about a week to encompass greater geographic areas and larger numbers of people .
This would put us at approximately March 26-27th .
@ @ @ @ @ @ @ still holds true , we may see many more regional lockdowns coming within the next 5 or 6 days .
States that already have restrictions in place , like Maryland , Pennsylvania , and New Jersey are likely to increase those restrictions next .
Places with a large exponential spread like Washington state are also likely to mandate lockdowns .
Is a national lockdown in the works ?
It depends on who you ask .
President Trump has said as recently as yesterday that he doesn ’ t think that there will be @ @ @ @ @ @ @ On the other hand , Dr. Anthony Fauci , the infectious disease expert for the National Coronavirus Task Force , has said for at least a week he believes stronger measures need to be taken and that he ’ d like to see a “ dramatic reduction in activity ” to curb the spread of the virus .
Given the speedy turnaround made by Governor Cuomo , it is certainly not impossible that we might see a lockdown mandated at the federal level .
If you aren ’ t yet prepared for what @ @ @ @ @ @ @ and this PDF guide that is specific to the Covid-19 pandemic .
If supplies are low in your area , you may be able to find some ideas for substitutes here .
And finally , this article has some advice on how to prep for potential lockdown without spending any more money .
The National Guard has been activated in many states and other Guard members are on “ enhanced readiness ” status .
But don ’ t worry , all the governors assure us that they ’ re only there to help @ @ @ @ @ @ @ .
Numerous sources have reported being given “ federal travel papers ” over the past 48 hours .
People working in food delivery , the medical field , distribution , and grocery stores have said under cover of anonymity that they ’ ve received papers from their employers to “ show to the police ” if they ’ re stopped during their travel to and from work .
Whether our country is turning into one in which authority figures demand to see your “ papers ” remains to be seen .
Daisy Luther @ @ @ @ @ @ @ frugality , voluntaryism , and the pursuit of liberty on her website , The Organic Prepper .
She is widely republished across alternative media and she curates all the most important news links on her aggregate site , PreppersDailyNews.com .
Daisy is the best-selling author of 4 books and runs a small digital publishing company .
You can find her on Facebook , Pinterest , and Twitter .

by Daisy Luther
(Mar. 21, 2020) On Thursday night, Governor Gavin Newsome took unprecedented action and locked down the entire state of California. The following day, Governor Andrew Cuomo locked down the state of New York and Gov. J.B. Pritzker locked down the state of Illinois.
Today, as of the time of publication, 70 million Americans are in mandatory isolation at home in the hopes of stopping – or at least slowing down – the Covid-19 virus that is beginning to spread exponentially across the country.
Borders between the US, Canada, and Mexico have also been closed by mutual consent between the three governments.
While this may be necessary to curb the virus so as not to overwhelm the medical system, many Americans are feeling distinctly uneasy about their movements being restricted. Especially worrisome is the idea of the National Guard being brought in to enforce the lockdowns, as has been discussed. Somewhere, there’s a fine line between maintaining our constitutional rights and the need to stop a global pandemic.
What do the lockdowns entail?
In all three states, non-essential businesses will be closed and residents have been ordered to stay in their homes unless they must leave for “vital reasons.” Many of our largest cities are encompassed in the lockdown: New York City, Chicago, Los Angelos, San Francisco, and San Diego.
All sorts of euphemisms are being used for the situation. Cuomo prefers to call this a “pause.” California is referring to this as “safer at home.” And Illinois is calling it “shelter in place.”
But for all the nice-sounding words, it is what it is: a lockdown on a massive scale.
California
The most populous state in the country with 40 million residents, on March 19th, California was the first to lock down entirely and the situation will remain in effect “indefinitely.”
“We’re going to keep the grocery stores open,” he said. “We’re going to make sure that you’re getting critical medical supplies. You can still take your kids outside, practicing common sense and social distancing. You can still walk your dog, you can still pick up food at one of our distribution centers, at a restaurant, at a drive-thru — all those things we will still be able to do.” (source)
Newsom is confident that Californians will be cooperative.
The order will not be enforced by law enforcement, he added. “I don’t believe the people of California need to be told through law enforcement that it’s appropriate just to home-isolate, protect themselves,” Newsom said. “We are confident that the people of the state of California will abide by it and do the right thing.” (source)
However, Newsom instructed the National Guard to be on alert and has activated about “500 guard personnel to help with humanitarian work and food distribution.”
New York
Interestingly, only 3 days before locking down the state, Cuomo said that the effort would be ineffective.
In New York, where coronavirus has killed 32 people, Gov. Andrew Cuomo said he has no plans to impose a statewide mandate.
“My job is to make sure that the state has a coordinated plan and it works everywhere,” he said this week. “I don’t think shelter-in-place really works.” (source)
However, on March 20th, the day after California locked down, he changed his mind, saying, “I want to be able to say to the people of New York — I did everything we could do. And if everything we do saves just one life, I’ll be happy.”
“No, this is not life as usual,” New York Gov. Andrew Cuomo said as the death toll in the U.S. topped 200, with at least 35 in his state. “Accept it and realize it and deal with it.” (source)
Cuomo has banned all businesses except grocery stores, hospitals, laundromats, gas stations, veterinarians, and doctor’s offices. Restaurants can operate on a take-out or delivery basis. Residents can go outside to walk their dogs or exercise but must maintain a 6-foot distance from others.
And breaking the rules will have consequences.
“These provisions will be enforced,” Mr. Cuomo said at a briefing in Albany. “These are not helpful hints.” (source)
In New York City, police officers will patrol and begin giving out warnings on Sunday evening.
Police Commissioner Dermot Shea said summonses and arrests would be issued as a “last resort.” (source)
The state of New York has a population of close to 20 million people.
We are primarily funded by readers. Please subscribe and donate to support us!
Illinois
In Illinois, Governor JB Pritzker instituted a “stay at home” order which will begin today, March 21st, and remain in effect until April 8.
Pritzker has said that no matter how tight the lockdown becomes, “interstate highways, gas stations, grocery stores and pharmacies would remain open.” He asked people to keep this in mind when stocking up.
“There is no need to run out and hoard food, gas and medicine,” the governor said Thursday. “Buy what you need within reason. There is enough to go around, as long as you do not hoard.” (source)
Although Pritzker activated the National Guard earlier in the week, he says that they will not be taking quarantine enforcement roles.
Instead, 60 service members will be deployed to establish drive-up testing sites, help with food delivery to disadvantaged families impacted by school closures and possibly prepare closed hospitals to reopen. The vast majority of currently activated troops are health care professionals — doctors, nurses, medical technicians — who would not be tapped for an law-enforcement assignment. (source)
Illinois has a population of about 12.6 million people.
Where and when will the lockdowns spread?
Other states already have strict rules in place but are not quite “locked down.” Maryland was the first state to order “drastic actions.” Pennsylvania has closed down all non-essential businesses. Hoboken, New Jersey has instituted curfews. It’s really only a matter of time before this spreads across the country, whether by state mandates or on the federal level.
Last week, I wrote an article about when the lockdowns would occur based on the patterns established by China and Italy. The first lockdowns occurred right on cue, on the 19th and 20th.
We have already had some small regional lockdowns and people in quarantine after traveling, but the quarantining of large groups of people has not yet occurred in the US. YET. We are on day 50 since the initial case was diagnosed in the United States. However, the first case of community spread was on February 26, and this may be a more important marker than the first case in a country the size of ours. “Community spread” means the illness was not contracted through traceable means, like a family member with the virus or travel history to places where the illness was running rampant. So if we’re counting from the first day of community spread, the US is on day 15. If massive lockdowns are occurring on about day 22-23 in other countries, that means we may have 7-8 days before we see major lockdowns and quarantines here. That would put us at March 19th or 20th. We may see some early lockdowns of cities or regions where the virus is rapidly spreading like Seattle and New York City. The lockdowns in other countries expanded in about a week to encompass greater geographic areas and larger numbers of people. This would put us at approximately March 26-27th. (source)
So if this pattern still holds true, we may see many more regional lockdowns coming within the next 5 or 6 days.
States that already have restrictions in place, like Maryland, Pennsylvania, and New Jersey are likely to increase those restrictions next. Places with a large exponential spread like Washington state are also likely to mandate lockdowns.
Is a national lockdown in the works?
It depends on who you ask.
President Trump has said as recently as yesterday that he doesn’t think that there will be a need for a national lockdown.
Despite approval for the states’ actions, Trump said he does not think a national lockdown order will be needed, adding that other areas don’t have the same hotspots as California, New York and Washington. “We are working with the governors, and I don’t think we’ll ever find it necessary,” he said. (source)
On the other hand, Dr. Anthony Fauci, the infectious disease expert for the National Coronavirus Task Force, has said for at least a week he believes stronger measures need to be taken and that he’d like to see a “dramatic reduction in activity” to curb the spread of the virus.
Asked by CNN’s Brianna Keilar on “State of the Union” if he’d like a “national lockdown” where people are being told they need to stay home and out of restaurants and bars, Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Disease, said he’d “like to see a dramatic diminution of the personal interaction that we see” in those places. “Whatever it takes to do that, that’s what I’d like to see,” Fauci added. (source)
Given the speedy turnaround made by Governor Cuomo, it is certainly not impossible that we might see a lockdown mandated at the federal level. If you aren’t yet prepared for what this entails, check out this article and this PDF guide that is specific to the Covid-19 pandemic. If supplies are low in your area, you may be able to find some ideas for substitutes here. And finally, this article has some advice on how to prep for potential lockdown without spending any more money.
The National Guard has been activated in many states and other Guard members are on “enhanced readiness” status. But don’t worry, all the governors assure us that they’re only there to help dispense supplies, not to enforce lockdowns.
Numerous sources have reported being given “federal travel papers” over the past 48 hours. People working in food delivery, the medical field, distribution, and grocery stores have said under cover of anonymity that they’ve received papers from their employers to “show to the police” if they’re stopped during their travel to and from work.
Whether our country is turning into one in which authority figures demand to see your “papers” remains to be seen.
About Daisy
Daisy Luther writes about current events, preparedness, frugality, voluntaryism, and the pursuit of liberty on her website, The Organic Prepper. She is widely republished across alternative media and she curates all the most important news links on her aggregate site, PreppersDailyNews.com. Daisy is the best-selling author of 4 books and runs a small digital publishing company. You can find her on Facebook, Pinterest, and Twitter.


investmentwatchblog--2020-03-21--Russia Won’t Blink First In The Oil Price War

Russia will not be the one to first demand a stop to the oil price war with Saudi Arabia because Russian President Vladimir Putin is unlikely to yield to what he sees as “ Saudi blackmail , ” sources familiar with Moscow ’ s thinking told Bloomberg .
The OPEC+ coalition between OPEC ’ s leader Saudi Arabia and the leader of the non-OPEC nations in the production cut deal , Russia , abruptly ended earlier this month after Russia refused to back a huge additional supply cut in response to depressed demand .
Saudi Arabia didn ’ t take @ @ @ @ @ @ @ a U-turn in its oil policy , saying it will be pumping at will and supply the oil market with record-high volumes of crude oil in the coming months .
Russia isn ’ t backing down either , promising to boost production , too .
OPEC members Saudi Arabia and the United Arab Emirates ( UAE ) are flooding the oversupplied market with oil , going for Russia ’ s market share , while Russian oil firms also plan to boost production as of April 1 .
Putin doesn ’ t have immediate @ @ @ @ @ @ @ or the King of Saudi Arabia , the Kremlin spokesman Dmitry Peskov said on Monday , as carried by TASS .
“ Putin is known for not submitting to pressure , ” Alexander Dynkin , head of the Institute of World Economy and International Relations in Moscow , told Bloomberg .
The institute is a state-run think tank which advises the Russian government on topics of international and economic relations .
Both Russia and Saudi Arabia are set to suffer from the oil price war , as $ 30 oil is below both @ @ @ @ @ @ @ Saudi Arabia ’ s $ 80-plus oil price breakeven .
Russia admitted this week that its revenues from oil and gas would be US $ 39.5 billion ( 3 trillion rubles ) lower than planned due to the tumbling oil prices , and that Russia ’ s budget would be in deficit this year .
Neither Saudi Arabia nor Russia are currently backing down from the oil price war , but the one who blinks first will likely be the one whose finances will be hurt more .

By Tsvetana Paraskova
Russia will not be the one to first demand a stop to the oil price war with Saudi Arabia because Russian President Vladimir Putin is unlikely to yield to what he sees as “Saudi blackmail,” sources familiar with Moscow’s thinking told Bloomberg.
The OPEC+ coalition between OPEC’s leader Saudi Arabia and the leader of the non-OPEC nations in the production cut deal, Russia, abruptly ended earlier this month after Russia refused to back a huge additional supply cut in response to depressed demand. Saudi Arabia didn’t take that break-up too well, and made a U-turn in its oil policy, saying it will be pumping at will and supply the oil market with record-high volumes of crude oil in the coming months.
Russia isn’t backing down either, promising to boost production, too.
OPEC members Saudi Arabia and the United Arab Emirates (UAE) are flooding the oversupplied market with oil, going for Russia’s market share, while Russian oil firms also plan to boost production as of April 1.
Putin doesn’t have immediate plans to contact either the Crown Prince or the King of Saudi Arabia, the Kremlin spokesman Dmitry Peskov said on Monday, as carried by TASS.
We are primarily funded by readers. Please subscribe and donate to support us!
“Putin is known for not submitting to pressure,” Alexander Dynkin, head of the Institute of World Economy and International Relations in Moscow, told Bloomberg. The institute is a state-run think tank which advises the Russian government on topics of international and economic relations.
Both Russia and Saudi Arabia are set to suffer from the oil price war, as $30 oil is below both countries’ fiscal breakevens, especially below Saudi Arabia’s $80-plus oil price breakeven.
Russia admitted this week that its revenues from oil and gas would be US$39.5 billion (3 trillion rubles) lower than planned due to the tumbling oil prices, and that Russia’s budget would be in deficit this year.
Neither Saudi Arabia nor Russia are currently backing down from the oil price war, but the one who blinks first will likely be the one whose finances will be hurt more.
By Tsvetana Paraskova for Oilprice.com


investmentwatchblog--2020-03-21--Here’s How to Save America, Mr. President

All my life , four titles have best described me : Conservative , Libertarian , Capitalist and Contrarian .
Keeping those in mind , I have great questions and doubts about what roads have been chosen to combat Coronavirus .
I think it ’ s our right and duty to ask questions in a free society .
I just don ’ t know if this route chosen to virtually ban business and commerce ; to literally destroy Las Vegas , one of the world ’ s great cities ; to leave millions unemployed , frightened and unsure how to pay @ @ @ @ @ @ @ Depression ; was the right path for stopping this deadly virus .
And I believe the vast majority of Americans and Las Vegans left jobless overnight , would agree with me .
They ’ re in shock , they ’ re scared .
And no one ever gave them a choice .
But now is not the time for blame .
Debate can all come later , after we ’ ve recovered from this nightmare .
And by then , we may find out this was the right choice .
And we ’ @ @ @ @ @ @ @ I bring solutions for America .
I hope you are listening President Trump .
Let ’ s start with Wall Street .
We need an immediate Executive Order to institute the “ Uptick Rule.
” This is not a ban on short-selling .
But it limits short sellers from betting on the destruction of the US economy .
It allows “ sharks ” and foreign governments who don ’ t have our best interests in mind , to only sell a share of stock short , after someone else has bought a share @ @ @ @ @ @ @ this now , soon America ’ s middle class , small investors , and pension owners will lose their life savings , or have their retirements wrecked forever .
Now to the middle class .
I ’ ve advised for weeks now a trillion dollar “ Marshall Plan ” to save all the employees of America- many of whom are now jobless .
If we are to prevent a Great Depression we must infuse cash immediately into every American ’ s hands .
President Trump appears ready to do this .
Now to @ @ @ @ @ @ @ America .
I see President Trump is ready to inject billions into business .
But will this be aimed only at banks , Wall Street and politically-connected billion-dollar companies ?
What about small business ?
The majority of economic and job growth comes from small companies with 20 or less employees .
Millions of us face going out of business in the coming weeks .
What we need is $ 250,000 to $ 1 million no-interest loans to get back on our feet .
The government must provide it , because banks never @ @ @ @ @ @ @ Trump is supporting a “ rescue plan ” designed by Nancy Pelosi and Democrats .
It ’ s filled with pork and waste .
But worst of all , it demands small businesses with 500 or less employees must pay for 14 days sick leave for every employee with Coronavirus .
You ’ d drive every retail store , restaurant , bar and gym in America out of business .
We ’ re already at death ’ s door .
This would finish us off .
By all means , pay 14 days @ @ @ @ @ @ @ Mr. President…with government ’ s money .
No small business can afford to pay employees for not working .
This is a death blow .
Remove this clause Mr. President .
I know you love small business .
Please don ’ t inadvertently damage it .

by Wayne Allyn Root
All my life, four titles have best described me: Conservative, Libertarian, Capitalist and Contrarian. Keeping those in mind, I have great questions and doubts about what roads have been chosen to combat Coronavirus. I think it’s our right and duty to ask questions in a free society.
I just don’t know if this route chosen to virtually ban business and commerce; to literally destroy Las Vegas, one of the world’s great cities; to leave millions unemployed, frightened and unsure how to pay bills; to potentially start a Great Depression; was the right path for stopping this deadly virus.
And I believe the vast majority of Americans and Las Vegans left jobless overnight, would agree with me. They’re in shock, they’re scared. And no one ever gave them a choice.
But now is not the time for blame. Debate can all come later, after we’ve recovered from this nightmare. And by then, we may find out this was the right choice. And we’ll all be thankful.
But now I bring solutions for America. I hope you are listening President Trump.
Let’s start with Wall Street. We need an immediate Executive Order to institute the “Uptick Rule.” This is not a ban on short-selling. But it limits short sellers from betting on the destruction of the US economy. It allows “sharks” and foreign governments who don’t have our best interests in mind, to only sell a share of stock short, after someone else has bought a share.
If we don’t do this now, soon America’s middle class, small investors, and pension owners will lose their life savings, or have their retirements wrecked forever.
We are primarily funded by readers. Please subscribe and donate to support us!
Now to the middle class. I’ve advised for weeks now a trillion dollar “Marshall Plan” to save all the employees of America- many of whom are now jobless. If we are to prevent a Great Depression we must infuse cash immediately into every American’s hands. President Trump appears ready to do this.
Now to small business, the economic engine of America.
I see President Trump is ready to inject billions into business. But will this be aimed only at banks, Wall Street and politically-connected billion-dollar companies? What about small business?
The majority of economic and job growth comes from small companies with 20 or less employees. Millions of us face going out of business in the coming weeks. What we need is $250,000 to $1 million no-interest loans to get back on our feet. The government must provide it, because banks never will.
Lastly, I see President Trump is supporting a “rescue plan” designed by Nancy Pelosi and Democrats. It’s filled with pork and waste. But worst of all, it demands small businesses with 500 or less employees must pay for 14 days sick leave for every employee with Coronavirus. You’d drive every retail store, restaurant, bar and gym in America out of business.
We’re already at death’s door. This would finish us off. By all means, pay 14 days for any employee sick with Coronavirus, Mr. President…with government’s money.
No small business can afford to pay employees for not working. This is a death blow. Remove this clause Mr. President. I know you love small business. Please don’t inadvertently damage it.


investmentwatchblog--2020-03-21--The rich really are bugging out…

The rich really are bugging out…

Small countries are taking extreme measures to halt international travel in an effort to stop the spread of COVID-19 .
Those accustomed to private jet travel are used to demanding what they want and getting it .
As a result , private jet flights escaping from and running to resort countries , such as those in the Caribbean , are currently in high demand and they do not always occur under the most lawful of circumstances .
The most wealthy among us are trying to get around flight bans with private jet flights as they are desperate to get into @ @ @ @ @ @ @ of which have partial or full international travel bans .
Those with complete bans include Guatemala , El Salvador , Honduras , Trinidad and Tobago , Columbia , Panama , Costa Rica , and Ecuador .
Partial international travel bans are in effect for Belize , Jamaica , Haiti , Dominican Republic , Antigua and Barbados , Saint Lucia , Grenada , and Venezuela .
These countries are home to many affluent expatriates .
The money some of them spend on private jet flights is staggering .
One round trip to Europe in @ @ @ @ @ @ @ States with five passengers can easily cost the client six figures .
With the world being crippled in many ways by the COVID-19 pandemic , the ultra-wealthy still have places to be and airline options are not only becoming restrictive , they are dwindling .
Rumors currently abound of private jet pilots , both from charter operations and private flight departments , being offered large bonuses to get into and out of Caribbean resort countries undetected and bypassing customs and port of entry requirements .
While not impossible , it ’ s an @ @ @ @ @ @ @ owned or chartered aircraft operate on demand , when and where their clients or owners need them .
Private jet pilots have a “ bag of tricks ” that airline pilots don ’ t , including late-night flights to closed airports , low altitude VFR flights , tricks to bypass arrival lines , departing under visual flight rules ( VFR ) to avoid lengthy departure routing and many others .
And that ’ s the list of legal options .
With so much money on the line , less than reputable private jet @ @ @ @ @ @ @ bag of tricks .
Yesterday in Guayaquil , Ecuador , Mayor Cynthia Viteri resorted to stopping flights at Jose Joaquin de Olmedo International Airport by directing that ground vehicles be parked on the runway .
The action is alleged to have been taken to stop two airliners , one each from KLM and Iberia , from arriving from Europe .
Video footage from a Robinson helicopter has surfaced , overflying the parked vehicles .

Small countries are taking extreme measures to halt international travel in an effort to stop the spread of COVID-19. Those accustomed to private jet travel are used to demanding what they want and getting it. As a result, private jet flights escaping from and running to resort countries, such as those in the Caribbean, are currently in high demand and they do not always occur under the most lawful of circumstances.
The most wealthy among us are trying to get around flight bans with private jet flights as they are desperate to get into or home from Caribbean countries, many of which have partial or full international travel bans. Those with complete bans include Guatemala, El Salvador, Honduras, Trinidad and Tobago, Columbia, Panama, Costa Rica, and Ecuador. Partial international travel bans are in effect for Belize, Jamaica, Haiti, Dominican Republic, Antigua and Barbados, Saint Lucia, Grenada, and Venezuela. These countries are home to many affluent expatriates. The money some of them spend on private jet flights is staggering. One round trip to Europe in a Gulfstream 550 jet from the United States with five passengers can easily cost the client six figures.
With the world being crippled in many ways by the COVID-19 pandemic, the ultra-wealthy still have places to be and airline options are not only becoming restrictive, they are dwindling. Rumors currently abound of private jet pilots, both from charter operations and private flight departments, being offered large bonuses to get into and out of Caribbean resort countries undetected and bypassing customs and port of entry requirements. While not impossible, it’s an extremely risky game to play. We are primarily funded by readers. Please subscribe and donate to support us! Privately owned or chartered aircraft operate on demand, when and where their clients or owners need them. Private jet pilots have a “bag of tricks” that airline pilots don’t, including late-night flights to closed airports, low altitude VFR flights, tricks to bypass arrival lines, departing under visual flight rules (VFR) to avoid lengthy departure routing and many others. And that’s the list of legal options. With so much money on the line, less than reputable private jet operators undoubtedly have a less than legal bag of tricks. Yesterday in Guayaquil, Ecuador, Mayor Cynthia Viteri resorted to stopping flights at Jose Joaquin de Olmedo International Airport by directing that ground vehicles be parked on the runway. The action is alleged to have been taken to stop two airliners, one each from KLM and Iberia, from arriving from Europe. Video footage from a Robinson helicopter has surfaced, overflying the parked vehicles.
www.thedrive.com/the-war-zone/32675/the-rich-are-scrambling-to-escape-covid-19-on-private-jets


investmentwatchblog--2020-03-21--Putting Our Differences Aside To Unite Against A Common Enemy Is The American Way

New best friends : Trump and archfoes Cuomo and Newsom bond in coronavirus crisis .
At every press conference — and all three leaders are doing daily COVID-19 press updates — praise is bestowed and compliments showered .
There are gratuitous namechecks — as with the lover who feels compelled just to repeat the name of the beloved — and many allusions to late night phone calls when details of policy are apparently being hashed out .
In his press conference yesterday , for instance , as Trump detailed the FDA ’ s expedited approval of a new virus treatment @ @ @ @ @ @ @ news that he ’ d spoken with Cuomo “ at great , great length last night ; he wants to be first in line.
” Considering that he and the governor are now besties , Cuomo will probably in fact be first in line to get the prescription drug to his state ’ s consumers — just as he ’ s recently gotten everything on his virus wish list , from a national guard deployment to Westchester County , site of an early hot spot , to a mobile testing drive-through , also @ @ @ @ @ @ @ of Engineers deployment , to a Navy hospital ship which will soon be docked in New York Harbor in case New York City runs out of hospital beds .
.
.
.
Gavin Newsom has got the love bug too .
President Trump does not namecheck Gavin Newsom as much as he does Cuomo , but Newsom — who has excoriated “ the corruption and the incompetence in the White House , ” has claimed to be “ absolutely humiliated ” by Trump ’ s stance on climate policy , and has proudly @ @ @ @ @ @ @ state in the US — is now crowing about the “ privilege ” of a recent conversation in which the president promised his state more COVID-19 testing swabs .
“ The president assured me , not only assured me , he was aware of where those swabs are being procured before I even offered my own insight , ” Newsom burbled .
“ Not only is he on top of it , but they ’ re securing and beginning the process of distributing those swabs.
” New Yorkers , as some will recall @ @ @ @ @ @ @ nature ” phenomenon for a few weeks after 9/11 .
For a few golden weeks passersby on the street made full eye contact and wreathed each other in beatific smiles ; they deferred , nay argued , about who should go through a door first .
They stopped their cars for bicyclists .
By December they ’ d resumed their self-centered ways .
Enjoy it while it lasts .

New best friends: Trump and archfoes Cuomo and Newsom bond in coronavirus crisis.
At every press conference — and all three leaders are doing daily COVID-19 press updates — praise is bestowed and compliments showered. There are gratuitous namechecks — as with the lover who feels compelled just to repeat the name of the beloved — and many allusions to late night phone calls when details of policy are apparently being hashed out.
In his press conference yesterday, for instance, as Trump detailed the FDA’s expedited approval of a new virus treatment, he managed to work in the news that he’d spoken with Cuomo “at great, great length last night; he wants to be first in line.”
Considering that he and the governor are now besties, Cuomo will probably in fact be first in line to get the prescription drug to his state’s consumers — just as he’s recently gotten everything on his virus wish list, from a national guard deployment to Westchester County, site of an early hot spot, to a mobile testing drive-through, also for Westchester, to an Army Corps of Engineers deployment, to a Navy hospital ship which will soon be docked in New York Harbor in case New York City runs out of hospital beds. . . .
Gavin Newsom has got the love bug too. President Trump does not namecheck Gavin Newsom as much as he does Cuomo, but Newsom — who has excoriated “the corruption and the incompetence in the White House,” has claimed to be “absolutely humiliated” by Trump’s stance on climate policy, and has proudly proclaimed California the “most unTrump” state in the US — is now crowing about the “privilege” of a recent conversation in which the president promised his state more COVID-19 testing swabs.
“The president assured me, not only assured me, he was aware of where those swabs are being procured before I even offered my own insight,” Newsom burbled. “Not only is he on top of it, but they’re securing and beginning the process of distributing those swabs.”
New Yorkers, as some will recall, experienced the “best of human nature” phenomenon for a few weeks after 9/11. For a few golden weeks passersby on the street made full eye contact and wreathed each other in beatific smiles; they deferred, nay argued, about who should go through a door first. They stopped their cars for bicyclists. By December they’d resumed their self-centered ways.
Enjoy it while it lasts.


investmentwatchblog--2020-03-21--Three months later…global pandemic.

Three months later…global pandemic.

Police in Central China 's Wuhan arrested 8 people spreading rumors about local outbreak of unidentifiable # pneumonia .
Previous @ @ @ @ @ SARS .
t.co/oVpk4EIYM7 pic.twitter.com/JXbK9pmq8v

Police in Central China's Wuhan arrested 8 people spreading rumors about local outbreak of unidentifiable #pneumonia. Previous online posts said it was SARS. t.co/oVpk4EIYM7 pic.twitter.com/JXbK9pmq8v
— Global Times (@globaltimesnews) January 1, 2020


investmentwatchblog--2020-03-21--Brian Stelter is a hack…and CNN is a joke

But yeah , you already knew that…

by DCG
But yeah, you already knew that…
We are primarily funded by readers. Please subscribe and donate to support us!
DCG


investmentwatchblog--2020-03-21--We face so many threats, like pandemics. Let’s defend ourselves.

Summary : We think of national defense too narrowly .
Let ’ s defend ourselves against the broad range of threats , instead of picking a few and ignoring the others .
The 21st century might be unkind to such a foolish people , despite all our wealth and power .
There are worse threats than pandemics .
It will happen again , eventually .
We spend most unimaginable sums on our military machines .
Super-carriers , submarines , strategic bombers , stealth fighters , and now hypersonic weapons get almost unlimited funding – with mind-blowing profits to contractors .
@ @ @ @ @ @ @ of opportunities for our elites to gain more power and profit .
Other serious threats are ignored .
I have often written about these ignored dangers , such as our dying oceans .
Current events remind us of other warnings , such as this from the NYT .
“ Before Virus Outbreak , a Cascade of Warnings Went Unheeded.
” “ Government exercises , including one last year , made clear that the U.S. was not ready for a pandemic like the coronavirus .
But little was done.
” I ( and many @ @ @ @ @ @ @ in posts such as these .
Nobody cared .
• See the ugly cost of the next big flu pandemic .
We can do more to prepare .
• Stratfor : The superbugs are coming .
We have time to prepare .
We face many threats , as humanity always has .
Unlike in the past , we have great ability to prepare to some degree for most threads ( but perfect security comes only after death ) .
But the daily bombardment of doomsday warnings leaves people feeling helpless , with the @ @ @ @ @ @ @ So we allocate funds on the basis of propaganda .
Which is determined by money and power .
Which threats most benefit our elites .
This is nuts , but it is our way .
We might not be able to afford it with the larger challenges that lie in our future .
COVID-19 is not the Black Death , but it provides a warning .
We can do better .
A supernova would bad news if it explodes within 50 light years of us .
The New Yorker warns about a doomed @ @ @ @ @ @ @ ” by Kathryn Schulz in The New Yorker – “ An earthquake will destroy a sizable portion of the coastal Northwest .
The question is when.
” That ’ s topped by James Hansen and 15 other climate scientists predicting ( in the Huff Post ’ s words ) “ Catastrophic Rise In Sea Levels ” , with “ sea levels rising as much as 10 feet in the next 50 years ” ( wildly above anything the IPCC ’ s reports consider likely ) .
That ’ s topped by this press @ @ @ @ @ @ @ “ Earth ’ s ‘ battery ’ draining too fast to sustain life ” – “ Unless humans slow the destruction of Earth ’ s declining supply of plant life , civilization like it is now may become completely unsustainable.
” We face a world full of foes , from terrorist sleeper cells in your town to great powers bent on world conquest ( China and Russia ) .
But even our foes will go broke as the world ’ s resources are exhausted : peak oil , peak fresh water , even @ @ @ @ @ @ @ of the world economy and the wars that follow will remove our ability to further wreck the biosphere .
No overpopulation .
But underpopulation will be terrible .
Of course , we will still suffer the effects of past chemical pollution ( and subtle ones , like impotence from hormones in the water ) .
Too bad about the coming mass species extinction ; we ’ ll miss the animals ( unless we build a space ark , as in the film “ Silent Running “ ) .
While we suffer from these @ @ @ @ @ @ @ floods , droughts , and storms from climate change .
These will distract us from the natural disasters wrecking the world : the reversal of Earth ’ s magnetic field , mega-tsunamis that scour away the cities on our coasts ( more here ) , and super-volcano eruptions ( like Yellowstone ) .
For variety , the sun will hit us with another solar storm like the Carrington Event of 1859 ; the National Academy ’ s warning is terrifying ( read the summary ) .
This will knock out the world ’ @ @ @ @ @ @ @ see the asteroid or comet that will destroy a continent ( “ The odds that a potentially devastating space rock will hit Earth this century may be as high as one in 10 “ ) .
Now for the bad news : as a result of all these things we will be too weak to deal with the coming super-plagues ( in addition to the disease of the week , dozens of them , each afflicting 5 % – 10 % or more of the population ) .
The result of this barrage @ @ @ @ @ @ @ , of different kinds and different magnitudes and probabilities over different time horizons .
Are we doomed ?
That ’ s a commonplace expression in posts and comments mentioning climate change .
There are so many different kinds of doom in our future , often presented as certainties .
Worse , the remedies are costly and of uncertain effectiveness .
Why bother doing anything to avoid them ?
Plus , older adults remember past forecasts of certain doom .
By now the world should have been wrecked by nuclear war , famine from @ @ @ @ @ @ @ , bankruptcy of the government , satanic cults , and global cooling ( science by press release in the 1970s ) .
Those apocalypses passed us as surely as the Christian end-of-the-world predictions .
Perhaps today ’ s forecasts of doom will prove false as well .
There are tools to help us put our risks in a useful operational context , allowing us to manage our fears and rationally allocated funds amongst them .
Nothing will happen so long as special interest groups , each touting their own cause , dominate the @ @ @ @ @ @ @ successful fear-mongers .
We ’ re all losers from their competition .
A first step to a better world What is the cost of minimum prevention or mitigation of the “ plausible worst case ” for all these risks ?
Probably a lot more than we will spend .
Perhaps more than we can afford to spend .
The precautionary principle provides answers for individual threats , such as climate change .
It gives us no guidance for allocation of funds across the full universe of risks .
The finance industry copes with @ @ @ @ @ @ @ in a portfolio has its own range of risk exposures , but risk can be meaningfully assessed only at the portfolio level when compared to a risk budget .
This is different than the risks a nation ( or world ) faces , but offers some useful ideas for coping .
To provide Congress and the public with recommendations , the government could create a Commission ( with staff , amply funded ) to assess all the individual risks ( consulting subject matter experts as needed ) , with a brief analysis of @ @ @ @ @ @ @ common analytical framework to rate each risk in terms of probability and impact .
The results would provide a basis for discussion and further analysis , liberating us from the narrow perspectives of the special interest activists .
Justing having the list , and its information about magnitude and probabilities , will change the public ’ s perceptions of risk .
Now , journalists write about individual risks – with each story describing the One and Only Threat .
The list will put each threat in a larger context .
Most importantly , @ @ @ @ @ @ @ rationally allocate our funds to best protect ourselves .
It will allow risk budgeting , making better use of our limited funds .
Let ’ s start today .
List in the comments what you consider the most serious risks facing America , ranked high to low .
Also , you might list the dollars per year you ’ d allocate to the mitigation of risks .
US GDP is almost $ 18 trillion per year .
( This was suggested by Tony B .
“ ClimateReason ” in a comment at Climate @ @ @ @ @ @ @ with our propaganda-based strategy , so that the risk with the most irrational campaign “ wins.
” This is planning to fail .

by Fabius Maximus
Summary: We think of national defense too narrowly. Let’s defend ourselves against the broad range of threats, instead of picking a few and ignoring the others. The 21st century might be unkind to such a foolish people, despite all our wealth and power.
There are worse threats than pandemics. It will happen again, eventually.
So many dangers!
We spend most unimaginable sums on our military machines. Super-carriers, submarines, strategic bombers, stealth fighters, and now hypersonic weapons get almost unlimited funding – with mind-blowing profits to contractors. Fighting climate change offers a lavish range of opportunities for our elites to gain more power and profit. Other serious threats are ignored. I have often written about these ignored dangers, such as our dying oceans. Current events remind us of other warnings, such as this from the NYT.
“Before Virus Outbreak, a Cascade of Warnings Went Unheeded.”
“Government exercises, including one last year, made clear that the U.S. was not ready for a pandemic like the coronavirus. But little was done.”
I (and many others) have written about this risk in posts such as these. Nobody cared.
We face many threats, as humanity always has. Unlike in the past, we have great ability to prepare to some degree for most threads (but perfect security comes only after death). But the daily bombardment of doomsday warnings leaves people feeling helpless, with the natural result of ignoring all warnings. So we allocate funds on the basis of propaganda. Which is determined by money and power. Which threats most benefit our elites. This is nuts, but it is our way. We might not be able to afford it with the larger challenges that lie in our future.
COVID-19 is not the Black Death, but it provides a warning. We can do better.
“Apocalyptic and misanthropic environmental narratives, as Clive Hamilton represents them, have had an important role in stirring up the public. But they have also contributed to widespread resignation and cynicism. So far, they have fallen short of mobilizing enough people to bring about real political change.” — NYT Journalist Andy Revkin.
A supernova would bad news if it explodes within 50 light years of us.
The coming certain dooms
“If current trends continue by the year 2000 the United Kingdom will simply be a small group of impoverished islands, inhabited by some 70 million hungry people, of little or no concern to the other 5-7 billion inhabitants of a sick world. …If I were a gambler, I would take even money that England will not exist in the year 2000.”
— Paul R. Ehrlich speaking in London at the Institute of Biology in Autumn 1969. From “In Praise of Prophets” by Bernard Dixon in the New Scientist, 16 September 1971.
The New Yorker warns about a doomed region: “The Really Big One” by Kathryn Schulz in The New Yorker – “An earthquake will destroy a sizable portion of the coastal Northwest. The question is when.”
That’s topped by James Hansen and 15 other climate scientists predicting (in the Huff Post’s words) “Catastrophic Rise In Sea Levels”, with “sea levels rising as much as 10 feet in the next 50 years” (wildly above anything the IPCC’s reports consider likely). That’s topped by this press release from the U of GA: “Earth’s ‘battery’ draining too fast to sustain life” – “Unless humans slow the destruction of Earth’s declining supply of plant life, civilization like it is now may become completely unsustainable.”
We face a world full of foes, from terrorist sleeper cells in your town to great powers bent on world conquest (China and Russia). But even our foes will go broke as the world’s resources are exhausted: peak oil, peak fresh water, even peak phosphorous.
At least the collapse of the world economy and the wars that follow will remove our ability to further wreck the biosphere. No overpopulation. But underpopulation will be terrible. Of course, we will still suffer the effects of past chemical pollution (and subtle ones, like impotence from hormones in the water). Too bad about the coming mass species extinction; we’ll miss the animals (unless we build a space ark, as in the film “Silent Running“).
While we suffer from these ills, we will bake amidst the floods, droughts, and storms from climate change. These will distract us from the natural disasters wrecking the world: the reversal of Earth’s magnetic field, mega-tsunamis that scour away the cities on our coasts (more here), and super-volcano eruptions (like Yellowstone).
We are primarily funded by readers. Please subscribe and donate to support us!
For variety, the sun will hit us with another solar storm like the Carrington Event of 1859; the National Academy’s warning is terrifying (read the summary). This will knock out the world’s electronics, so we will not see the asteroid or comet that will destroy a continent (“The odds that a potentially devastating space rock will hit Earth this century may be as high as one in 10“).
Now for the bad news: as a result of all these things we will be too weak to deal with the coming super-plagues (in addition to the disease of the week, dozens of them, each afflicting 5% – 10% or more of the population).
A super-volcano will erupt again, eventually.
Doom fatigue
The result of this barrage is public apathy. So many threats, of different kinds and different magnitudes and probabilities over different time horizons. Are we doomed? That’s a commonplace expression in posts and comments mentioning climate change. There are so many different kinds of doom in our future, often presented as certainties. Worse, the remedies are costly and of uncertain effectiveness. Why bother doing anything to avoid them?
Plus, older adults remember past forecasts of certain doom. By now the world should have been wrecked by nuclear war, famine from over-population, resource exhaustion, poisonous pollution, bankruptcy of the government, satanic cults, and global cooling (science by press release in the 1970s). Those apocalypses passed us as surely as the Christian end-of-the-world predictions. Perhaps today’s forecasts of doom will prove false as well.
There are tools to help us put our risks in a useful operational context, allowing us to manage our fears and rationally allocated funds amongst them. Nothing will happen so long as special interest groups, each touting their own cause, dominate the news – and funding rewards the most successful fear-mongers. We’re all losers from their competition.
A first step to a better world
What is the cost of minimum prevention or mitigation of the “plausible worst case” for all these risks? Probably a lot more than we will spend. Perhaps more than we can afford to spend.
The precautionary principle provides answers for individual threats, such as climate change. It gives us no guidance for allocation of funds across the full universe of risks. The finance industry copes with this problem every day. Each security in a portfolio has its own range of risk exposures, but risk can be meaningfully assessed only at the portfolio level when compared to a risk budget. This is different than the risks a nation (or world) faces, but offers some useful ideas for coping.
To provide Congress and the public with recommendations, the government could create a Commission (with staff, amply funded) to assess all the individual risks (consulting subject matter experts as needed), with a brief analysis of each. Then they can apply a common analytical framework to rate each risk in terms of probability and impact. The results would provide a basis for discussion and further analysis, liberating us from the narrow perspectives of the special interest activists.
Justing having the list, and its information about magnitude and probabilities, will change the public’s perceptions of risk. Now, journalists write about individual risks – with each story describing the One and Only Threat. The list will put each threat in a larger context.
Most importantly, with this analysis we can begin to rationally allocate our funds to best protect ourselves. It will allow risk budgeting, making better use of our limited funds.
Let’s start today. List in the comments what you consider the most serious risks facing America, ranked high to low. Also, you might list the dollars per year you’d allocate to the mitigation of risks. US GDP is almost $18 trillion per year. (This was suggested by Tony B. “ClimateReason” in a comment at Climate Etc.)
Or we can continue with our propaganda-based strategy, so that the risk with the most irrational campaign “wins.” This is planning to fail.


investmentwatchblog--2020-03-21--#MacroView: Mnuchin & Kudlow Say No Recession?

I understand they have to pander to the administration , but this is a stretch to say the least .
Let ’ s dig into some facts to determine our real risks .
Even before COVID-19 had infected the planet , economic data , and inflationary pressures were already weakening .
This already suggested the decade long economic expansion was “ running lean.
” However , the sharp decline in both 5- and 10-year “ breakeven inflation rates , ” are suggesting economic growth over the next couple of quarters will drop markedly .
The last time there was such @ @ @ @ @ @ @ the beginning of the “ financial crisis.
” Since then , the markets have been rocked as concerns over the spread of the “ COVID-19 ” virus .
The U.S. has shut down sporting events , travel , consumer activities , restaurants , bars , stores , and a host of other economically sensitive inputs .
This is on top of the collapse in oil prices , which impacts a very important economic sector of the economy .
( The O & G sector either directly or indirectly creates millions of jobs , @ @ @ @ @ @ @ and is responsible for about 1/4th of all capital expenditures . )
However , this is just in the United States .
This is a “ global issue , ” and the supply chains of the world are tightly interconnected .
As we discussed previously : Our Economic Output Composite Indicator ( EOCI ) was already at levels which warned of weak economic growth .
Furthermore , as shown below , even the Leading Economic Indicators ( LEI ) were already suggesting something was amiss long before the virus became “ a thing.
@ @ @ @ @ @ @ economic data will worsen near term is the correlation between the index and the annual rate of change of the S & P 500 index .
The financial markets lead the economy by about 6-months as markets begin to “ price in ” changes to earnings due to the outlook for economic strength .
The recent plunge in the S & P 500 has deviated from the current EOCI index reading suggesting the index will decline towards recessionary levels over the next two months .
The U.S. economy , along with the bulk @ @ @ @ @ @ @ “ recession.
” Let ’ s start with a bit of historical context .
Since the 1800 ’ s , the average length of an economic recession has been 18-months .
Some of that length is skewed by a more agricultural-based economy at the beginning , with more modern recessions having been shorter .
( We are assuming that March 2020 was the start of a new recession at one-month . )
While the average recession has been somewhat shorter in recent decades , the recessions of 1973 , 1991 , and 2007 @ @ @ @ @ @ @ chart below also shows the subsequent decline in asset prices during subsequent recessions .
Given , declines of these magnitudes only occur during recessionary periods , the recent near 30 % decline is likely good confirmation a recession has begun .
( However , at just one-month , it may be overly optimistic to assume it is over with already . )
Interest rates are also a very good confirmation of recessionary periods as well .
Since 2013 , I have disagreed the mainstream analysis ( including Jeff Gundlach and Bill Gross ) @ @ @ @ @ @ @ was dead .
The reality has been substantially different as rates have continued to trend lower , and recently approached our long-term target of ZERO .
So , where are we nearly 4-years later ?
• 23 % of global debt is now supporting negative interest rates .
• The U.S. deficit has well surpassed $ 1 Trillion on its way to $ 2 Trillion .
• Central Banks continue to be a primary buyer of bonds as the Fed ’ s balance sheet has swelled back to its previous peak and the @ @ @ @ @ @ @ started a $ 700 billion QE program .
Here is the relevant chart I posted in 2016 .
At that time rates were hitting lows of 1.6 % , which was unthinkable at the time .
And , where are rates , today ?
Approaching zero .
As shown above , over the last sixty years , the yield on the 10 year has approximated real GDP plus inflation ( shown in the chart below ) .
Given this historical fact , we can do some basic math to determine what yields are @ @ @ @ @ @ @ .
“ Given ZIRP and QE policies around the globe which has pulled an extraordinary amount of sovereign debt into negative territory coupled with secular headwinds to energy prices , I have assumed that the 10 year yield will fall from 1.0x nominal GDP and average about 0.8x nominal GDP .
According to my pal Peter Boockvar , the 10 year inflation breakeven ( in the tips market ) stands at 1.41 % this morning : So , let ’ s solve for what the market expects Real GDP to be ( over @ @ @ @ @ @ @ formula : The implied U.S. Real GDP of this equation is now negative — at -0.48 % .
( This compares to the consensus 2020 Real GDP growth forecast of between +1.75 % to +2.00 % ) It also implies that nominal GDP ( Real GDP plus Inflation ) will be only about +0.93 % – substantially below consensus expectations of slightly above 3 % .
” It ’ s markedly worse now as the collapse in oil prices has sent breakeven rates below 1 % .
As we noted in “ On @ @ @ @ @ @ @ ” the collapse in interest rates , as well as the annual rate of change in rates , is screaming that something “ has broken , ” economically speaking .
Mnuchin ’ s suggestion the economy will likely avoid “ recession , ” is a bit ludicrous .
The data suggests an entirely different outcome .
However , David Rosenberg recently put some numbers on the impact to the economy from the “ economic shutdown ” from the virus .
To wit : Given the average recession is 18-months , and given the @ @ @ @ @ @ @ this 12-month forecast is likely overly optimistic .
However , we are still missing a LOT of data , which will come to light over the next several months .
The recession will be quite severe .
I know you shouldn ’ t point and laugh , but you almost have to when Mnuchin and Kudlow have the audacity to suggest this is a temporary negative shock .
This a collision of multiple shocks impacting an overly leveraged , overly valued , and overly bullish market simultaneously .
The problem for the Federal @ @ @ @ @ @ @ financial crisis , ” or a simple “ business cycle ” recession , that monetary policy can fix .
Governments have opted for to “ contain the virus ” by shutting down the economy .
Giving households $ 1000 checks sounds great , but not if you can ’ t spend them .
Maybe they will opt to pay down debt , but that doesn ’ t spur economic activity , or improve earnings , in the near term .
Of course , since stocks price in future earnings growth , and since @ @ @ @ @ @ @ of the recession coming , we can guesstimate the impact to earnings .
Unfortunately , both Larry Kudlow , Steve Mnuchin , and the Fed , are still misdiagnosing what ails the economy , and monetary policy is unlikely to change the outcome in the U.S .
Furthermore , the lack of economic growth , resulting in lower earnings growth , will eventually lead to a full repricing of assets .
Yes , we are in a recession , it has just started , and we have quite a ways to go before @ @ @ @

by Lance Roberts
“Treasury Secretary Steven Mnuchin on Sunday downplayed the likelihood of an economic recession as the economy takes a beating from the coronavirus outbreak. When asked on ABC’s ‘This Week’ if the US was now in an economic recession as some have suggested, Munchin said, ‘I don’t think so.’ ” – CNN
However, it wasn’t just Mnuchin making such a claim, but Larry Kudlow as well:
“I just think, in general, I would be very careful to put too much emphasis on what bond rates are doing, what interest rates are doing. Or even in the short, short run, the stock market. I think you have a lot of mood swings here and I don’t think it reflects the fundamentals.” – Larry Kudlow via CNBC
I understand they have to pander to the administration, but this is a stretch to say the least.
Let’s dig into some facts to determine our real risks.
Even before COVID-19 had infected the planet, economic data, and inflationary pressures were already weakening. This already suggested the decade long economic expansion was “running lean.”
However, the sharp decline in both 5- and 10-year “breakeven inflation rates,” are suggesting economic growth over the next couple of quarters will drop markedly. The last time there was such a sharp drop in inflation expectations at the beginning of the “financial crisis.”
Since then, the markets have been rocked as concerns over the spread of the“COVID-19” virus. The U.S. has shut down sporting events, travel, consumer activities, restaurants, bars, stores, and a host of other economically sensitive inputs. This is on top of the collapse in oil prices, which impacts a very important economic sector of the economy. (The O&G sector either directly or indirectly creates millions of jobs, has some of the highest wages, and is responsible for about 1/4th of all capital expenditures.)
However, this is just in the United States. This is a “global issue,” and the supply chains of the world are tightly interconnected. As we discussed previously:
“Given that U.S. exporters have already been under pressure from the impact of the ‘trade war,’ the current outbreak could lead to further deterioration of exports to and from China, South Korea, and Japan. This is not inconsequential as exports make up about 40% of corporate profits in the U.S.”
Our Economic Output Composite Indicator (EOCI) was already at levels which warned of weak economic growth. Furthermore, as shown below, even the Leading Economic Indicators (LEI) were already suggesting something was amiss long before the virus became “a thing.”
Data as of February 2020.
(The EOCI is comprised of the Fed Regional Surveys, CFNAI, Chicago PMI, NFIB, LEI, and ISM Composites. The indicator is a broad measure of hard and soft data of the U.S. economy)”
One reason we are confident the economic data will worsen near term is the correlation between the index and the annual rate of change of the S&P 500 index.
The financial markets lead the economy by about 6-months as markets begin to “price in” changes to earnings due to the outlook for economic strength. The recent plunge in the S&P 500 has deviated from the current EOCI index reading suggesting the index will decline towards recessionary levels over the next two months.
The Question Isn’t If…
The U.S. economy, along with the bulk of the globe, is already in “recession.”
Let’s start with a bit of historical context. Since the 1800’s, the average length of an economic recession has been 18-months. Some of that length is skewed by a more agricultural-based economy at the beginning, with more modern recessions having been shorter. (We are assuming that March 2020 was the start of a new recession at one-month.)
While the average recession has been somewhat shorter in recent decades, the recessions of 1973, 1991, and 2007 have pushed those long-term averages. The chart below also shows the subsequent decline in asset prices during subsequent recessions.
Given, declines of these magnitudes only occur during recessionary periods, the recent near 30% decline is likely good confirmation a recession has begun. (However, at just one-month, it may be overly optimistic to assume it is over with already. )
Yields Are Screaming: “Recession”
Interest rates are also a very good confirmation of recessionary periods as well.
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Since 2013, I have disagreed the mainstream analysis (including Jeff Gundlach and Bill Gross) that the “bond bull market” was dead. The reality has been substantially different as rates have continued to trend lower, and recently approached our long-term target of ZERO.
“There is an assumption that because interest rates are low, the bond bull market has come to its inevitable conclusion. The problem with this assumption is three-fold: All interest rates are relative. With more than $10-Trillion in debt globally sporting negative interest rates, the assumption that rates in the U.S. are about to spike higher is likely wrong. The coming budget deficit balloon. Given the lack of fiscal policy controls in Washington, and promises of continued largesse in the future, the budget deficit is set to swell back to $1 Trillion or more in the coming years. Central Banks will continue to be a buyer of bonds to maintain the current status quo, but will become more aggressive buyers during the next recession. The next QE program by the Fed to offset the next economic recession will likely be $2-4 Trillion, which will push the 10-year yield towards zero.” – August 30, 2016
So, where are we nearly 4-years later?
23% of global debt is now supporting negative interest rates.
The U.S. deficit has well surpassed $1 Trillion on its way to $2 Trillion.
Central Banks continue to be a primary buyer of bonds as the Fed’s balance sheet has swelled back to its previous peak and the Fed recently dropped rates to zero and started a $700 billion QE program.
Here is the relevant chart I posted in 2016. At that time rates were hitting lows of 1.6%, which was unthinkable at the time. And, where are rates, today? Approaching zero.
As shown above, over the last sixty years, the yield on the 10 year has approximated real GDP plus inflation (shown in the chart below). Given this historical fact, we can do some basic math to determine what yields are currently predicting for the U.S. economy currently.
Via Doug Kass:
“Given ZIRP and QE policies around the globe which has pulled an extraordinary amount of sovereign debt into negative territory coupled with secular headwinds to energy prices, I have assumed that the 10 year yield will fall from 1.0x nominal GDP and average about 0.8x nominal GDP. According to my pal Peter Boockvar, the 10 year inflation breakeven (in the tips market) stands at 1.41% this morning: So, let’s solve for what the market expects Real GDP to be (over the next 1-2 years) with this formula: 10 Year Yield (0.744% Actual) = 0.8x (Real GDP + 1.41% Actual (inflation)) The implied U.S. Real GDP of this equation is now negative — at -0.48%. (This compares to the consensus 2020 Real GDP growth forecast of between +1.75% to +2.00%) It also implies that nominal GDP (Real GDP plus Inflation) will be only about +0.93% – substantially below consensus expectations of slightly above 3%.”
It’s markedly worse now as the collapse in oil prices has sent breakeven rates below 1%.
As we noted in “On The Cusp Of A Bear Market,” the collapse in interest rates, as well as the annual rate of change in rates, is screaming that something “has broken,” economically speaking.
Mnuchin’s suggestion the economy will likely avoid “recession,” is a bit ludicrous. The data suggests an entirely different outcome. However, David Rosenberg recently put some numbers on the impact to the economy from the “economic shutdown” from the virus. To wit:
“The pandemic is a clear ‘black swan’ event. There will be a whole range of knock-on effects. Fully 40 million American workers, or one-third of the private-sector labor force, are directly affected ─ retail, entertainment, events, sports, theme parks, conferences, travel, tourism, restaurants and, of course, energy. This doesn’t include all the multiplier effects on other industries. It would not surprise me at all if real GDP in Q2 contracts at something close to an 8% annual rate (matching what happened in the fourth quarter of 2008, which was a financial event alone). The hit to GDP can be expected to be anywhere from $400 billion to $600 billion for the year. But the market was in trouble even before COVID-19 began to spread, with valuations and complacency at cycle highs.”
Given the average recession is 18-months, and given the severity of the economic impact, even this 12-month forecast is likely overly optimistic. However, we are still missing a LOT of data, which will come to light over the next several months.
The recession will be quite severe.
As David concludes:
“A 35% slump in global financial stocks and a similar plunge in U.S. small-cap equities cannot be wrong on this forecast. And the massive volume of leverage complicates the outlook that much more.”
I know you shouldn’t point and laugh, but you almost have to when Mnuchin and Kudlow have the audacity to suggest this is a temporary negative shock. This a collision of multiple shocks impacting an overly leveraged, overly valued, and overly bullish market simultaneously.
Coronvirus impact
Supply chain shutdowns
Economy wide “closures”
Consumer confidence collapse.
Employment shock
Debt crisis
The problem for the Federal Reserve is this is NOT a “financial crisis,” or a simple “business cycle” recession, that monetary policy can fix. Governments have opted for to “contain the virus” by shutting down the economy. Giving households $1000 checks sounds great, but not if you can’t spend them. Maybe they will opt to pay down debt, but that doesn’t spur economic activity, or improve earnings, in the near term.
Of course, since stocks price in future earnings growth, and since we have a feel for the impact of the recession coming, we can guesstimate the impact to earnings.
“Profit margins are probably the most mean-reverting series in finance, and if profit margins do not mean-revert, then something has gone badly wrong with capitalism. If high profits do not attract competition, there is something wrong with the system, and it is not functioning properly.” – Jeremy Grantham The impending recession, and consumption freeze, is going to start the mean-reversion process in both corporate profits and earnings. In the following series of charts, I have projected the potential reversion. The reversion in GAAP earnings is pretty calculable as swings from peaks to troughs have run on a fairly consistent trend. (The last drop off is the estimate to for a recession)
“Using that historical context, we can project a recession will reduce earnings to roughly $100/share. The resulting decline asset prices to revert valuations to a level of 18x (still high) trailing earnings would suggest a level of $1800 for the S&P 500 index.”
“If our, and Mr. Rosenberg’s, estimates are correct of a 5-8% recessionary drag in the second quarter of 2020, then an average reduction in earnings of 30% is most likely overly optimistic. However, here is the math: Current Earnings = 132.90
30% Reduction = $100 (rounding down for easier math) At various P/E multiples, we can predict where “fair value” for the market is based on historical assumptions: 20x earnings: Historically high but markets have traded at high valuations for the last decade.
Historically high but markets have traded at high valuations for the last decade. 18x earnings: Still historically high.
Still historically high. 15x earnings: Long-Term Average
Long-Term Average 13x earnings: Undervalued
Undervalued 10x earnings: Extremely undervalued but aligned with secular bear market bottoms. You can pick your own level where you think P/E’s will account for the global recession but the chart below prices it into the market.”
Unfortunately, both Larry Kudlow, Steve Mnuchin, and the Fed, are still misdiagnosing what ails the economy, and monetary policy is unlikely to change the outcome in the U.S. Furthermore, the lack of economic growth, resulting in lower earnings growth, will eventually lead to a full repricing of assets.
Yes, we are in a recession, it has just started, and we have quite a ways to go before it is over.
Fade rallies, and reduce risk accordingly.