2020-02-10

n-cov notes:

Saxo Bank: Sanguine Approach To Virus Impact Is Misplaced

This impact via the supply chain shock is likely to get worse before it gets better and that risk is not priced into equity markets. As the economic disruption prevails, the potential downwards revisions to growth and economic activity have the capacity to outweigh tentative green shoots, particularly across Asia and the Eurozone (via trade linkages with China).

He may not be right, but can’t be so certain he’s wrong:

The Pandemic Isn't Ending, It's Just The Beginning Of Global Disorder & Depression

Unsurprisingly, denying the pandemic is unstoppable and consequential is the order of the day: authorities everywhere are terrified these realities

might leak through all their oh-so-obviously desperate firewalls and filters. Why are they terrified? Because they know the entire global economy, including the linchpin Chinese and U.S. economies, was extremely fragile before the pandemic arose: why else the panic-stimulus and panic-repo policies of the Federal Reserve and the People's Bank of China in the pre-pandemic months of Q4 2019?

And so everything is covered up, and if that doesn't work, then outright denial is the default policy. The number of cases globally is absurdly understated, the number of deaths in China is absurdly under-reported, and so on.

But the biggest denial campaign is aimed at masking the fragility of the global economy, as the only thing keeping the rickety, speculative-bubble, insolvent global economy from imploding is the belief and confidence of the masses that everything is going swimmingly, so keep on borrowing, borrowing, borrowing, buying, buying, buying and speculating, speculating, speculating.

While the real-world battle to limit the spread of the virus in China gets the headlines, the battle inside your head to maintain your confidence in the system is just as important.

Will Coronavirus Crater Hopes Of A Global Recovery As World Trade Tumbles?

Regular notes:

Payrolls Revisions Wipe Out 520,000 Job Gains Under Trump

Deep Dive Into the BLS Job Revisions: What Really Happened?

Class 8 Heavy Duty Truck Orders Dead-Cat-Bounce 10% In January, Marking First Rise In 15 Months 

Typical collapse ahead of recessions.

Global Air Freight Just Suffered Worst Year Since 2009

Visualizing The 700-Year Fall Of Interest Rates

The Next “Minsky Moment” Is Inevitable

Banks Tighten Credit Card, Auto Loan Standards As C&I Loan Demand Continues To Shrink

Other fare:

The AI delusion: why humans trump machines

(not just) for the ESG crowd:

Carbon Tracker: Handbrake Turn: The cost of failing to anticipate an Inevitable Policy Response to climate change.

FT: Lex In-Depth: The $900bn Cost Of ‘Stranded Energy Assets’

Quotes of the Week:

Andrew Grant, senior oil & gas analyst and author said: “We do not know when or how an Inevitable Policy Response will come, which makes it hard for companies to plan. However, they risk being left with stranded assets if they assume governments will not take forceful action to limit climate change. Preparing in advance and aligning their investment with climate targets will deliver the highest returns for the lowest risk under any outcome.”

Steve Keen: "Since policymakers take what economists predict seriously — even after the 2008 financial crisis — they have been duped and have drastically underestimated how severe climate change will actually be"

Photo of the Week

Every color is home to 1 billion people; find Wuhan on the map: