Baltic Dry Index. 617 +18 Brent Crude 45.27 Spot
Gold 1674
Covid-19 Cases 08/2/20 World 35,010 Deaths 726 (Maybe.)
Covid-19 Cases 29/2/20 World
85,206 Deaths
2,923 (Maybe.)
Covid-19 Cases 07/3/20 World 104,094 Deaths
3,524 (Maybe.)
Let us suppose now that
one day a helicopter flies over this community and drops an additional $1,000
in bills from the sky, which is, of course, hastily collected by members of the
community. Let us suppose further that everyone is convinced that this is a
unique event which will never be repeated.
Milton Friedman.
Did the rising global coronavirus crisis
just generate a new 2007-2008 style credit crisis?
Well in my view probably not. I think the new credit crisis predates the December coronavirus appearance, with the Feds pumping in repo money like a drunken sailor since late September and unable to stop.
Well in my view probably not. I think the new credit crisis predates the December coronavirus appearance, with the Feds pumping in repo money like a drunken sailor since late September and unable to stop.
The growing global coronavirus crisis is
just aggravating an already existing credit crisis.
But with all the recent
whipsaw volatility, my guess is that many of the tracker hedge funds are
bleeding cash in an unprecedented way, and bracing for a massive wave of
redemptions at the end of March. Besides, given the recent action did any of
them just blow up?
Even if they manage to stem the rising
losses, whipsaw markets scare everyone, and an arriving global recession from
the coronavirus crisis suggests it’s prudent to sit it out in cash.
The panic going on in the credit markets
suggests that the next Lehman will shortly surface. But where? America, Europe
or Asia?
My guess is Europe, but it really doesn’t
matter anymore. The financialised gambling world is now so leveraged and
interconnected, a blow up in Italy is likely to blow up Germany’s top bank,
generating problems in London, New York, and Tokyo.
Add in massive growing coronavirus
losses for the insurance sector, airlines, cruise lines, hotels, tourism and
retailing, and many more, and it’s pretty obvious that when the next Lehman
hits the central banksters in panic and desperation will go for “helicopter
money.”
Nothing good for most comes from
helicopter money.
Liquidity Angst Builds in Bond Market on Surging Risk Indicators
Edward Bolingbroke, Alexandra
Harris and Stephen Spratt
BloombergMarch 6, 2020
(Bloomberg) -- Anxiety about an emerging liquidity crunch
is roiling global bond markets.
A key gauge of banking-sector risk, known as the FRA/OIS
spread, soared to its highest level in almost two years, while dollar swap
spreads widened, suggesting stresses in U.S. markets are becoming increasingly
severe. Here are five charts to watch for further angst:
The two-day blow-out in the FRA/OIS spread -- a U.S.
money-market benchmark that measures the difference in rates between
forward-rate agreements and overnight index swaps -- shows increased
perceptions of interbank lending risk or dollar hoarding. The gauge jumped from
around 12 basis points at the end of February to over 50 basis points Friday,
before paring.
A similar measure for euros widened to a level unseen since
September, while futures on Euribor -- the European bank lending rate -- fell.
On Thursday, speculative puts were scooped up, hedging for a bigger drop,
despite traders pricing in about 9 basis points of rate cuts by the European
Central Bank next week.
U.S. swap spreads widened, indicating higher risk levels
perceived by counterparties in interest-rate swap agreements. The two-year
sector rose to its highest level in over a year.
“We are on high alert for any spill-over not just into funding
today but credit markets,” NatWest strategists led by John Briggs wrote in a
note to clients. “We are concerned that there are skeletons out there in
closets we may not be aware of that come out in times like this, particularly
leverage from the shadow banking system.”
Cross-currency basis swaps -- the rate that international
investors pay to switch their local currency for dollars -- also showed a sharp
increase in demand for the greenback.
The three-month yen basis touched its widest levels of the year
and similar euro and sterling swaps also saw increased volatility.
U.S. rates volatility is on fire, with widening swap spreads
and convexity triggers on traders’ radars. The at-the-money three-month-10-year
swaption hit the highest levels since 2016, fast approaching 100 basis points
in annualized volatility on Friday.
The cost to protect against default on investment-grade credit
jumped to the highest in more than a year on Friday, adding to aggressive moves
from a day earlier.
Traders are struggling to digest the impact of the coronavirus
on the economy and their jobs, spurring an epic rally in global bonds. Equities
around the world tanked and bets on further central-bank easing rose, but many
now fear that this volatility could hurt liquidity.
“We are staring at the abyss of a credit crunch,” said Kaspar
Hense, a portfolio manager at BlueBay Asset Management, noting in particular
the widening of dollar FRA/OIS.
Helicopter money
Helicopter money is a proposed unconventional monetary policy, sometimes suggested as an alternative to quantitative easing (QE) when the economy is in a liquidity trap (when interest rates near zero and the economy remains in recession). Although the original idea of helicopter money describes central banks making payments directly to individuals, economists have used the term 'helicopter money' to refer to a wide range of different policy ideas, including the 'permanent' monetization of budget deficits – with the additional element of attempting to shock beliefs about future inflation or nominal GDP growth, in order to change expectations.[1] A second set of policies, closer to the original description of helicopter money, and more innovative in the context of monetary history, involves the central bank making direct transfers to the private sector financed with base money, without the direct involvement of fiscal authorities.[2][3] This has also been called a citizens' dividend or a distribution of future seigniorage.[4]The phrase "helicopter money" was first coined by Milton Friedman in 1969, when he wrote a parable of dropping money from a helicopter to illustrate the effects of monetary expansion. The concept was revived by economists as a monetary policy proposal in the early 2000s following Japan's Lost Decade. In November 2002, Ben Bernanke, then Federal Reserve Board governor, and later chairman suggested that helicopter money could always be used to prevent deflation.
China January-February exports tumble, imports slow as coronavirus batters trade and business
March 7, 2020 / 3:59 AM
BEIJING (Reuters) - China’s exports
contracted sharply in the first two months of the year, and imports slowed, as
the health crisis triggered by the coronavirus outbreak caused massive
disruptions to business operations, global supply chains and economic activity.
The gloomy
trade report is likely to reinforce fears that China’s economic growth halved
in the first quarter to the weakest since 1990 as the epidemic and strict
government containment measures crippled factory production and led to a sharp
slump in demand.
Overseas
shipments fell 17.2% in January-February from the same period a year earlier,
customs data showed on Saturday, marking the steepest fall since February 2019.
That
compared with a 14% drop tipped by a Reuters poll of analysts and a 7.9% gain
in December.
Imports sank
4% from a year earlier, better than market expectations of a 15% drop. They had
jumped 16.5% in December, buoyed in part by a preliminary Sino-U.S. trade deal.
China ran a
trade deficit of $7.09 billion for the period, reversing an expected $24.6
billion surplus in the poll.
Factory
activity contracted at the fastest pace ever in February, even worse than
during the global financial crisis, an official manufacturing gauge showed last
weekend, with a sharp slump in new orders. A private survey highlighted
similarly dire conditions.
The epidemic has killed over 3,000 and
infected more than 80,000 in China. Though the number of new infections in
China is falling, and local governments are slowly relaxing emergency measures,
analysts say many businesses are taking longer to reopen than expected, and may
not return to normal production till April.
---- The supply and demand shocks in China
are likely to reverberate through global supply chains for months, and the
rising number of virus cases and business disruptions in other countries is
raising fears of a prolonged global slowdown or even recession.
More
U.S. financial companies prep for new normal amid coronavirus outbreak
March 5, 2020 / 5:42 PM
NEW YORK (Reuters) - U.S. financial
companies are doubling down on travel restrictions to include domestic trips,
replacing meetings with video calls, and webcasting events as the coronavirus
outbreak starts to alter business-as-usual across the sector.
JPMorgan Chase & Co (JPM.N) said on Thursday that employees should forgo any non-essential domestic business travel in all of its worldwide locations, according to a memo seen by Reuters.
“Meet across cities and countries by telephone or telepresence,” the bank encouraged employees in the memo.
Similarly Wells Fargo & Co (WFC.N) said on Thursday that it was restricting all non-essential domestic business air travel in the United States, according to a memo seen by Reuters.
The moves made Wells Fargo and JPMorgan the first large U.S. banks to restrict domestic travel, after recently restricting international travel.
Rival Citigroup Inc (C.N) has also started discouraging face-to-face meetings, according to a source familiar with the matter.
Silicon Valley venture capital firm Andreessen Horowitz is asking all visitors to its office where they have traveled to in the past few weeks and is rescheduling meetings to video or phone whenever appropriate, according to a statement.
Hedge-fund firm Third Point LLC decided to replace the in-person portion of its March 9 investor day in Manhattan with a webcast, according to a message sent to attendees on Thursday, a copy of which was seen by Reuters.
Buyout firms Blackstone Group Inc (BX.N) and Apax Partners LLC postponed their annual meetings or will hold them remotely because of the coronavirus.
The changes to day-to-day business come as several states across the U.S. start registering more cases of the new coronavirus.
In the
United States 12 people have died of coronavirus and the virus has killed more
than 3,300 worldwide.
Some of the
sector’s younger and more tech-savvy firms are getting creative in their
coronavirus preparation plans.
New
York-based cryptocurrency data firm Messari implemented an indefinite
work-from-home policy this week, and bought virtual reality headsets for
everyone on the team to start experimenting with the technology which could be
used to participate remotely in events.
“Might sound
crazy, but it’s worth the experiment,” said founder and Chief Executive Ryan
Selkis.
Japan's households tighten wallets as coronavirus empties streets
March 6, 2020 / 12:22 AM
TOKYO (Reuters) - Japanese homes extended
their frugal spell for a fourth straight month in January as an earlier sales
tax hike and a warmer winter kept wallets shut, adding to headaches for firms
as they struggle with the growing hit to business from the coronavirus.
The world’s
third-largest economy is trying to cushion the blow to output and exports from
the global health crisis, which threatens to tip it into its first recession in
nearly five years.
Household
spending fell 3.9% in January from a year earlier, government data showed on
Friday, largely in line with a median forecast for a 4.0% decline.
That marked
the longest stretch of contraction since a five-month run to June 2018, a
government official said.
The gloomy
data suggests households were tightening their purse strings even before the
coronavirus forced many retail outlets to close their doors in February and
March as shoppers stayed at home.
“The
reduction in going outside is likely to have a big impact, especially on
spending related to services,” said Yoshiki Shinke, chief economist at Dai-ichi
Life Research Institute.
The
coronavirus crisis now threatens to spoil chances of the domestic-led recovery
many policymakers had hoped for after the economy shrank at its fastest pace in
nearly six years in the past quarter.
---- Spending in January fell 1.6% from the previous month, pulled down by lower spending on gasoline and overseas and domestic travel amid mild winter weather, a government official said.
Some people
expect Japan’s economy to get a boost from pent-up demand after the virus
impact fades later in the year.
“Many people
have stopped eating and drinking out altogether,” said Daisaku Nagayoshi, whose
firm produces marketing goods. He expects a burst of activity with people
flocking to restaurants again once the virus threat clears.
More
Finally, why a coronavirus vaccine might
still be a very long way off.
03.04.2020 05:07 PM
Everything You Need to Know About Coronavirus Vaccines
As Covid-19 spreads, the pressure is on for
drugmakers to get a vaccine to market. But it's not that easy.
----President Donald Trump told pharmaceutical executives and public health officials in a White House meeting on Monday that he wants one ready before the election in November.
For the record, that would be impossible. Developing vaccines that are safe and effective takes time, investment, and good science. Developing a vaccine for a coronavirus like the one that causes Covid-19 comes with even more challenges. But at least 30 companies and academic institutions are trying. Here’s your guide to everything you need to know about those efforts. Check back often—we’ll be keeping it updated with any notable progress or setbacks.
What’s In a Vaccine?
Vaccines all work on the same basic principle: Scientists try to make something that closely resembles a pathogen, and then expose a person’s immune system to it through a small dose administered as an injection. Ideally, the immune system develops a strong memory of the pathogen, so that the next time the person is exposed, their body will mount an attack before the infection can take hold. The trick is to do this without making the person seriously ill from the vaccine itself. There are a few different methods for making vaccines, but they all must strike this delicate balance.One way to make a vaccine is to weaken, or attenuate, the microorganism while still keeping it alive.
The most common method for doing this is growing several generations of the pathogen in environments other than human cells, so that it evolves away from causing disease in humans. By repeatedly culturing live viruses or bacteria in animal cells, scientists can essentially create a bunch of mutants. Then it’s a matter of selecting the mutant strains that can replicate in human cells but don’t cause disease like their wild ancestor. The trick is that these imposters still have to look enough like the original virus to accurately train the immune system to fend it off. Examples of attenuated vaccines include those for measles, mumps, and tuberculosis.
Another type is called an inactivated vaccine, which is made from a dead version of the whole virus or bacteria after it’s been killed with heat or chemicals. This type of vaccine can also be made using smaller pieces of the microbe, which by themselves are not considered alive.
One common approach is to locate the
protein that a virus uses like a key to get into human cells, which is usually
on its surface. Once scientists know the genetic code for this protein, they
can paste it into bacteria or yeast and use these
microbial factories to produce huge
quantities of it to be used as the basis of the vaccine. The protein alone is
often enough to be easily recognized by the immune system and to trigger a
defense on subsequent exposure. Alternately, sometimes scientists will
genetically modify the virus instead, swapping bits of the disease-causing
pathogen into a harmless virus shell. These types of inactivated vaccines
almost always require multiple doses, because they’re not as good at
stimulating the immune system as a live microbe. But they come with a lower
risk of severe reactions. Examples of inactivated vaccines include those for
polio, rabies, and hepatitis A and B.
All the approved vaccines on the market
use one of these two techniques. But newer methods still in development may get
their debut with the Covid-19 outbreak. One such promising technology is
nucleotide-based vaccines. Nucleotides are the chemical building blocks that
make up genetic material, both DNA and RNA. The virus that causes Covid-19,
known as SARS-CoV-2, consists of a strand of RNA enclosed in a spike-covered
capsule. It uses these spikes to invade human lung cells.
Vaccine makers can
copy the genetic instructions for making these spikes and package them up into
a shot. Once inside the body, human cells will make the viral proteins, which
the immune system will then recognize as foreign. It will produce antibodies
against them and learn how to attack any future invaders carrying these protein
spikes.
When Will a Covid-19 Vaccine Be Ready?
On Tuesday, National Institute of Allergy and Infectious Diseases director Anthony Fauci told US senators, “It will take at least a year and a half to have a vaccine we can use.” That might seem like an eternity for public health officials staring down a probable pandemic. But if true, it would actually set a record. Most vaccines take between five and 15 years to come to market, says Jon Andrus, an adjunct professor of global vaccinology and vaccine policy at the Milken Institute of Public Health at George Washington University.---- A Potential Wrinkle
There’s another factor that makes developing a vaccine against coronavirus a particularly tricky endeavor, says Peter Hotez, a vaccine researcher and dean of the National School of Tropical Medicine at Baylor College of Medicine. That’s something called “immune enhancement.” In the 1960s, scientists at the National Institutes of Health were working on a vaccine against respiratory syncytial virus, or RSV, a common, very contagious virus responsible for most of the colds that infants and toddlers get. During clinical trials, some children who received the vaccine later went on to get terribly sick when they caught RSV in the wild. The vaccine produced an exaggerated immune response, causing extensive damage in their bodies. Two kids died.
Much more
This weekend’s musical diversion. J. S Bach and a little sanity in a world gone
mad. Enjoy.
Johann Sebastian Bach Keyboard Concerto in E major, BWV 1053
In 2003, Willem Buiter, then chief economist at the European Bank for Reconstruction and Development, revived the concept of helicopter money in a theoretical paper, arguing that base money is not a liability, which provides a more rigorous case for Friedman and Haberler's Pigouvian intuitions.[10]
Starting from 2012, economists have also called this idea "quantitative easing for the people."
The Bernie Sanders magic
money playbook.
The monthly Coppock Indicators finished February
DJIA: 25,409
-75 Down. NASDAQ: 8,567 +171 Up. SP500: 2,954 +133 Up.
A mixed bag. But given the severity of the still growing coronavirus
crisis, I wouldn’t follow technical signals in what I think will turn into the
first depression since the 1930s.
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