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Rabobank: Stocks Go Up As Everything Is Going Down In Flames
Rabobank: Stocks Go Up As Everything Is Going Down In Flames
It’s All Going to the Dogs (and Goats)
Friday’s April US payrolls report showed 20.5 million jobs lost when in an ordinary downturn 200,000 might be considered bad; the drop in March alone was larger than that seen during the worst of the global financial crisis. In short, we face a global future of mass unemployment (now 14.7% in the US and 13% in Canada) on top of mass debt, both public and private.
Last week the German Constitutional Court (GCC) ruled that it is superior to the European Court of Justice (ECJ), and that the ECB has three months to prove it is not exceeding its remit with its extraordinary monetary policy. Yesterday the President of the EU Commission von der Leyen threatened to sue Germany, stating the final word on EU law is always spoken by the ECJ. Guess which court ultimately hears the case? The ECJ. How is this going to play out if the GCC doesn’t back down? Very badly in the Eurozone periphery, to the benefit of Euroskeptics. How is it going to play out in Germany if the GCC is forced to back down? Badly in Germany, to the benefit of Euroskeptics. Given the ECJ won’t back down and the ECB has said it will ignore the GCC, and the GCC is not likely to blink either, we seem set for an institutional crisis over the scope and shape of the Eurozone financial market – albeit one that rumbles on rather than erupting immediately.
US Vice-President Mike Pence, titular head of the US virus task force, is self-isolating after figures close to the White House were diagnosed as positive for Covid.
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GDP Now Q2 Estimate At -34.90 Percent, So What Now?
GDP Now Q2 Estimate At -34.90 Percent, So What Now?
Summary
- The Atlanta Fed’s GDP Now is estimating a -34.9 percent Q2 GDP print, which is 3.5x the largest quarterly decline in the post-WWII economy
- If realized, the 11.3 percent non annualized first-half GDP collapse in 2020 will approach the worse year of the Great Depression, when in 1932, the economy shrank 13.1 percent for the entire year
- We are not paying much attention to these numbers as they reflect an economy that has been closed for two months, which should experience a relatively sharp snapback in Q3, with unemployment most likely peaking this month
- Nonetheless, the pandemic and economic lockdown will do long-term structural damage to the economy
- The rapid growth of the monetary aggregates alleviates much of the deflationary forces in the economy in the short-term and we perceive inflation a much bigger risk over the medium-term
- If the GDP Now estimate holds, and even if GDP prints a record annualized 27.6 percent number in Q3, real output will still be 7 percent below the Q4 2019 level with unemployment remaining close to low double digits
- We suspect the recovery will come too late and not be enough to save President Trump and the Republicans though the White House will tout it as “the greatest economic recovery in the history of the world“
- Investors and companies should plan for higher capital gains and corporate taxes
- Check out the astonishing performance of our stock picker’s large-cap portfolio, which is trouncing the S&P500 this year
Since the COVID crisis hit America, many businesses are operating at limited capacity while others have ceased operations completely. The unprecedented aggregate supply and demand shock to the U.S. economy has resulted in horrific economic data, including the 20.5 in nonfarm payroll jobs lost in April and the unemployment rates shooting up over 14 percent.
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U.S. Depression? The V-Shaped Recovery Fades Away
U.S. Depression? The V-Shaped Recovery Fades Away
The recent jobless claims figures show how difficult it will be for the U.S. recovery to be as quick and strong as initially expected.
- 7.7 million jobs were lost in Hospitality and Leisure in April, 2.5 million in Education and Health, with 2 million in Retail and another 2 million in Professional Services. These sectors are unlikely to recover fast and enough to compensate the job losses of the past month and even less likely to see the same level of wages of 2019.
- Credit card delinquencies are rising, and retail sales are going to see a very modest recovery because household debt is increasing, wages are under pressure and most citizens are changing their consumption patterns, looking to strengthen their savings in case another shock arrives.
- Corporate debt is rising to new records due to the collapse in operating revenues. As such, companies will likely take all possible measures to conserve cash flow, reduce expenditure and be prudent about hiring decisions. This will lead to slower job creation and investment even once the economy opens.
- Tax increases are likely to affect the recovery. The government deficit is soaring, with the Treasury looking at $2 trillion of new debt in 2020 due to the measures implemented to combat the economic impact of coronavirus. Unfortunately, the Democrats are looking to increase taxes just when the economy needs more investment and attraction of capital. If taxes rise significantly, what is already a weak outlook for capital expenditure and job creation is likely to worsen.
All of this makes a V-shaped recovery even more challenging than before. However, the U.S. economy is likely to recover faster than the Eurozone and suffer less in 2020.
…click on the above link to read the rest of the article…
As Unemployment Claims Rise, So Do Missed Mortgage Payments
As Unemployment Claims Rise, So Do Missed Mortgage Payments
Over 22 million people have filed for unemployment benefits in the past 4 weeks. Many struggle with payments.
Black Knight reports More than 2.9 Million in Forbearance, 5.5% of All Mortgages
Key Details
- As of April 16, more than 2.9 million homeowners – or 5.5% of all mortgages – have entered into COVID-19 mortgage forbearance plans
- This population represents $651 billion in unpaid principal and includes 4.9% of all GSE-backed loans and 7.6% of FHA/VA loans
- At today’s level, mortgage servicers would be bound to advance $2.3 billion of principal and interest payments per month to holders of government-backed mortgage securities on COVID-19-related forbearances
- Another $1.1 billion per month in lost funds will be faced by those with portfolio-held or privately securitized mortgages
Forbearance Totals
Payment Forbearance Under Cares Act
On March 27, 2020, President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security Act (also known as the CARES Act) into law. A provision of the CARES Act allows borrowers with federally backed mortgages to request temporary loan forbearance for up to 180 days. Borrowers also have the right to apply for an extension of another 180 days of forbearance.
Once a borrower requests hardship forbearance due to the COVID-19 pandemic, the act requires the servicer to offer a CARES Act forbearance.
Pitfalls
Forbes warns of Mortgage Forbearance Pitfalls.
John Ulzheimer, an Atlanta-based credit expert formerly of FICO and Equifax, warns of a potential balloon payment.
“If the lender or servicer demands that you pay back the deferred amount all at once or in an otherwise expedited manner, that could be impossible for the borrower.”
Unfortunately, having a mortgage servicer ask for a “balloon” payment once your forbearance period ends is a very real possibility. Borrowers from multiple national banks have reportedly been informed of the need to repay any delayed payments in a lump sum at a future date.
Three Things Not to Do
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“Worst. Recession. Ever.”
“Worst. Recession. Ever.”
When Harry Met Comic-Book-Guy
“Worst global downturn since the Great Depression” says the IMF. Actually, it’s potentially worse than that.We are seeing credible (initial) claims in the UK and US that millions/tens of millions are going to be unemployed – again taking us back to black & white memories of long queues of the jobless holding signs saying “Will Work For Food.”
We are also seeing calls for GDP to collapse by up to a third in the presumed Q2 trough in the UK and the US, as just two examples, which in the space of months would already take us to the kind of depths plunged back in the 1930s (and actually this will be the worst recession since the 18th century according to one UK report.) Moreover, in a world far more economically-integrated today than it was in the 1930s, what happens in the (smaller) West will rapidly hit the (larger) rest.
As will the virus itself, of course. What is to stop it rampaging through Africa and South Asia, as just two examples? “Heat!” we have been told. Yet besides the fact that Covid-19 is transmitting in Indonesia and Singapore we see a report today that French scientists have found some strains of the virus can survive long exposures to temperatures of up to 60c, and it takes almost boiling point to kill it. Another (non-peer reviewed) study from Australian and Taiwanese researchers based on samples from India has shown Covid-19 is already mutating, shifting its mechanism used to bind to human cells – the paper concludes “This means current vaccine development…is at great risk of becoming futile.” Moreover, a Chinese scientist is warning of a serious risk of a second global wave of Covid in November – exactly the pattern seen in the 1918-19 Spanish Flu.
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Deep Economic Suffering Has Erupted All Over America, But Guess Who The Federal Reserve Is Helping?
Deep Economic Suffering Has Erupted All Over America, But Guess Who The Federal Reserve Is Helping?
As millions upon millions of Americans lose their jobs in the greatest wave of unemployment in U.S. history, the Federal Reserve has decided that now is the time to spend trillions of newly created dollars in a desperate attempt to protect financial asset values. In other words, as much of the country suddenly plunges into poverty, the Federal Reserve is working exceedingly hard to protect the wealth of the elite. Approximately fifty percent of all stock market wealth is owned by the wealthiest one percent of all Americans, and the amount of stock market wealth owned by the poorest 50 percent of all Americans is so small that it really doesn’t matter. And those running the Fed certainly understand that their reckless policies will create very painful inflation that will hit average American families extremely hard, but they don’t seem to care. At this point, they figure that asset values must be protected at all costs, and that is going to continue to expand the absolutely massive gap between the rich and the poor in this country.
Over the past 3 weeks, more than 16 million Americans have filed new claims for unemployment benefits.
Prior to this year, the highest number that we had ever seen in any 3 week span in all of American history was about 2 million.
It is a collapse of unprecedented magnitude, and things have already gotten so bad that even “the Happiest Place on Earth” is conducting mass layoffs…
Walt Disney World Resort will furlough 43,000 union workers while its theme parks remain closed as authorities restrict large gatherings due to the coronavirus pandemic, according to the Service Trades Council Union.
…click on the above link to read the rest of the article…
America’s New Breadlines Are Growing…
America’s New Breadlines Are Growing…
Over the past month, the American economy has collapsed into a depression, with the most significant unemployment spike in history. Millions of people have just lost their jobs, and as we’ve been documenting, food bank networks across the country are becoming overwhelmed.
We recently said that some food banks had seen an eightfold increase in the number of people asking for food. The National Guard has been deployed to food banks in Cleveland, Pittsburgh, and Phoenix, to make sure supply chains do not breakdown, which if food shortages did materialize, it could lead to a “social bomb,” triggering civil unrest.
“I’ve been in this business over 30 years, and nothing compares to what we’re seeing now. Not even when the steel mills closed down did we see increased demand like this,” said Sheila Christopher, director of Hunger-Free Pennsylvania, which represents 18 food banks across 67 counties.
Today’s food bank lines resemble ‘breadlines’ from the 1930s. However, this time around, Americans are not standing around city blocks waiting for soup, they’re sitting in mile-long traffic jams outside donation centers waiting for a care package.
The run on food banks was first documented on March 30. Drone footage captured a traffic jam of hungry Americans waiting to pick up food aid at a facility in Duquesne, Pennsylvania.
Hundreds of cars wait to receive food from the Greater Community Food Bank in Duquesne. Collection begins at noon. @PghFoodBank @PittsburghPG
As a reminder, to visualize how America went from “the greatest economy ever” to “Greater Depression,” in just one month, take a look at the chart below:
The run on food banks will only increase as the depression worsens in April.
On Monday, a drone captured dramatic footage outside a South Florida food bank that measured “miles-long” row of cars, reported Daily Mail.
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Stockman: This Is Not Your Grandfather’s Recession…
Stockman: This Is Not Your Grandfather’s Recession…
Based on the shocking 6.6 million of new unemployment claims, we’d bet they’ll be some explosive political fireworks soon in this country about Covid-containment versus keeping the main street economy alive. There have now been an unprecedented, off-the charts 9.96 million new unemployment claims in the last two weeks.
For point of reference, it took fully 28 weeks to generate the same level of cumulative new claims after the beginning of the Great Recession. During that interval, the largest weekly number was 387,000 during the week of March 29, 2008.
Even when you scroll forward (not shown) to the worst week after the Lehman Bankruptcy meltdown commenced on September 15, the peak number was only 665,000 during the week of March 28, 2009. So today’s new claims number was 10X higher!
So, yes, some politically incorrect pundit is likely to note that there are now:
- 47 jobless workers for every confirmed coronavirus case;
- 320 jobless for every hospitalization; and
- 2,112 jobless for every coronavirus death.
Moreover, it virtually certain that cumulative initial claims will hit 20 million before the end of April, thereby doubling the above ratios. That is to say, do they really want 100 jobless workers for every case of a bad winter flu?
Well, yes, it seems that our establishment betters can’t get rabid enough urging on a total shutdown of the US economy.
Indeed, the thinly disguised subtext in the whole daily MSM narrative for the last couple of days has been that the benighted governors of the Red States are not doing their part to order their economies into instant cardiac arrest. But it took the perennially obnoxious liberal columnist for the New York Times, David Leonhardt, to come right out and say it.
Worse Than 2008: We Are Being Warned That The Coronavirus Shutdown “Could Collapse The Mortgage Market”
Worse Than 2008: We Are Being Warned That The Coronavirus Shutdown “Could Collapse The Mortgage Market”
The cascading failures that have been set into motion by this “coronavirus shutdown” are going to make the financial crisis of 2008 look like a Sunday picnic. As you will see below, it is being estimated that unemployment in the U.S. is already higher than it was at any point during the last recession. That means that millions of American workers no longer have paychecks coming in and won’t be able to pay their mortgages. On top of that, the CARES Act actually requires all financial institutions to allow borrowers with government-backed mortgages to defer payments for an extended period of time. Of course this is a recipe for disaster for mortgage lenders, and industry insiders are warning that we are literally on the verge of a “collapse” of the mortgage market.
Never before in our history have we seen a jump in unemployment like we just witnessed. If you doubt this, just check out this incredible chart.
Millions upon millions of American workers are now facing a future with virtually no job prospects for the foreseeable future, and former Fed Chair Janet Yellen believes that the unemployment rate in the U.S. is already up to about 13 percent…
Former Federal Reserve Chair Janet Yellen told CNBC on Monday the economy is in the throes of an “absolutely shocking” downturn that is not reflected yet in the current data.
If it were, she said, the unemployment rate probably would be as high as 13% while the overall economic contraction would be about 30%.
If Yellen’s estimate is accurate, that means that unemployment in this country is already significantly worse than it was at any point during the last recession.
And young adults are being hit particularly hard during this downturn…
…click on the above link to read the rest of the article…
“All The Jobs Are Gone” – Africa Facing ‘Complete Economic Collapse’ As Virus Spreads
“All The Jobs Are Gone” – Africa Facing ‘Complete Economic Collapse’ As Virus Spreads
The COVID-19 pandemic and lockdowns across the African continent could trigger an economic collapse, according to one United Nations (UN) official, who spoke with Associated Press (AP).
Ahunna Eziakonwa, the UN Development Program regional director for Africa, warned that the pandemic would likely result in job losses for millions of people, many of whom are already low-income, have no savings, and have no access to proper healthcare.
“We’ve been through a lot on the continent. Ebola, yes, African governments took a hit, but we have not seen anything like this before,” Eziakonwa said. “The African labor market is driven by imports and exports and with the lockdown everywhere in the world, it means basically that the economy is frozen in place. And with that, of course, all the jobs are gone.”
We’ve warned over the last month that a virus crisis looms in Africa. A little more than half of the continent’s 54 countries have imposed lockdowns, curfews, and or travel bans to mitigate the spread of the virus.
Places like South Africa, where the military has enforced “unprecedented” Martial law-style lockdowns through mid-April, is an attempt to thwart social uprisings as 370,000 jobs have likely been lost.
For the 1.3 billion that inhabit the continent, widespread lockdowns are triggering vicious economic downturns, couple that with a public health crisis, and it could be a perfect storm that results in social unrest.
Eziakonwa said unless the virus spread can be controlled – then up to 50% of all estimated growth for Africa’s travel, services, mining, agriculture and the informal sectors could be lost. An extended period of subpar economic growth could be seen across the continent in the quarters ahead.
March Jobs Disaster: 701,000 Jobs Lost, Unemplyment Rate Soars Most In 45 Years As US Slides Into Depression
March Jobs Disaster: 701,000 Jobs Lost, Unemplyment Rate Soars Most In 45 Years As US Slides Into Depression
Just like that the 113 record straight months of employment growth is over with a bang.
While today’s payrolls report was expected to be not quite as terrible as the recent initial claims suggested, especially since the March survey week took place around March 13 or ahead of the big shutdown and layoff announcements, it ended up being catastrophic nonetheless, with the BLS reporting moments ago that a whopping 701K jobs were lost in March, 7x more than the 100K expected, and just shy of the worst payrolls prints recorded during the financial crisis.
That this happened well before the worst of the cronavirus induced coma hit, suggests that what comes next will be truly biblical.
For some reason the famous “Taleb Turkey” comes to mind:
Not like it matters, but there were also revisions: the change in total nonfarm payroll employment for January was revised down by 59,000 from +273,000 to +214,000, and the change for February was revised up by 2,000 from +273,000 to +275,000. With these revisions, employment gains in January and February combined were 57,000 lower than previously reported.
Private sector jobs dropped by 713K (vs Exp. 163K), with almost all the drop the result of a record collapse in service-providing jobs.
And of all service jobs, leisure and hospitality were hardest hit:
The unemployment rate soared from 3.5% to 4.3%, led by a record surge in Hispanic unemployment.
In March, the unemployment rate increased by 0.9 percentage point to 4.4 percent. This is the largest over-the-month increase in the rate since January 1975, when the increase was also 0.9 percentage point. The number of unemployed persons rose by 1.4 million to 7.1 million in March. The sharp increases in these measures reflect the effects of the coronavirus and efforts to contain it. The participation rate plunged from a 7-year-high to tie the lowest level in 5 years.
…click on the above link to read the rest of the article…
It’s Only a Matter of Time Until COVID-19 Lockdowns Lead to Civil Unrest and Violent Crime
It’s Only a Matter of Time Until COVID-19 Lockdowns Lead to Civil Unrest and Violent Crime
(March 31, 2020) The United States of America is basically closed for business, leaving citizens jobless, broke, and without options. We’re facing restrictions on movement the likes of which our nation has never seen. The stores that are open have never fully restocked after the “panic buying” of previous weeks, leading to shelves barren of things like meat, flour, toilet paper, and rice.
It’s only a matter of time before these issues combine to become the flashpoint that leads to an explosion of civil unrest and violent crime.
The financial situation
Unemployment skyrocketed, with 3.3 million claims last week, and the Fed estimates that number to climb to a whopping 47 million due to the virus. Many of these jobs may not come back after the Covid-19 virus has run its course through the nation – businesses small and large are going to be defaulting on their April rent payments, and many simply won’t be able to catch up later.
So far, a lot of people in the area where I’m staying seem to be treating this break of business like a surprise staycation. It’s nice to see families out walking together, playing games, and spending time with the people they love.
But this happiness may be shortlived. Despite generous government-mandated disaster pay, unemployment, and stimulus checks, the money may not arrive in time for former employees, self-employed people, and gig workers to pay their personal bills. And when the money does arrive, for many folks it isn’t going to be the same amount they were earning before the shutdowns. Most people don’t have emergency funds, so things will be dire in short order.
Of course, this affects landlord, mortgage companies, utility companies, retail businesses…the list could go on and on.
…click on the above link to read the rest of the article…
Pandemic-Related Unemployment and Shutdowns Are a Recipe for Social Unrest
Pandemic-Related Unemployment and Shutdowns Are a Recipe for Social Unrest
That’s a huge concern as forecasters expect the U.S. unemployment rate in the months to come to surpass that seen during the depths of the Great Depression.
Could the stalled economy we’ve inflicted on ourselves in our frantic efforts to battle the COVID-19 pandemic lead to civil disorder? History suggests that’s a real danger.
Around the world, high unemployment and stagnant economic activity tend to lead to social unrest, including demonstrations, strikes, and other forms of potentially violent disruptions. That’s a huge concern as forecasters expect the U.S. unemployment rate in the months to come to surpass that seen during the depths of the Great Depression.
“We’re putting this initial number at 30 percent; that’s a 30 percent unemployment rate” in the second quarter of this year as a result of the planned economic shutdowns, Federal Reserve Bank of St. Louis President James Bullard told Bloomberg News on March 22. Gross Domestic Product, he adds, is expected to drop by 50 percent.
Unlike most bouts of economic malaise, this is a self-inflicted wound meant to counter a serious public health crisis. But, whatever the reasons, it means businesses shuttered and people without jobs and incomes. That’s risky.
“Results from the empirical analysis indicate that economic growth and the unemployment rate are the two most important determinants of social unrest,” notesthe International Labour Organisation (ILO), a United Nations agency that maintains a Social Unrest Index in an attempt to predict civil disorder based, in part, on economic trends. “For example, a one standard deviation increase in unemployment raises social unrest by 0.39 standard deviations, while a one standard deviation increase in GDP growth reduces social unrest by 0.19 standard deviations.”
…click on the above link to read the rest of the article…
The Covid-19 Economic Crisis Will Change Everything: Short Term and Long Term Effects
The Covid-19 Economic Crisis Will Change Everything: Short Term and Long Term Effects
Whether you think the global pandemic is “just the flu” or you realize it’s the real deal, one thing is difficult to debate – many Americans are already feeling the economic pain being caused by the outbreak and the measures taken to stop it.
Unemployment claims skyrocketed this week as businesses laid-off employees in an attempt to weather the storm. More than 281,000 people filed for unemployment and those numbers would have been even higher if the influx of claims had not crashed the systems in several states.
In a news release, the Department of Labor said:
During the week ending March 14, the increase in initial claims are clearly attributable to impacts from the COVID-19 virus. A number of states specifically cited COVID-19 related layoffs, while many states reported increased layoffs in service-related industries broadly and in the accommodation and food services industries specifically, as well as in the transportation and warehousing industry, whether COVID-19 was identified directly or not. (source)
At the same time as employees are filing claims, businesses are trying to figure out how to stay afloat. Restaurants are switching to carry-out only. Bars are closed. Retail sales are down unless the business happens to be selling vital supplies like medications, food, and the new gold standard, toilet paper and Lysol wipes.
The Covid-19 pandemic is causing an economic crisis that will have both short-term and long-term effects. This will challenge your adaptability skills, but I want to stress something: life will be different, but that doesn’t mean life is over. Here’s what you need to know.
Recession or Depression?
This is just the beginning of the economic crisis bearing down on us. As social distancing measures become more widespread, less and less money will be in play – both earned and spent.
…click on the above link to read the rest of the article…
No One Gets Out Of Here Alive
NO ONE GETS OUT OF HERE ALIVE
“The seasons of time offer no guarantees. For modern societies, no less than for all forms of life, transformative change is discontinuous. For what seems an eternity, history goes nowhere – and then it suddenly flings us forward across some vast chaos that defies any mortal effort to plan our way there. The Fourth Turning will try our souls – and the saecular rhythm tells us that much will depend on how we face up to that trial. The saeculum does not reveal whether the story will have a happy ending, but it does tell us how and when our choices will make a difference.” – Strauss & Howe – The Fourth Turning
As we wander through the fog of history in the making, unsure who is lying and who is telling the truth, seemingly blind to what comes next, I look to previous Fourth Turnings for a map of what might materialize during the 2nd half of this current Fourth Turning. After a tumultuous, harrowing inception to this Crisis in 2008/2009, we have been told all is well and are in the midst of an eleven-year economic expansion, with the stock market hitting all-time highs.
History seemed to stop and we’ve been treading water for over a decade. Outwardly, the establishment has convinced the masses, through propaganda and money printing, the world has returned to normal and the future is bright. I haven’t bought into this provable falsehood. Looking back to the Great Depression, we can get some perspective on our current position historically.
The Dow is up 450% since its 2009 low, which is the metric used by the establishment to prove their money printing solutions have succeeded in lifting the country from the depths of despair and depression.
…click on the above link to read the rest of the article…
