The TP and PT crisis seems to have abated as production has begun to exceed the unusual demand.
If there is any major mistake Trump may have made it would be his single track approach to confronting the COVID-19 issue and trust of Ji. But there are also two major reasons that one has to consider before concluding this blame shifting attempt.
a) Initially, Trump correctly sought and relied upon his major health team whose sole ability and recommendations were focused on protecting the health of America.
b) To have done otherwise and to have elevated economics with health would have been an immoral decision.
c) The strongest argument against Trump is his desire to work with China and other advisories and to trust Xi. In the case of COVID 19 this may have proven harmful.
Trump's negotiating style is to compliment his protagonist in the hope that builds trust, find something on which they have common ground and build a future relationship one step at a time. This is the way it should be but every once in a while you run against that impenetrable mind and mostly among those who are ideologically incapable of change.
Once again, I raise the issue of whether you want to stand in the shoes of Trump and if you had what avenue would you have taken?
Yet, Sen. Cotton knew because he opened his two eyes and ears and his deep distrust of China:
The Senator Who Saw the Coronavirus Coming
While others slept, Tom Cotton was warning anyone who would listen that the coronavirus was coming for America.
On January 22, one day before the Chinese government began a quarantine of Wuhan to contain the spread of the virus, the Arkansas senator sent a letter to Secretary of Health and Human Services Alex Azar encouraging the Trump administration to consider banning travel between China and the United States and warning that the Communist regime could be covering up how dangerous the disease really was. That same day, he amplified his warnings on Twitter and in an appearance on the radio program of Fox & Friends host Brian Kilmeade.
At the time, the Senate impeachment trial was dominating the news cycle. The trial, which lasted from January 16 to February 5, had even blotted out coverage of the Democratic presidential primary in the days leading up to the Iowa caucuses. When the first classified briefing on the virus was held in the Senate on January 24, only 14 senators reportedly showed up.
Cotton’s public and private warnings became more urgent that last week of January. In a January 28 letter to the secretaries of state, health and human services, and homeland security, he noted that “no amount of screening [at airports] will identify a contagious-but-asymptomatic person afflicted with the coronavirus” and called for an immediate evacuation of Americans in China and a ban on all commercial flights between China and the United States.
Cotton first spoke to President Trump about the virus the next day. The Arkansas Gazette reported that he missed nearly three hours of the impeachment trial while he was discussing the matter with Trump-administration officials. The outbreak was “the biggest and the most important story in the world,” he said in a Senate hearing that week.
What tipped the senator off to the true nature of the threat? Why was he the first and the loudest voice in Congress to sound the alarm about the looming pandemic?
In an interview with National Review, Cotton is quick to point out that he doesn’t have a background in science or public health, but he does have two eyes. As a long-time China hawk, he found his interest piqued early on by reports “primarily from East Asian news sources.”
“Two things struck me about China’s response,” he says. “First their deceit and their dishonesty going back to early December. And second, the extreme draconian measures they had taken. By the third week of January, they had more than 75 million people on lockdown. They were confined to their homes and apartments, otherwise they were arrested. In some cases, the front doors of those buildings were welded shut. All schools had shut down. Hong Kong had banned flights from the mainland. [These are] the kind of extreme, draconian measures that you would only take in a position of power in China if you were greatly worried about the spread of this virus.”
On January 31, the president announced a ban on entry to foreign travelers who had been in China in the previous two weeks, while allowing Americans and permanent residents to continue to travel back and forth between the two countries. The measure was not as stringent as Cotton’s call for a ban on all commercial flights, but Cotton points out that the president “did not have many advisers encouraging him to shut down travel.” Advisers who were supportive tended to be national-security aides, he adds, while “most of his economic and public-health advisers were ambivalent at best about the travel ban.”
“I commend the president greatly for ultimately making the right decision contrary to what the so-called experts were telling him,” he says.
Of course, while the travel restriction may have bought the United States time, that time was largely squandered by the catastrophic failure of the CDC and FDA to ramp up testing for the coronavirus in the United States.
In phone calls and meetings in early February, Cotton says, he encouraged the administration “to be very aggressive and very flexible when it came to testing and diagnostic protocols. One consistent thing I had seen in the literature from past outbreaks is that the FDA and especially the CDC is unfortunately somewhat slow to act in these circumstances. I did discuss that with the president. I discussed it with Jared Kushner. I discussed it a lot with Robert O’Brien, the national-security adviser,” and O’Brien’s deputy, Matthew Pottinger.
“The CDC should not have acted like know-it-all bureaucrats who had the only medical and scientific expertise to develop tests. We have lots and lots of very capable labs all around the country,” Cotton adds. “The FDA should not put all of its eggs in the CDC basket. . . . They were slow to use their emergency-use authorization.” In a January 26 appearance on Face the Nation, Cotton called on the FDA to expedite approval for testing to state and local governments.
“The bureaucracy just didn’t move as fast as it could have,” he says. “Dr. Fauci said it’s not the president’s fault. It would have happened to any other president. But it was a lost opportunity, given the time the president bought everyone with the travel [restriction].”
Does the president ultimately bear responsibility for the failures at the CDC and FDA? “He is the president, and it’s always the president’s job to push the bureaucracy when they’re moving too slowly,” Cotton says. “But sometimes you have to push very, very hard.”
Where are we now and where do we go from here in the fight against the coronavirus? “You can’t have a virus rampaging through society and expect the economy to open up, but you can’t have economic collapse and expect our health-care system to continue to work,” Cotton says. “You have to get the virus under control before you gradually start reopening things like white-collar work and manufacturing capacity and low-density retail and ultimately high-density retail.”
The things the country must focus on over the next few weeks, he says, are building up production capacity for “rapid testing, respirator masks, [and] thermometer guns,” getting “personnel trained on contact tracing,” and developing “procedures and even laws at the local level for individual mandatory quarantines” for those infected with the virus.
Cotton notes that there is still a lot that’s unclear about the virus: It could be far more infectious with a lower fatality rate than has been reported for instance. But then again, “They don’t turn the Javits Center into a field hospital for the flu. They don’t bring in ice trucks to back up the morgue for the flu.”
“Using your own two eyes to see what’s happening in our hospitals,” Cotton says, is “the real acid-test for how serious this virus is.”
Many trillion and thousands of death later:
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Don’t listen to the echo chamber
Giving money to Iran’s rulers won’t help the Iranians they oppress
The “echo chamber” is back! You know what I’m talking about, right? Ben Rhodes was President Obama’s “deputy national security adviser for strategic communications,” a hifalutin term for the White House’s foreign policy spin-meister. Four springs ago, in The New York Times Magazine, ace journalist David Samuels profiled Mr. Rhodes, marveling at how he “skillfully shapes and ventriloquizes” the voices of “columnists and reporters.”
“We created an echo chamber,” Mr. Rhodes boasted in answer to a question about all those “cheerleading” for the Joint Comprehensive Plan of Action or JCPOA, the deal Mr. Obama cut with Iran’s rulers. Mr. Rhodes proudly noted that his friends in the media “were saying things that validated what we had given them to say.”
Despite those efforts, more than 60 percent of Congress did not, in the end, support the JCPOA, while polls showed the public disapproving by a 2 to 1 margin. Nevertheless, President Obama sealed the deal on his own authority in 2015. That made it relatively easy for his successor, on his own authority, to withdraw in 2018.
The chamber’s echoes never entirely faded away. Diehard deal supporters and defenders of the Tehran regime continued to lament America’s withdrawal from an agreement that enriched Iran’s rulers, funded terrorism abroad and repression at home while, at best, delaying their entry into the nuclear weapons club.
Which brings us to the present: The echo chamber’s new talking point, reverberating like a yodel in the Swiss Alps: The COVID-19 pandemic makes it imperative that the U.S. lift sanctions and provide billions of dollars to Iran’s theocrats!
“Demonstrating compassion in times of crisis is good foreign policy,” editorialized The New York Times, urging that the International Monetary Fund grant $5 billion in emergency funding to the regime “immediately.”
The Washington Post opined that President Trump and Supreme Leader Ali Khamenei should end “their war against each other.” Who knew that for 41 years “Death to America!” has really only meant “Death to Donald!”?
Mehdi Hasan, a columnist for the far-left Intercept charged: “The U.S. government is run by sociopaths. How else to explain the Trump administration’s callous disregard for the lives of ordinary Iranians in the midst of this global coronavirus crisis?”
An online publication of the Quincy Institute, a project of globalist George Soros and libertarian Charles Koch, asserted that U.S. sanctions are “cruelly and coldly calculated to cause as much human pain for the Iranian people as possible.”
Consider some pertinent facts. Secretary of State Mike Pompeo declared last month: “The whole world should know that humanitarian assistance to Iran is wide open, it’s not sanctioned.”
He added: “There is no sanction on medicines going to Iran, there is no sanction on humanitarian assistance going into that country. They’ve got a terrible problem there and we want that humanitarian, medical assistance to get to the people of Iran.”
He added: “There is no sanction on medicines going to Iran, there is no sanction on humanitarian assistance going into that country. They’ve got a terrible problem there and we want that humanitarian, medical assistance to get to the people of Iran.”
Meanwhile, not only has Mr. Khamenei refused offers of assistance from the U.S., he’s joined the propaganda campaign orchestrated by China’s Communist Party to blame America for the virus. “You might send people as doctors and therapists, maybe they would want to come here and see the effect of the poison they have produced in person,” he said in a speech broadcast across Iran.
Iran’s Ministry of Health, which says it has no problem getting medicines, last week revoked the approval previously given to Doctors Without Borders – an independent non-governmental organization – to build an intensive-care field hospital. Iranian officials said they have sufficient capacity. One such official tweeted that Iran does “not need hospitals established by foreigners.”
A serious question for the echo chamber: Why aren’t you telling Iran’s rulers to demonstrate compassion and make concessions?
To start, ask them to open their doors to credible NGOs without further delay or restrictions. Second, they should agree that all assistance will go through NGOs – not to Ayatollah Khamenei who will use it to strengthen state control, fund Bashar al-Assad’s slaughter in Syria and Hezbollah’s death grip on Lebanon, rather than to assist poor and powerless Iranians.
Third, don’t you think Iran’s rulers should release American and other foreign hostages and, while they’re at it, prisoners of conscience and religion?
Fourth, is it too much to expect the regime to halt attacks by its militias against Americans? Killing Americans while Americans are trying to save Iranians – you have no problem with that?
A few other activities from which Iran’s rulers might cease and desist: sending sophisticated weaponry to Hezbollah; inciting genocide against Israelis; further developing nuclear weapons and missiles; and blocking international inspectors -- as they have been, despite promises made under the JCPOA.
Finally, Ayatollah Khamenei, 80 years young, is believed to have as much as $300 billion in assets under his control, resources he stole from Iranians insufficiently committed to the Islamic Revolution. If he were to donate $299 billion to fighting COVID-19, wouldn’t he still be able to spend his twilight years in comfort?
It boils down to this: If Iran’s rulers want support from the “international community,” they ought to become members in good standing of that community – or at least stop their most destructive activities.
The echo chamber is demanding instead that we pay the theocrats’ medical bills and provide them economic stimulus so they can fully fund their terrorism and neo-imperialism.
Here’s a more strategic and moral approach: We do whatever we can to help the long-suffering people of Iran. But not a finger do we lift for those who, amidst this crisis, continue to oppress, impoverish and persecute the people of Iran, while aggressing against both their neighbors and us.
Clifford D. May is founder and president of the Foundation for Defense of Democracies (FDD) and a columnist for the Washington Times.
Analysis: Iran now has enough enriched uranium to build bomb
The United Nations needs to break its silence and, before it is too late, take seriously Iran’s latest rapid nuclear escalation.
By Majid Rafizadeh, The Gatestone Institute
While many governments around the world are focusing on how to halt the spread of the COVID-19 virus, the Iranian regime appears to be concentrating on another issue: rapidly advancing its nuclear program.
Amid the coronavirus, Iran has crossed a major threshold concerning its nuclear plans. The United Nations’ atomic watchdog, the International Atomic Energy Agency (IAEA), reported that Tehran has increased its enriched uranium stockpile, which now stands at the equivalent of 1,510 kg. Iran is allowed to possess 300 kg of low enriched uranium — a substantial increase in Iran’s enriched uranium stockpile in a short period of time.
Why should having this amount of enriched uranium be regarded as a critical issue? Because the Iranian regime now has enough enriched uranium to refine and build a nuclear bomb if it desires to do so. Approximately 1000kg of uranium enriched at just 5% can be refined to create one nuclear bomb.
Moreover, “the agency identified a number of questions related to possible undeclared nuclear material and nuclear-related activities at three locations in Iran,” according to a recently published second report by the IAEA.
It is important to point out that the three undeclared nuclear locations to which the IAEA is referring are in addition to another, fourth, clandestine nuclear site in Iran that was first revealed by Israel. In a November 2018 speech to the UN General Assembly, Israeli Prime Minister Benjamin Netanyahu stated that Iran had a “secret atomic warehouse for storing massive amounts of equipment and material from Iran’s secret nuclear weapons program.”
At the same time, two non-partisan organizations based in Washington, DC — the Institute for Science and International Security (ISIS) and the Foundation for the Defense of Democracies (FDD) — released detailed reports about Iran’s undeclared clandestine nuclear facilities as well.
Although Iranian leaders claimed that the nuclear warehouse was a carpet cleaning facility, traces of radioactive uranium were detected at the site; Israel’s warning and other reports have proved accurate.
The Director General of the IAEA, Rafael Grossi, admitted, as reported on March 3, 2020:
“The fact that we found traces (of uranium) is very important. That means there is the possibility of nuclear activities and material that are not under international supervision and about which we know not the origin or the intent.”
“Iran must decide to cooperate in a clearer manner with the agency to give the necessary clarifications,” Grossi told journalists, when he was meeting with French President Emmanuel Macron on March 3, 2020.
Although Iran is a party to the Non-Proliferation Treaty (NPT), it is refusing to allow the IAEA to inspect its nuclear sites. The IAEA is also not allowed to inspect or monitor Iran’s military sites, where nuclear activities are most likely being carried out.
Among the many concessions that the Obama administration granted to the Iranian government was accepting the Iranian leaders’ demand that military sites would be out of the IAEA’s reach. Because of this surrender, at various high-profile sites such as the Parchin military complex, located southeast of Tehran, the regime has been free to engage in nuclear activities without any risk of inspection.
Iran is also breaching several UN resolutions by not allowing the IAEA to inspect its nuclear sites. The March 12, 2020 Congressional Research Service report on Iran’s Nuclear Program stated:
“Several U.N. Security Council resolutions adopted between 2006 and 2010 required Iran to cooperate fully with the International Atomic Energy Agency’s (IAEA’s) investigation of its nuclear activities, suspend its uranium enrichment program, suspend its construction of a heavy-water reactor and related projects, and ratify the Additional Protocol to its IAEA safeguards agreement. Iran did not comply with most of the resolutions’ provisions.”
Iran’s leaders keep professing that their nuclear activities are solely for peaceful purposes; inconveniently for them, however, plutonium is not needed for peaceful nuclear energy.
Iranian Foreign Minister Mohammad Javad Zarif claimed on March 4, 2020, “We have always said we are not interested in building nuclear weapons.” If the Iranian government is advancing its nuclear program for peaceful purposes, why has Tehran repeatedly failed to report its nuclear facilities, including those at Natanz and Arak, to the IAEA? Also, why does the Iranian government keep refusing to answer the IAEA’s questions regarding its secret nuclear facilities?
The United Nations needs to break its silence and, before it is too late, take seriously Iran’s latest rapid nuclear escalation.
Dr. Majid Rafizadeh is a business strategist and advisor, Harvard-educated scholar, political scientist, board member of Harvard International Review, and president of the International American Council on the Middle East. He has authored several books on Islam and US foreign policy. He can be reached at Dr.Rafizadeh@Post.Harvard.
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Another RossRant:
Another RossRant:
I know everyone is looking for an answer. So am I. However there are no answers right now. Various analysts are trying to compare this to other market crashes and recoveries. Past times are irrelevant in my view. This is the one time I say -this time is different. There have been various financial crashes, excessive euphoria in dot com, oil shortages, high interest rates, or whatever. There has never been anything like this. WWII affected the world, but here at home nobody was getting killed. Life went on. There has never been zero interest rates and government stimulus so fast, so widespread, and so large as now. There has never been anything that impacted 150 countries all at once at a time of such globalization. So trying to claim we know for sure what is going to happen is not realistic. All we can do is try to understand what is sure, what is likely, and what we have no idea about.
The shift to April 30 has blown some of my optimism. I had believed things would at least begin the process of return to normal by April 15, at the latest. If that happened with the stimulus and unemployment bills, we could have had a real V recovery. Now it is unclear. There are parts of the economy that are being obliterated. Not damaged-obliterated. Hotels and restaurants, barber shops, gyms, sports venues, concert venues, uber drivers, PT therapists, and on and on. No dentists are working for another month. They all have well paid staff and rent. Hotels and restaurants cannot go on like this. 25%, or so, of hotels are already closed, and the rest are averaging under 10% occupancy, and now they have another 30 days to go. Most hotels are owned by small owners who may own one or two, or maybe 5, but even with the stimulus money to pay wages and stay open, and using capex reserves, it will be hard to survive for many at nil occupancy. The owners will be faced with a choice, stay barely open to get stimulus dollars, and pay no room taxes or any other taxes, use up cap ex reserves, which is not a lot, and then tap owner equity. When things restart they need to convince consumers their hotel is clean and safe, and they have to hope a lot of people will travel quickly to catch up on business or relatives. Maybe that will happen. I think it is likely. Hard to know how much of trained staff comes back. Most hotels need 55%-60% occupancy to just cover costs. Restaurants need to hire back and then find cash to restock food from scratch.
Meantime their CMBS servicers will be pressing for some sort of payments, and owner equity infusion in exchange for modifications. . Owners are not going to find servicers just willing to do a cram down. That is not going to happen. They may do as in 2010- extend payment terms with a big balloon payment, or hope certificate, split the note into A and B pieces, lower the rate, and allow use of reserves, but loss of principal is not something they are going to do easily as they represent bondholders who have a first lien. Special servicers also are on the hook for making payments to the bondholders. They can only forbear for so long, and then they will commence foreclosure. Part of the stimulus money is supposed to go to debt service, but I know many hotel owners will choose to fight with their servicer instead of paying, hoping for a cram down.. The courts will be clogged, and already have a huge backlog from the shut down, so time and legal fees will mount. A losing proposition for owners. I was an expert witness in several cases in 2009-12 and saw these cases unfold. The judges will be slow, but debtor friendly, so the servicers will have real fights, but the cost to the owners will be not worth it in many cases. This time is different- last time the hotels at least had some decent occupancy. The decline in value then was around 40% at the worst. This time is much worse potentially since hotels are closed. This time they have no occupancy. Renovation will be delayed for many years as it was in 2012. It is hard to know now with the April 30 date what will happen. Nothing like this has ever happened before. Even 9-11 was of short duration, and not comparable. Owning CMBS paper, or a fund with a slug of that paper, is likely to be very costly. The loss of principal is going to be potentially huge. It is so far unclear what role the Fed will play in buying CMBS notes as opposed to RMBS of agency backed CMBS. Some vultures are going to make a killing buying up closed hotels, and notes, and then foreclosing.
The REITs area mixed story. Hotel and retail REITS will get hurt, retail less because they have higher quality properties. Office we will see what happens, Apartment REITs generally own higher end properties where tenants are much more likely to pay rent. Cell towers are good. Most REITs had good balance sheets and lines of credit, but many lines have been pulled. The place of risk other than hotels is mortgage REITs. They have seen huge cash outs and also lines pulled, big margin calls, and repo security liquidated, so they are at risk despite being solid investments up to now. The Fed is moving aggressively to buy paper so these mortgage REITs may be able to sell paper to the Fed and stay alive. That seems to be what is happening. We just need to see where all of this plays out over the next 60 days. Mortgage REITs may not be where you want to be, but it may be too late to get out. REITs were a good place to be for yield for 10 years, but the sudden crash has left some in bad shape.
It is possible that the combination of the small business loans, enhanced unemployment, loans to large companies, and many companies keeping staff on payroll, will help to keep many businesses and consumers near whole, but lodging and other travel and entertainment employ huge numbers of staff, they buy a lot of consumables, pay for lots of outside services, and pay a lot of room tax and sales tax that cities need to cover their budgets. It is not possible yet to see how the losses of income, taxes etc is really going to play out over the next year. Cities and states are going to be badly hurt with the loss of all that room tax and sales tax, and eventually quarterly income taxes which can never be recouped. Landlords for barbers, restaurants, and gyms, etc are going to be hit with a substantial number of defaults as small businesses go out of business. Will these small businesses restart immediately? Probably, but hard to know. There are a lot of go fund me efforts happening for restaurants where the locals want to help. Maybe that, combined with the small business forgivable loans will help some reopen with the original staff. The problem now is nobody really knows how this plays out. It seems clear the $2 trillion plus the added $4 trillion of Fed loans is not going to be enough. If the infection curve really flattens in two weeks, as it seems possible, and if they can reopen some hotels, and restaurants in four weeks, and if all the government money is enough to keep everyone going, then there is a chance for a real V, but the longer this goes the more V becomes U. Hard to predict right now. The market seems to believe the scenario that there will be a sharp recovery by Q4. We are creating a very serious problem at the local and state levels when they come to budget time. There will have to be major service cutbacks due to the huge loss of tax revenue. It will look like 2009 all over again, but much worse. Listen to Cuomo to get the picture on this. There will be huge fights now on teacher pensions and other pensions, and union required healthcare payments that jurisdictions could not afford before this. Now there is no way to pay for these giant union give away contracts which were made by politicians essentially bribed with campaign contributions.. There is a huge pension crisis about to hit in the next year or two as returns are very low due to low interest rates, and due to market losses, and the inability of governments to fund the obligations. It was coming, but now it is here.
The Fed is doing a great job of keeping the capital markets functioning. On Monday there was a flood of high investment grade bonds issued to individual investors and mutual funds. That part of the market seems OK now. The Fed is buying GSE paper-Fannie Freddie and keeping that market functioning. The problem for institutional buyers right now is nobody can predict the prepayment situation going forward, so pricing is a problem. The Fed has been buying at a slightly higher price than the market, but the market is functioning now. The Fed nearly created a problem for dealers and originators a few days ago because the dealers and originators were hedged for the downside, and then the Fed stepped in a bought which pushed up prices and blew up the hedges. That created margin calls. That has been rectified now. There is still a market jam on single family home paper. The Fed will have to step in and clear that, and get that market liquified. CMBS is still shut and subject to possible huge losses. When the big box tenants announce they do not intend to pay rent, the mall owners are in for a major problem, which means CMBS is in for a major problem on top of all the hotel defaults of which there will be thousands.
Thanks to the Dems refusing to fund the oil reserve purchases, the oil patch is going to get crushed. At $20, oil is not worth pumping. A lot of small producers cannot survive. A lot of well paid workers will be out of work thanks to the Dem stupidity. There will be a lot of consolidation, but the industry will go on. Putin will not win, nor will the Saudis. They depend totally on oil revenue, and so their economies will be very badly hurt, far worse than ours. Life in Russia is about to get much worse for the average person. Putin’s popularity will take a real hit. When I was in Russia I had extensive discussions with Russians about how their lives had improved under Putin. Now they will be going back to scarcities, and a much lower standard of living. Putin will have a lot less cash for weapons and for Syria, and to help Iran. There will be as yet unknown geopolitical consequences from this. There will be growing pressure to replace the Prince, but that will not be soon. In November the oil patch will remember how Pelosi played stupid politics and killed them. Texas will be solid Republican except maybe Austin. The left needs to wake up to reality that oil is here to stay, and this is a major national security issue, not some silly climate issue. Killing a bunch of small frackers is not going to do anything other than make a lot of workers unemployed and very angry at Dems. Meantime the ultra- low gas prices will help low income workers get by- a big help to the economy.
Many are not paying attention to the real cost of having the economy shut down. There are a lot of people who depend on getting a paycheck every week, and when they do not, they get very stressed and struggle with rent, food, and other necessities. Uncertainty is the big problem. When I was a naval officer it became very clear that most people need structure and certainty in their lives. They need to be told what to do. When there is uncertainty things go badly. This creates huge stress, and in some cases leads to child or wife abuse, opioids, or suicide. This has already become a huge problem, and Cuomo has created a group of therapists, several thousand, to try to help for free. That is just in NY. A lot more people are going to die of these other things if the economy does not get reopened quickly. The commentators like Chris Wallace clearly ignore the huge collateral damage being done, and only focus on the spread of the virus. They are just not paying attention, or they are just dumb. If you take all the deaths from the virus vs the total population of the US, all of whom are being heavily impacted by the economic dislocation, the deaths are not even a blip. Reality is, nobody has said let people die, but the mortality rate is only around 1% in the US of people who get the virus, but the economic damage is to probably 98% of the population. The docs can still save people, especially with some of the drugs now in trial, but a complete shut down of the economy has dire consequences that will be with us far past the virus being here unless they start to reopen areas where the experts say it is safe to do so by April 30. Hopefully the enhanced unemployment, and the small business loans will help get small companies through this and cover enough payroll to make the real difference, but the stress will be there regardless. It is the total unknown combined with being locked up for weeks, that is going to be too much for many people. Some medical experts will say you must first get rid of the virus which crosses state lines, or they say, you need to defeat the virus first, or you will prolong the virus. China is now almost fully reopened, as is S Korea, Singapore, Hong Kong and Taiwan. Sweden never closed down. They simply told old people they must stay indoors and others with conditions, the same. Everyone else in Sweden is going about life as normal. So far it is working well. Dr Brix has said they are getting county by county data which may let them open some counties, and not others by the end of April. I will take her opinion when it comes. This is a giant country, so it seems reasonable that Brix is correct that you can do things in one area, but not others, with reasonable safety. Some docs want the whole country just shut down, but they are not looking at the real cost of that, but just the perfect medical solution. Nothing in life is perfect, and everything is a trade-off. Might some people get a little sick if some places are reopened, yes, but maybe a lot more lives will be saved from opioids or battering, or suicide. Meantime the sick can be treated and maybe the malaria drug will prove out in the next two weeks and solve some of the problem.
The classic 60-40 portfolio has not proven to be a safe place. On average it is down 20%. Normally as stocks drop, rates drop, and bond prices rise. With rates at near zero, there is no place for rate drops. Bond prices are going to drop as stock prices increase. There are many places for defaults and principal losses to come. In the end stocks will rise a lot before bond prices rise again. In fact bond prices may decline as rates rise again when things reopen, and the giant fiscal stimulus becomes a drag on Treasuries. They have to sell a lot of new bonds to cover all of this. It is possible, though unlikely, that the Fed might buy equities. Powell has said nothing is off the table. I am sticking to my 100% equity strategy and only large, strong companies.
Some good news. The spread between the ten year and investment grade corporates is only around 300 BP this time vs 650 in 2008. That suggests the market is not expecting many defaults on corporate high quality bonds. If the spread shrinks, as is likely, the bonds will rise in price.
Another bit of good news is Iran is getting hammered by Covid. They are on lockdown, many sick and getting worse, prison riots, and no money coming in. Their people are likely getting even angrier. Their ability to fund their proxies and Syria declines rapidly by the day now. Their ability to recoup from this will be slow and long while oil prices remain at a loss position. The squeeze on the regime has to be very high now and getting worse. They are in no position to start any sort of action. While the regime is not going to collapse in the near term, they will remain weak and subject to riots, protests, and a real shortage of cash. They are likely counting on Biden getting elected so they can get their coffer refilled just as Obama did. If Trump wins the Iran regime may not last more than another couple of years at most. Their economy is already collapsed and their proxies are not getting paid. No pay no fight. The entire mid- East geopolitics is going to radically change over the next two years. There is simply no way to know when nor what comes next. Russia is in no position to bail out Iran and Syria and others so long as oil prices remain below $54 on Brent. Putin is in a deteriorating position if oil prices remain low. When this is over it is likely Israel will be the one left standing. The Arabs will be much poorer due to low oil prices. Iran will be weak and maybe the mullahs will be gone one day. The Iran proxies will be weak because they will have gotten no money from Iran or Russia. That leaves the Palestinians with no real benefactors and in need of being nice to Israel as their only hope to survive. Maybe then in 2021 they will be more amenable to talking about the Trump peace plan. The Saudis, and other donors to the Palestinians may feel they need a way out of that morass due to low oil prices and may push the Palestinians to a deal. This is all a lot of speculation, and in a part of the world where reason and thought never prevails, so there is no way to know. It could be that out of desperation Iran starts a war, or goes for a nuke. Lots of possibilities now, but very likely there will be major changes in that part of the world, especially if oil prices remain very low for much longer.
Sometimes I find this whole thing to be like a dream. It is hard to wrap your brain around the prolonged shut down of everything. After 9-11 it was a shock, but then the country moved on quickly, Nobody was isolated. In fact crowds rallied. In 2008 we all felt poorer and the economy nearly crashed, but that was a purely banking and liquidity problem. It could be solved mechanically and was. Now nobody can be near anyone. I have never experienced anything remotely like this, making it hard to know what happens May 1. Likely it will be like the first spring day in NY when everyone suddenly comes out of hibernation and is in the park or on the street. Were it not for the internet, and being able to work remotely, and to Facetime, and otherwise connect, this would be a giant mental health disaster..
My neighbor here in FL who is in his seventies had a party last night with three couples. I knew he was not smart but, I did not know he was a total idiot. And they wonder why the virus spreads. Luckily there is distance between the houses and lots of heavy landscaping
I am not sure what is the motivation, maybe trying to look non-partisan in a crisis, but Trump actually said nice things about DeBozo and Newsome. He could have blasted Pelosi for what she did on the stimulus bill, but he didn’t.
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Rumor has it that now that they can do drive by virus testing they are working on drive by prostate tests.
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