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Sunday, July 19, 2020

2020-07-20

COVID-19 notes:

 US Daily New Cases

 

US Daily New Deaths


Goldman: States Containing 80% Of The US Population Have Paused Or Taken Steps To Reverse Reopening


Scientists identify six different types of coronavirus with increasing severity levels


More than half of all COVID-19 patients found to have damaged hearts


WHO warns that coronavirus crisis may get 'worse and worse and worse'

The Covid-19 pandemic is set to get “worse and worse” if countries do not stick to strict healthcare guidelines, the World Health Organization (WHO) has warned.


"No Return to the 'Old Normal' for Foreseeable Future," Warns WHO Chief

"If the basics aren't followed, there is only one way this pandemic is going to go. It's going to get worse and worse and worse."


What to do if COVID-19 is here to stay

We do not yet know whether individuals who recover from COVID-19 can be reinfected. If immunity wanes, the disease will become endemic, in sharp contrast to a model in which recovery confers permanent immunity. This column considers the possibility that immunity is indeed only temporary, and derives a stylised optimal containment policy to reduce the initial wave of contagion and then manage persistent infections. In practice, this means that partial lockdowns and social distancing measures may be the norm for years to come.


Coronavirus warning from Italy: Effects of COVID-19 could be worse than first thought

The long-term effects of COVID-19, even on people who suffered a mild infection, could be far worse than was originally anticipated, according to researchers and doctors in northern Italy. Psychosis, insomnia, kidney disease, spinal infections, strokes, chronic tiredness and mobility issues are being identified in former coronavirus patients in Lombardy, the worst-affected region in the country. The doctors warn that some victims may never recover from the illness and that all age groups are vulnerable. The virus is a systemic infection that affects all the organs of the body, not, as was previously thought, just a respiratory disease, they say. Some people may find that their ability to properly work, to concentrate, and even to take part in physical activities will be severely impaired.


THE COVID-19 PANDEMIC AND RESULTING ECONOMIC CRASH HAVE CAUSED THE GREATEST HEALTH INSURANCE LOSSES IN AMERICAN HISTORY


Hussman’s Market Comment, Fundamentally Unsound, includes a very readable Public Health Note at the end, that I recommend reading in its entirety:

A final note. Over 35,000 Americans die in vehicle accidents every year. Seat belt use in the United States is about 90%. Roughly 10% of Americans don’t wear them. Half of all crash fatalities come from each of those two groups. That’s another way of saying that unclicking that belt results in a 9-fold increase in the likelihood a crash will be fatal. Vehicle fatalities are the leading cause of death between ages 5-34. I’m a big fan of seat belt laws, but if you choose not to wear a belt, at least you’re not hurting anyone else. When it comes to public, shared-airspace settings, using a mask isn’t about you. Refusing to wear one is like unclicking the seat belts of all of your passengers, and then texting while driving into oncoming traffic.

 

Regular Related Fare:

The U.S. Set Up These Programs to Offset Covid Hardship. They’re All About to Expire.


It Starts: Mortgage Delinquencies Suddenly Soar at Record Pace

OK, it’s actually worse. Mortgages that are in forbearance and have not missed a payment before going into forbearance don’t count as delinquent. They’re reported as “current.” And 8.2% of all mortgages in the US – or 4.1 million loans – are currently in forbearance, according to the Mortgage Bankers Association. But if they did not miss a payment before entering forbearance, they don’t count in the suddenly spiking delinquency data.

The onslaught of delinquencies came suddenly in April, according to CoreLogic, a property data and analytics company (owner of the Case-Shiller Home Price Index), which released its monthly Loan Performance Insights today. And it came after 27 months in a row of declining delinquency rates. These delinquency rates move in stages – and the early stages are now getting hit:


Bank loans, Commercial real estate index, Dining



Regular Fare:

Rethinking public debt.


Fertility rate: 'Jaw-dropping' global crash in children being born

 

            

Bubble Fare:

Jesse Felder: ‘What Were You Thinking?’ Part Deux

famous Scott McNeely quote from the aftermath of the Dotcom bust:

“At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?”

even as we find ourselves in the midst of the worst economic crisis in modern history, there are still more stocks that trade above 10-times revenues today (37) than there were in March of 2000 (30), the month the Nasdaq put in its infamous peak before falling 75% over the subsequent two years.



Weekly Credit Bubble Bulletin: Utmost Crazy

It is a central tenet of Credit Bubble analysis that things turn “Crazy” near the end of cycles. And with the thesis that we’re in the concluding (“terminal”) phase of a multi-decade, super-cycle global Bubble, there’s been every reason to foresee Utmost Craziness.

In the most simplified terms, Bubbles inherently gather momentum and inflate to dangerous extremes. Mounting fragilities ensure policymakers employ the increasingly outrageous measures demanded to hold collapse at bay. Craziness is cultivated by a confluence of late-cycle intense monetary inflation (i.e. QE and speculative leverage) and deeply ingrained speculative impulses.

The bigger the Bubble, the more intense the speculative fervor; the greater the attendant government intervention; and the more convinced market participants become that officials won’t allow a bust. Throw Trillions at systems already acutely prone to Bubble excess and you’re courting disaster (that’s you, Washington and Beijing).

The global nature of Bubble Dynamics makes this period unique. And while Europe, Japan and EM are important contributors, the global Bubble is foremost under-pinned by historic U.S. and Chinese monetary inflation. That these two countries are increasingly bitter rivals adds unique challenges to Bubble analysis. The irony of it all: China’s communist party readily promoting the stock market. Do they have much choice? The Federal Reserve over three decades shifted away from the traditional model of affecting bank lending – elevating the financial markets to the primary policy stimulus mechanism. Instead of measured interest-rate reductions, on the margin, stimulating bank lending, the Fed has resorted to Trillions of securities purchases (QE) and zero rates to directly trigger market speculation and asset inflation. This model proved an absolute boon to U.S. markets, the economic expansion, the dollar and broader U.S. global influence. To compete, Beijing knew what to do.

It’s not unusual for short squeezes to unfold even in the face of deteriorating fundamentals. There is often a final “blow-off” fueled by a confluence of speculative excess, panicked short covering, and derivative-related trading. It’s a key facet of late-cycle Craziness.

That sick feeling in my stomach returned this week: this is out of control. COVID is out of control. Market speculation is out of control. And it’s this combination that recalls the unease I was experiencing back in February, as a speculative marketplace was content to completely disregard mounting pandemic risk.

It’s difficult to fathom the almost 400,000 new U.S. COVID infections since the last [bulletin]. Hopes from just a few weeks ago of a return to a semblance of normalcy have been crushed. The specter of overflowing ICUs and hospital wards has returned – but instead of NYC it will unfold in cities and towns across the entire southern U.S. And it looks like a replay of PPE and COVID test shortages. And what the future holds appears more unsettled today than even in March and April. Back then we believed there was a curve to flatten. With shared sacrifice, we’d overcome the pandemic…. A harsh reality has begun to set in. At this point, no one – or any model – has a clue as to how many will perish – or even the general trajectory of this pandemic. The relatively low daily death rate was early in the week still a talking point for the dismissive. The daily death count surpassed 800 by the end of the week – on the way to 1,000, 2,000 or even higher?

Will the most populated states in the country be forced to dramatically tighten restrictions? Texas, Georgia, California and others are contemplating a return to “lockdown” conditions. Does this widely dispersed outbreak portend a major nationwide spike in infections – in cities, towns and rural communities? Are we prepared? Have we procured sufficient supplies?

Stocks are surging, so the economic recovery must not be at risk, right? Yet it’s difficult to see how the economy – at home and abroad – isn’t facing serious chronic problems. We’re only weeks away from the start of a new school year – and there’s little clarity…. It’s simply difficult to comprehend what a mess we’ve made of things.

 


Value is Dead. Long Live Value Investing.

 


The COVID Economy In Suspended Animation



(not just) for the ESG crowd:

Biden Outlines $2 Trillion Climate Plan

The ultimate cost of carbon

 

Quotes of the Week:

Hussman: If someone tells you, “well, stock valuations are high, but high valuations are justified by low interest rates,” they’re actually arguing that passive investors face the worst of all possible worlds. They’re saying “well, future stock returns are likely to be dismal, but dismal returns on stocks are justified because you’re going to get dismal returns on bonds too.” Saying that current stock market valuations are “justified” by low interest rates is like saying that poking yourself in the eye is “justified” by smashing your thumb with a hammer.

 

Toon of the Week:

  

 

xkcd of the Week:

 

 

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