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‘We’re going to have more deaths’: Influenza kills more people than the coronavirus so everyone is overreacting, right? Wrong — and here’s why

‘We’re going to have more deaths’: Influenza kills more people than the coronavirus so everyone is overreacting, right? Wrong — and here’s why

President Trump tweeted Monday that thousands die of the flu every year, and suggested that life should go on as usual — not so fast, experts say

Some cite influenza as a reason not to be worried about COVID-19, the disease caused by the new coronavirus, but health professionals say that comparison misses some very important points.MarketWatch photo illustration/iStockphoto

Coronavirus. It’s just like the flu, isn’t it? 

Hundreds of thousands of people die of the flu every year, and people need to calm down, some say. Everyone should wash their hands for 20 seconds,  elbow bump, stop buying face masks because they don’t protect against the virus, note that airplane air is filtered 20 to 30 times an hour, avoid cruise ships, and just relax — right?

That appears to be the accumulated advice of exasperated Americans on Twitter and Facebook FB, -6.40% in recent days who despair at the long lines at Trader Joe’s and Whole Foods AMZN, -5.28% (where people apparently have been stocking up on oat milk) and the panic buying and empty shelves at Costco COST, -3.00%. “Toilet paper is golden in an apocalypse,” one customer told MYNorthwest.com.

‘This is additive, not in place of. Yes, the flu kills thousands of people every year, but we’re going to have more deaths.’— Amesh Adalja, Infectious Diseases Society of America

Studies, however, suggest the differences between the flu and coronavirus are more nuanced than some people suggest. In fact, health professionals point out important distinctions between the COVID-19 illness and other viral sicknesses like the flu. For a start, there is no vaccine for COVID-19 and it could take many months or years to get one to market. What’s worse, doctors fear the virus will mutate.

…click on the above link to read the rest of the article…

Opinion: The Federal Reserve is stuck in quantitative-easing hell

Opinion: The Federal Reserve is stuck in quantitative-easing hell

The central bank’s short-term buying of securities could morph into long-term easing

Federal Reserve Chairman Jerome Powell

Imagine doing the same thing over and over again, with little progress and no relief. Sounds like most people’s vision of hell — or the Federal Reserve’s current predicament. 

Since September, the central bank, through the Federal Reserve Bank of New York, has been purchasing securities hand over fist to alleviate short-term pressures in the overnight money markets. It has used repurchase (“repo”) and reverse repurchase (“reverse repo”) agreements to provide liquidity and keep overnight borrowing rates from spiking. 

But these complex money market operations already have caused the Fed to buy a net $400 billion worth of securities, after Chairman Jerome Powell shrank the Fed’s balance sheet by $700 billion. That “normalization,” which also included raising the federal funds rate through late 2018, is now effectively dead and the Fed’s balance sheet is growing again.

Powell and the Fed have repeatedly denied this is a new phase of “quantitative easing (QE),” three rounds of which added $3.6 trillion to the Fed’s balance sheet in the years after the financial crisis. And indeed, in the earlier rounds of QE, the central bank bought Treasuries and mortgage-backed securities of various maturities. The current buying has been focused on Treasuries with maturities of 12 months or less. 

On the way: QE4

But that may not continue, says Danielle DiMartino Booth, CEO and chief strategist at Quill Intelligence, a Dallas-based boutique research firm. Booth, who worked on both Wall Street and in the Federal Reserve Bank of Dallas, has been a critic of Fed policies since the central bank pushed fed funds down to near zero and launched its three rounds of QE after the financial crisis. (She also was one of the few people to connect the dots between the housing bust and Wall Street before the crisis hit.)

…click on the above link to read the rest of the article…

America’s Debt Burden Will Fuel The Next Crisis

America’s Debt Burden Will Fuel The Next Crisis

Just recently, Rex Nutting penned an opinion piece for MarketWatch entitled “Consumer Debt Is Not A Ticking Time Bomb.” His primary point is that low per-capita debt ratios and debt-to-dpi ratios show the consumer is quite healthy and won’t be the primary subject of the next crisis. To wit:

“However, most Americans are better off now than they were 10-years ago, or even a few years ago. The finances of American households are strong. 

But, that’s not what a lot of people think. More than a decade after a massive credit orgy by households brought down the U.S. and global economies, lots of people are convinced that households are still borrowing so much money that it will inevitably crash the economy.

Those critics see a consumer debt bomb growing again. But they are wrong.”

I do agree with Rex on his point that the U.S. consumer won’t be the sole cause of the next crisis. It will be a combination of household and corporate debt combined with underfunded pensions, which will collide in the next crisis.

However, there is a household debt problem which is hidden by the way governmental statistics are calculated.

Indebted To The American Dream

The idea of “maintaining a certain standard of living” has become a foundation in our society today.Americans, in general, have come to believe they are “entitled” to a certain type of house, car, and general lifestyle which includes NOT just the basic necessities of living such as food, running water, and electricity, but also the latest mobile phone, computer, and high-speed internet connection. (Really, what would be the point of living if you didn’t have access to Facebook every two minutes?)

But, like most economic data, you have to dig behind the numbers to reveal the true story.

So let’s do that, shall we?

 …click on the above link to read the rest of the article…

Government Shutdown Reveals Nasty Truth About Americans’ Savings

government shutdown reveals americans have no savings

Government Shutdown Reveals Nasty Truth About Americans’ Savings

The temporarily-ended government shutdown didn’t have had a large effect on the U.S. economy, but it may have revealed something disturbing about the savings of 80% of Americans.

They aren’t prepared if the economy get worse.

MarketWatch published some recent findings in an op-ed (emphasis ours):

Why do a few weeks without pay turn into a crisis for many families? Simple: Nearly 80% of Americans live paycheck to paycheck. That’s a problem when you have little to no savings. In fact, it’s akin to playing financial Russian roulette.

And the problem is terrifyingly pervasive. According to a recent GoBankingRates survey, only 21% of Americans have more than $10,000 in savings, with nearly 60% having less than $1,000 in savings.

The findings come from a recent GoBankingRates survey, which contained the following chart reflecting MarketWatch’s findings:

american savings 2014 - 2018

With interest rates on the rise and the economy at levels of uncertainty not seen since 2008, it’s crucial for Americans to buffer their income with some sort of hedge.

Without reliable “go-to” savings and a plan, there could be tough times ahead if the market continues diving into recession.

But the nasty truth appears to be most Americans don’t have enough savings, if any at all, to get them through the tough times.

Right now, government-reported unemployment is the lowest it’s been since 2000. But as you can see from the chart below, a recession tends to follow the “lowest” unemployment rates:

civilian unemployment rate

It’s not for sure that this is a signal of an imminent recession, but it sure seems like enough circumstantial evidence to consider looking into your savings options. That, and the fact that the shutdown has only been “ended” until February 15. After that, we may see “Part II.”

And the shutdown isn’t only affecting individuals. It even drew the attention of top CEOs.

 …click on the above link to read the rest of the article…

The ‘Godfather’ Of Market Analysis: ‘Damage Done To The Stock Market Is Much Worse’

The ‘Godfather’ Of Market Analysis: ‘Damage Done To The Stock Market Is Much Worse’

The so-called “Godfather” of market chart analysis said that the damage already done to the stock market is much worse than most people are talking about. Ralph Acampora, a prominent market technician, says the stock market is in bad shape and it’s worse than many Wall Street investors appreciate.

From a technical perspective, the damage that has been done technically to the stock market is much, much worse than people are talking about,he told MarketWatch in a phone interview on Tuesday. Acampora also said that the technical damage that has resulted in the Dow Jones Industrial Average and the S&P 500 index erasing all of their gains for 2018, and the Nasdaq Composite Index falling into correction territory (which is usually characterized as a decline of at least 10% from a recent peak) will take months to repair.

“I’ve been a bull for a long, long time and like everyone, I was waiting for a correction but this is something different,” said Acampora. “All the leadership is getting crushed,” he said. He added that he feels that the entire market will go into bear territory soon.

“Honestly, I don’t see the low being put in yet and I think we’re going to go into a bear market,” he said according to MarketWatch. He speculates that the market may not be healed until around the first quarter of 2019. Acampora said that the current dynamic in the market was eerily similar to the stock-market crash of 1987 when the Dow plunged a historic 22.6% in a single day on October 19 of that year.

…click on the above link to read the rest of the article…

Opinion: Powell has lost his North Star, and the Fed is flying blind

The Fed risks raising interest rates too much as the compass spins wildly

Stars appear to rotate around Polaris, the North Star, in this time exposure of the Kitt Peak National Observatory near Tucson, Ariz.

Federal Reserve Chairman Jerome Powell is in an unenviable position. Folks expect him to fine-tune interest rates to keep the economy going and inflation tame but he can’t make things much better — only worse.

Growth is nearly 3% and unemployment is at its lowest level since 1969. What inflation we have above the Fed target of 2% is driven largely by oil prices and those by forces beyond the influence of U.S. economic conditions — OPEC politics, U.S. sanctions on Iran, and dystopian political forces in Venezuela and a few other garden spots.

When the current turbulence in oil markets recedes, we are likely in for a period of headline inflation below 2%, just as those forces are now driving prices higher now.

Overall, long-term inflation has settled in at the Fed target of about 2%. The Fed should not obsess about it but keep a watchful eye.

Amid all this, Powell’s inflation compass has gone missing. The Phillips curve, as he puts it, may not be dead but just resting. To my thinking, it’s in a coma if it was ever alive at all.

That contraption is a shorthand equation sitting atop a pyramid of more fundamental behavioral relationships. Those include the supply and demand for domestic workers and in turn, an historically large contingent labor force of healthy prime-age adults sitting on the sidelines, the shifting skill requirements of a workplace transformed by artificial intelligence and robotics, import prices influenced by weak growth in Europe and China, and immigration.

…click on the above link to read the rest of the article…

Why the American Dream of owning a big home is way overrated, in one chart

Courtesy of Rogers & Cowan
Do you NEED this much space?

From 1978 through 2015, the median size of the single-family home increased every year until it peaked at 2,467 square feet, according to the U.S. Census Bureau. Then, in 2016, that number began to shrink, albeit ever so slightly.

So, are we finally coming to our senses about McMansions?

Of course, owning a big house has long been a key component of the American Dream — you know you’ve arrived when you have columns, an indoor pool and a theater room — but, in reality, it’s all usually a huge waste of space, according to a study cited by Steve Adcock on the Get Rich Slowly blog.

A research team affiliated with UCLA studied American families and where they spend most of their time while inside their homes. The results were fascinating, but really not all that surprising. Here’s one representative example:

As you can see, most square footage is wasted as people tend to gather around the kitchen and the television, while avoiding the dining room and porch.

“The findings were not pretty. In fact, they helped prove how little we use our big homes for things other than clutter,” Adcock said. “Most families don’t use large areas of their homes — which means they’ve essentially wasted money on space they don’t need.”

And Adcock knows a thing or two about utilizing space.

Like the family in the illustration above, he used to spend all of his time hanging out in the kitchen and family room in his 1,600-square-foot home. Now, after managing to retire from his full-time gig at the age of 35, he lives his version of the American Dream in an Airstream trailer with his wife.

…click on the above link to read the rest of the article…

Opinion: No, hurricanes are not good for the economy

Yes, GDP may get a temporary boost from rebuilding, but there’s nothing positive about destruction

REUTERS/Adrees Latif
Think of the increased production of motor vehicles to replace all those flooded trucks!

Once the immediate danger of a natural disaster subsides, and the loss of life, property damage, cost of rebuilding, and degree of insurance coverage can be assessed, attention generally turns to the economic effect. How will Hurricane Harvey affect the nation’s gross domestic product?

You will no doubt hear assertions that the rebuilding effort will provide a boost to contractors, manufacturers and GDP in general. But before these claims turn into predictable nonsense about all the good that comes from natural disasters, I thought it might be useful to provide some context for these sorts of events.

Over the years, I’ve observed a tendency among economists and traders to view such events through a demand-side prism. They see lost income translating into reduced spending on goods and services, which might even warrant some largesse from the central bank.

Of course, that is precisely the wrong medicine. Supply shocks reduce output and raise prices. The Federal Reserve’s interest-rate medicine affects demand. Lower interest rates will increase the demand for gasoline, among other goods and services, but they have no effect on supply. An easing of monetary policy under such circumstances would increase demand for already curtailed supply, raising prices even more.

…click on the above link to read the rest of the article…

The American dystopia didn’t begin with Trump

Media narrative includes myths fostered by Obama

Hulu/courtesy Everett Collection
The dystopian classic, “The Handmaid’s Tale,” is streaming on Hulu, sparking lots of false comparisons between the misogynistic dictatorship in the miniseries and the presidency of Donald Trump.

WASHINGTON (MarketWatch) – Dystopia is here. It’s not just the “imagined place” of the dictionary definition or a future state of dystopian novels. It is very real and right now, at least for those of us trying to follow national politics.

And it’s not just Donald Trump. It’s Barack Obama, it’s Ted Cruz, it’s the New York Times, it’s Breitbart News. It is an alternate universe detached from the world we live in but intruding into it in painful and dangerous ways.

It is a media narrative of political conspirators colluding with a dictatorial archenemy, of an intemperate and delusional leader overturning the institutions of democracy, of a “deep-state” resistance to constitutional authority.

It is a dystopia of rampant hypocrisy, where obstructing legislation, supporting a law-enforcement official who strays beyond the limits of his authority, or boycotting a president’s appointments is evil and undemocratic until it’s your party that wants to do it.

Two dystopian classics have shot back to the top of best-seller lists because the media suggest the authoritarian surveillance societies they portray have arrived. The 1948 novel “1984” and the 1985 novel “The Handmaid’s Tale” are touted as descriptions of where we are headed under Trump.

While the author of “Handmaid,” Margaret Atwood, and the cast of the Hulu miniseries based on it see a Trump administration as the realization of the misogyny depicted in the novel, it’s obvious the U.S. is not about to become a Puritanical theocracy like that in the book.

Critics on both the left and the right dispute the media meme that “Handmaid” is a depiction of the Trump era.

…click on the above link to read the rest of the article…

3 Things: Value Of Cash, 3rd Mandate, Yellen Channels Bernanke

3 Things: Value Of Cash, 3rd Mandate, Yellen Channels Bernanke


El-Erian – The Value Of Cash

My friend, Anora Mahmudova, recently wrote for MarketWatch about Mohamed El-Erian’s discussion on the importance of “cash” for investors.

“At a breakfast meeting with reporters on Monday, the former Pacific Investment Management Company chief executive said central bank asset purchases have successfully decoupled asset prices from fundamentals and distorted traditional correlations.

‘Investors cannot rely on correlations as a risk mitigator, making cash a very valuable thing to have.

It can give your portfolio resilience during stressful times, optionality—whether you use it for tactical or strategic purposes and flexibility to deploy it when necessary.’ 

Central banks are finding it harder and harder to repress volatility in financial markets, and any jolts, such as currency devaluation in China or political events, such as Brexit, result in wild swings in the markets.’

El-Erian also said years of unconventional monetary policy, including asset purchases, and a lack of fiscal stimulus are making developed economies less stable.”

Whenever El-Erian makes comments about the value of holding cash, there is generally a good bit of media lash-back about relating to the impacts of inflation and the inability to successfully navigate market cycles.

El-Erian’s comments are a valuation call, driven to excess by monetary interventions, on the financial markets suggesting that having capital invested will likely yield substantially lower or negative returns in the future. This is an extremely important concept in understanding the “real value of cash.”

The chart below shows the inflation-adjusted return of $100 invested in the S&P 500 (using data provided by Dr. Robert Shiller). The chart also shows Dr. Shiller’s CAPE ratio. However, I have capped the CAPE ratio at 23x earnings which has historically been the peak of secular bull markets in the past. Lastly, I calculated a simple cash/stock switching model which buys stocks at a CAPE ratio of 6x or less and moves to cash at a ratio of 23x.

…click on the above link to read the rest of the article…

Grinding In Harms’ Way——The Fed’s Sick Wall Street Puppies Will Self-Destruct

Grinding In Harms’ Way——The Fed’s Sick Wall Street Puppies Will Self-Destruct

Whatever is going on in the daily stock market, you can’t call it “price discovery” or even remotely rational.

In fact, it amounts to grinding in harms’ way, and measures the degree to which the Fed and other central banks have turned the Wall Street casino into a giant litter of sick puppies who are bent on rolling the dice until they self-destruct.

Even MarketWatch has noted that the S&P 500 has climbed above 2100 on more than 30 occasions during the last 18 months, but has retreated each and every time.

So buying the dips in that context is based on eyes wide shut speculation; it essentially implies there is no material downside, and that one of these days the market will bust loose from its 2130 top of May 2015 and soar to spectacular new highs.

Source: FactSet

Why is the MSM Covering Up Recessionary Data?


The Census Bureau put out their monthly retail sales report this morning. During good times, the MSM would be hailing the tremendous increases as proof the consumer was flush with cash and all was well with the economy. Considering 70% of our GDP is dependent upon consumer spending, you would think this data point would be pretty important in judging how well Americans are really doing.

It’s not perfect, because the issuance of debt to consumers to purchase autos, furniture, appliances and electronics can juice the retail sales numbers and create the false impression of strength. That’s what has been going on with auto sales for the last two years.

The retail sales figures have been propped up by the issuance of subprime auto loans to deadbeats, 7 year 0% interest loans to good credit customers, and an all-time high in leases (aka 3 year rentals). Despite this Fed induced auto loan scheme, retail sales have still been pitiful, as the average American has been left with stagnant wages, 0% interest on their minuscule savings, surging rent and home prices, and drastic increases in their healthcare costs due to Obamacare.

The retail sales for March, reported this morning, were disastrous and further confirmed a myriad of other economic indicators that the country is in recession. GDP for the first quarter will be negative. And this time they can’t blame it on snow in the winter. They have already doubly seasonally adjusted the figures, and they will still be negative. Retail sales in the first quarter were atrocious. It might make a critical thinking person question the establishment storyline of solid job growth being peddled by politicians and their MSM mouthpieces. If people had good paying jobs, they would be spending money.

…click on the above link to read the rest of the article…

Why a selloff in European banks is ominous

Europe’s bank index has posted its longest weekly string of losses since 2008

Everett Collection 
Dark clouds are gathering around Europe’s banking sector.

European banks have been caught in a perfect storm of market turmoil, lately.

Lackluster profits and negative interest rates, have prompted investors to dump shares in the sector that was touted as one of the best investment ideas just a few months ago.

“The current environment for European banks is very, very bad. Over a full business cycle, I think it’s very questionable whether banks on average are able to cover their cost of equity. And as a result that makes it an unattractive investment for long-term investors.”

Peter Garnry, head of equity strategy at Saxo Bank.

The region’s banking gauge, the Stoxx Europe 600 Banks Index FX7, -5.59% has logged six straight weeks of declines, its longest weekly losing stretch since 2008, when banks booked 10 weeks of losses, beginning in May, according to FactSet data.

The doom-and-gloom outlook for banks comes as the stock market has had an ominous start to the year.

East or west, investors ran for the exit in a market marred by panic over tumbling oil prices CLH6, -3.01%  and signs of sluggishness in China. But for Europe’s banking sector, the new year has started even worse, sending the bank index down 23% year-to-date, compared with 13% for the broader Stoxx Europe 600 index SXXP, -3.54%

Jeroen Blokland/Robeco

European banks have underperformed the broader regional market

…click on the above link to read the rest of the article…

Venezuela fails to persuade Saudis to cut oil production

Meeting called ‘successful,’ but no word of agreement to help boost prices
AFP/Getty Images
Venezuela’s minister of petroleum and mining, Eulogio Del Pino, seen in December. 

DUBAI — Saudi oil minister Ali al-Naimi met with his Venezuelan counterpart on Sunday but didn’t announce any plans for the production cut the South American country says is needed to prop up crude prices.

Venezuela’s Eulogio del Pino traveled to Riyadh this weekend as part of a tour of oil-producing countries both within and outside of the Organization of the Petroleum Exporting Countries, including Iran and nonmember Russia. Del Pino wants Saudi Arabia, the world’s largest oil exporter, to come around to his call for an output reduction that could bring the world’s vast supply of oil back in line with demand.

Naimi called the meeting “successful,” with a “positive atmosphere,” according to the state-run Saudi Press Agency. Del Pino, on his official Twitter page, said the meeting was productive and focused on cooperating to “stabilize the international oil market.”

An expanded version of this report appears on WSJ.com.

The Lull Before The Storm—–It’s Getting Narrow At The Top, Part 2

The Lull Before The Storm—–It’s Getting Narrow At The Top, Part 2

Shares in Hong Kong led a rally across most of Asia Tuesday, on expectations for more stimulus from Chinese authorities, specifically in the property sector…….The gains follow fresh readings on China’s economy, which showed further signs of slowdown in manufacturing data released Tuesday (which) remains plagued by overcapacity, falling prices and weak demand. The dimming view casts doubt that the world’s second-largest economy can achieve its target growth of around 7% for the year. The central bank has cut interest rates six times since last November.

More stimulus from China? Now that’s a true absurdity—-not because the desperate suzerains of red capitalism in Beijing won’t try it, but because it can’t possibly enhance the earnings capacity of either Chinese companies or the international equities.

In fact, it is plain as day that China has reached “peak debt”. Additional borrowing there will not only prolong the Ponzi and thereby exacerbate the eventual crash, but won’t even do much in the short-run to brake the current downward economic spiral.

That’s because China is so saturated with debt that still lower interest rates or further reduction of bank reserve requirements would amount to pushing on an exceedingly limp credit string.

To wit, at the time of the 2008 crisis, China’s “official” GDP was about $5 trillion and its total public and private credit market debt was roughly $8 trillion. Since then, debt has soared to $30 trillion while GDP has purportedly doubled. But  that’s only when you count the massive outlays for white elephants and malinvestments which get counted as fixed asset spending.

…click on the above link to read the rest of the article…


Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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