Jim Bianco “This virus is the event of this generation. In the future, we will refer to this as pre-virus, post-virus.“
Jim Bianco at Bianco Research made a fantastic, educational presentation last week on where we are and where we are going.
The presentation is 1 hour and 8 minutes in length. Playing it will be one of the best 68 minutes you have ever spent.
I played it twice.
Here’s a link to a Free Trial subscription to Bianco Research.
What follows are my notes of Bianco’s opinions, followed by my own comments at the end.
Again, these are MY Notes on what Jim said. Apologies for any translation errors.
What Happened?
In two words “Massive Revaluation“.
We woke up in February and the market said “Oops, everything is at the wrong price and I will correct that immediately.”
Why Fixed Income Locked Up
When the panic selling started, the dealers bought, bought, and bought, but then hit the limits of what they could hold on their balance sheet. This is more important in fixed income because fixed income operates under a dealer system.
The Fed realized the dealers don’t have the capacity to make markets. The Fed offered them a repo facility. The Fed can wave its rules, but banks are also under BIS, Basel-3 capital requirements FDIC, OCC, etc., regulations.
The Fed said ignore the rules. The banks responded “You told me that in 2008, then you fined me $19 billion for buying WaMu after you told me to do it. So, I want a letter from the DOJ indemnifying me.”
When that did not happen, the bond market froze up.
Bond Market ETF to NAV
- The Fed, BOE, BOJ all doing the same thing over and over again and it isn’t working. Why? We still have the wrong prices!
- The bond ETFs have liquidity but the actual bond market doesn’t. The discount to NAV suggests the price is wrong.
- When prices get low enough bids and offers will emerge.
- Dealers don’t won’t to get there now because they do not want a 2008 type of loss in the first quarter.
- But look at the bank stock index. It is down 50%. Because mark-to-market rules have been suspended banks won’t record these losses, but they are real.
What’s Next? Twenty Things
- These scars will last a generation. A huge change in attitudes is underway.
- Credit ETFs are telling us lower. How will we know when prices are correct? When natural buyers come in, not when the Fed supports asset prices. As goes the credit market – so goes the stock market. Expect a massive wave of BBB downgrades.
- The jobs reports in April and May will be the worst in history.
- Earnings Negative For the Year. 1800-2000 Might be Fair Value on S&P 500.
- New Way of Business
- Crude will continue to glut until supply is taken out of the market. The Saudis want to burn Russia, Iran, and US frackers. Crude Trades Net of Storage and Transportation Costs. The lowest price crude is oil sands in Canada. Closed at $8 last Wednesday.
- China has Suffered Permanent Damage. The chinese economic miracle is done.
- Gold and Silver Struggle Until We Find the Equilibrium Level
- Huge Change in Risk Parity. The relationship between stocks and bonds broke. They are now likely to rise and fall together eliminating use of one or the other as a hedge. There is only one trade that works: Liquidation. Risk parity is done as an idea because the stock-bond relationship is no longer stable.
- Gargantuan deficits. The trillion dollar deficits of today will look like balanced budgets compared to what’s coming next.
- Even as an Austrian Libertarian, we need fiscal stimulus like we have never seen before, because if we don’t see it, we will rerun the Great Depression. We are in a world of least bad options. If there was a good option, the markets would not have fallen as far as they did, as fast as they did.
- Managing earnings ends. Corporate buybacks are gone. That’s why we won’t get back to the old highs.
- Less globalization. Less risk taking. This will depress earnings and market multiples.
- Higher interest rates and rates of inflation (after the crisis) and that will also depress stock market multiples.
- Whether or not we have a prolonged depression depends on the amount of corruption in Washington.
- Fed will not buy stocks. The same applies to Congress and SS funds. This would open up a huge can of worms that could potentially give the likes of AOC and radical liberals voting rights to all kinds of things including running the companies. Here’s the Green News Deal, abide by it.
- Fed will not position rates below zero. No run on banks. The Fed has a printing press.
- The Elon Musk theory is this will all go away and we go back to buying $120K cars. But the market does not see it that way and neither do I.
- People will not forget this. This is not 911. It is not 1987.
- National crypto currencies coming. The next reserve currency will be a global crypto. It will not be Bitcoin.
Mish Comments on Bianco’s Ideas
1: This is the second crisis in 12 years. The huge fear, and for the second time, is How Do I Pay the Bills? These scars will last.
3: The jobs estimates are too rosy still. Most of the estimates are for unemployment rates under 10%. The bare minimum I forsee is 12%. And that would be coupled with a U6 underemployment rate of close to 40%. For details and my calculations, please see 9% of the US Has Been Laid Off Due to the Coronavirus.
4: Earning estimates are going to dive. I commented Goldman Projects a Catastrophic GDP Decline Worse than Great Depression. Yet, despite these earnings forecasts, analysts expect the economy to be back near full strength by the 4th quarter. Toss that notion out the window. The recovery will be shallow and slow. Fair value might be 1800-2000 but markets tend to overshoot. The Fed short-circuited that process in 2009. Feelin’ lucky this time?
5: New way of doing business. Just-in-time production strategies with no inventories are toast. It costs to hold inventory. There will be more production in the US as well. Trump won’t like the result because the stock market won’t like the result. Globalization is not over, but the rush to globalize everything is. The US, Europe, and China will all be more inward looking than before.
7: China has Suffered Permanent Damage. The chinese economic miracle is done. Those who thought China would surpass the US are mistaken.
8: Gold and Silver Struggle Until We Find Equilibrium Level. Today’s $76 surge, a 5% rally suggests we may have found that level already.
9: Huge Change in Risk Parity. Risk parity strategies allowed massive amounts of leverage by hedge funds and pension plans. But that strategy is over. Pension plans are in a world of hurt.
11: Whether we want it or not, fiscal stimulus is coming. Yet, the debate in Congress postponed it again. Democrats and Republicans are fighting over who gets what. Both sides are undoubtedly wrong here. Congress bailed out the banks last time and look what happened: only the wealthy benefitted. But Democrats want 1100 pages of God knows what. Unfortunately, here we go again with “We have to pass the bill to see what’s in it.” This is not the time to be demanding a Green New Deal or crucifying small businesses with $15 minimum wages.
15: The Fed fears a collapse in credit. On that score, the Fed is correct. But once again, the Fed blew this bubble. If we save the banks and Boeing and the frackers, and throw the people under the bus, Bianco is correct: we have a prolonged depression. What’s the perfect solution? There is none or if there is, I do not know what it is. We screwed up in 2001 and 2008. Is there any reason to believe we won’t screw up again?
18: People won’t go back to routinely buying $120K cars. In fact, car buying of all kinds will take a prolonged hit. Then with a few years, the whole idea of owning cars outright will change as true self-driving hits the road. Millennials do not see ownership of cars and homes as their boomer parents. This is part of the attitude adjustment process in point number 1.
20: Congress is going to issue checks. This is genuine helicopter money. Fed loans and repos aren’t. It is going to take a while to process and send the checks. The Fed and Congress will present that delay as a national problem. The Fed will then push for and get a national cryptocurrency “for the people”. Unlike Jim, I am not sure this leads to a global reserve crypto. I do not see the Fed or Congress or the president wanting to give up currency control. Perhaps this does happen down the line, but first things first: countries including the US ban will ban cash transactions. They will tout the benefits: Instant cash, fighting money laundering, fighting fraud, protecting us from the likes of Bitcoin. They will not tell you that the real purpose is to track every dollar in the system. We will have a loss of freedom, independence, and privacy as a direct result.
Constitutional Attack
In regards to the loss of freedom, indepence, and privacy, I also fear something Jim did not mention: A constitutional attack on Habeas Corpus, the right to a speedy trial.
Rolling Stone and Politico both had recent articles on suspension of Habeas Corpus.
Politico reports DOJ Seeks New Emergency Powers Amid Coronavirus Pandemic.
The Justice Department has quietly asked Congress for the ability to ask chief judges to detain people indefinitely without trial during emergencies — part of a push for new powers that comes as the novel coronavirus spreads throughout the United States.
Documents reviewed by POLITICO detail the department’s requests to lawmakers on a host of topics, including the statute of limitations, asylum and the way court hearings are conducted. POLITICO also reviewed and previously reported on documents seeking the authority to extend deadlines on merger reviews and prosecutions.
The move has tapped into a broader fear among civil liberties advocates and Donald Trump’s critics — that the president will use a moment of crisis to push for controversial policy changes.
There are 1100 pages in the emergency legislation. What’s in it?
It is highly doubtful Democrats would grant such powers to a Republican. But if Republicans were in control of the House, such legislation could pass. Moreover, the same applies if Democrats held executive office and both branches of Congress.
Even if these fears are unfounded for now, it is disturbing, to say the least, that such powers are even requested.
Mike “Mish” Shedlock
Wow!
Guys,
People fear things they don’t understand and act irrationally based on that fear.
How would you interpret the same data if you knew for a fact how this virus was going to play out? If the total impact ends up being .5% total population death rate, mostly old and/or infirm? 1%? 5%? You pick your upper bound.
The point isn’t to be callous or indifferent to these tragedies, but to have a reasonable perspective on economy-wide impacts informed by likely possibilities rather than open-ended fear-driven mania.
Certainly there will be social and economic impacts, but this is a virus, not a nuclear war. It will kill some people and temporarily reduce productivity. It will dramatically reduce a few weeks to months of earnings. It won’t level cities.
Happy to see less JIT manufacturing. The system needs some slack for the cases where everything doesn’t go perfectly. Also happy to see more manufacturing brought back to the US. I’d be happy to pay $10 more for an iPhone made here.
I feel like I’m sitting above the heavens gates watching the heavens, via gvmt branch, like guys in white robes, with long white beards, @ the pearly gates,& they think they’re getting away with 2 sets of books. Like truckers, used to get accused of. One for digital banking that’s real, the other, is not. Most public, thinks it’s real. But they’re in the Not pile! The heavens, are sitting in the office comparing, what people are really doing. All along, we are being dupped. Then, the real cash flow, hidden away, in some safe place, is the real deal. Yup. I will add it to my bank account as needed.
we might as well sell everything and get what we can based on this analysis.
Excellent analysis, but I am surprised that not once did you mention any republicans by name but you can toss AOC and radical democrats out there freely. How is it that every time the crap hits the fan a republican is at the top? Any answers? Any answers why your trump called the virus a hoax for nearly two on ths or said it was just like the flu or a cold? Why wasn’t trump prepared? Why wasn’t trump’s CDC prepared? But tossing AOC out there is an easy one for the click bait.
Why not mention Bill Barr or Ron DeSantis by name since they want to end habeas corpus because they and their republican party acted too slowly and too late. You never mention trump once, but AOC gets anod. Pathetic.
Then you say if it wasn’t for democrats habeas corpus would be a thing of the past, but then you say if they had power they would do it too! Why not just brand each of your commentaries as republican views?
Maybe a little bit more about the complete and total failure of the trump response to the virus might give you some impartiality, but that’s not in your playbook apparently. As with trump, when the going gets good you take credit, but when the crap hits the fan you won’t take the blame.
I knew from the start that once trump had a crisis he would fuck it up completely. He doesn’t care. All he wants is his name on the relief checks! He’s your man. Take the results but don’t mention him by name…
Crawl back under your rock loser
A Republic, if you can keep it… If we want to keep it, we should probably know why the Roman Republic (not empire) fell. We’re on that curve. Because Republics are ALWAYS on that curve.
we have been on life support since the great recession.We have not had 1 single year of 3% or greater gdp. So we will be even worse now after all these bailouts. Coronavirus was/is a smoke screen for the thefts which just occurred on a massive scale. Americans deserve it though. An ignorant, gluttonous group of obese slobs. Go eat some cookies you slobs.
We obese Americans don’t eat cookies my fiend. We eat cake.
I worked and lived in China as Prof of Engineering and Dean at Shenzhen University.
The PRC will emerge as the world’s largest economy by the end of the year, because:
Whatever. But I see you left China and are in the USA, why is that my friend? Maybe for the same reason China rich people try and launder their money out of China and into Vancouver…solve for the equilibrium professor.
Point 11 I can’t agree on: “Even as an Austrian Libertarian, we need fiscal stimulus like we have never seen before, because if we don’t see it, we will rerun the Great Depression.” Real Austrian, of Mises kind, (Libertarian is more ambiguous) would never say that, or suggest government intervention for any reason.
In Poland gold dealers are run out of stock. Whatever left is 15% above spot prices. Interesting…
“Even if these fears are unfounded for now, it is disturbing, to say the least, that such powers are even requested.”
How are they unfounded when the government is shutting down the economy at this very moment, on its command?
“But look at the bank stock index. It is down 50%. Because mark-to-market rules have been suspended banks won’t record these losses, but they are real.”
1+1 always = 2.
WHO: US has potential to be “epicentre of outbreak”
A spokeswoman from the World Health Organisation has said that US risks becoming the next epicentre of the coronavirus outbreak as the country is seeing a “very large acceleration” in cases.
One of the strange things is that The Fed has taken no hit to its public credibility in this crisis. The drop in the markets and the strain on the financial system has largely been blamed on the virus and “who could see that coming”?
No one wants to face Another Great Depression, so The Fed is generally being lauded for using every bazooka they have to stave off that possibility.
A lot of what changes will depend on the various post mortems that are held after the crisis has abated.
And that’s when we will see the corruption—I mean besides the blatant and obvious corruption in Congress as the two parties bicker over which pigs shall be slaughtered to appease the masses—sorry—their donors.
The corruption will come in the post mortem… that’s when we will see whether they pull moves like banning cash… or banning buybacks. Like in the aftermath of 9-11, that’s when the power game will occur.
The heavy implication in Mish’s article above is that attitudes towards savings will change, both by households and business.
I’m not so sure about that. That likely depends on the actions of The Fed down the road. You cannot pump money into an economy and not expect that printing to result in speculation. Happens every time.
And from what we’ve see in the past is that The Fed has no exit for the drastic actions it is taking.
The Fed needs to let deflation happen and interest rates rise to normal levels, while mitigating deflation’s more catastrophic effects. But will they leave it at that?
One attitude that has a really good chance of changing… Europeans’ attitude towards the European Project.
That Federal project will end long before the American one.
After we get our free money and bailouts, then we bash the FED.
This is ironically one situation where the alarmists would happily embrace martial law. Terrorism ran it’s course over 20 years, so politicians will seize any opportunity for more control. In other news, more academics question the current policies: https://onlinelibrary.wiley.com/doi/pdf/10.1111/eci.13222
Academics are divided on Covid-19, see MarginalRevolution blog. Truth is, precautionary principle is at play. If you’re so confident that Covid-19 is nothing, then you should volunteer to be infected, then treat others (since after infection, you’re immune for up to two years say most experts). I don’t see many people too excited about this proposal however, since Covid-19 is not “just like the flu”, even for youngsters.
Good material from both Jim and Mish. I disagree with the “we need financial stimulus or we’ll have a Great Depression.” The depression was made Great by FDR performing numerous numb skull experiments on the economy. He was crippled
in mind, soul and body. The government has no money to stimulate with. It just robs and spends: usually on hair brained schemes. How about the Fed and Government butting out. Haven’t they cause enough trouble already.
Dow drops below 15k look for NIRP this week along with TARP 2.0 pumpin tens of trillions more in banks and stocks and direct bailouts to state pensions.The only thing that will never be bailed out is the main street economy…ever!
After reading the comments on this post, I am bullish in the market, why you may ask, because everyone is bearish. I read someone thinks googl is going to 500, maybe but it probably goes to 1300 first. If you want to use puts here, prepare to have your head handed to you.
You’ll need people to be bullish at a higher level so you can sell to them.
Fair value 1800? Try 600. Or lower. The entire world economy has stopped on a dime. The market fell 90% before as did the Nikkei and I see nothing that indicates it cannot happen again. Fed and fiscal stimulus notwithstanding. This is the greatest deflationary impulse in history. That said I’m loaded up on ultra long dated gold plays in case I’m wrong.
DNFTF — do not fight the fed. Get ready to experience the fastest recovery ever.
So 20 points on where we’re going and not one mention of covid19. Now Trumps says were opening back up soon. Is this crap real or overhyped or wtf? Yesterday it was the worst thing ever, millions are going to die, now we have bailouts and talks of opening back up. What the hell is going on?
The tulip mania brought down the Dutch republic. Toilet paper mania will bring down the American empire.
Reminds me of the following observation:
“…the strange modern waste and ruin, moral and material, is really a destruction of strong things by soft things. This is the picturesque point in the Scripture phrase about the moth and rust that corrupt. The moth is frailer than the garments. The rust is softer than the iron. We have to guard the heavy robes of Pontiffs from the wrath of a butterfly…It is the vanities that consume and the feeble things that we fight in vain.”
-GK Chesterton
(“Public Education and Other Negative Revolutions” Illustrated London News, August 24, 1912)
This question is still way too early, just like “when will the market recover?”
We have yet to have the national recognition that lots of people are dead simply because we weren’t prepared, don’t have PPE, don’t have ventilators or beds, and a significant portion of our medical workers have succumbed.
We are in the second inning of a long game. The destruction will be immense.
Just because Donny DF Trump is tired of the shutdown because it is a bummer to campaign on and he’s used to a rapid-fire news cycle, real life isn’t like that and we have much more suffering in store.
Less than 1% of Italy’s death rate from covid 19: https://www.youtube.com/watch?v=WzbFGCuZ_rY
That sounds utterly absurd. Is that for the year to date? When they’re experiencing 500-600 deaths per day from the virus, that would mean 50-60K other deaths daily.
Over a million deaths every three weeks would be bonkers for a country of 60M people. Mount Vesuvius didn’t cause that much carnage to Italy.
Looks like the economy is going to open soon per Trump. The absence of Dr Fauci during the press announcement is possible proof of this.
Seems awfully foolhardy when we’re seeing 10K new cases per day, or maybe this another “15 cases, soon to be zero” moment.
Well the number of deaths in the US is quite a bit lower when compared to other countries so perhaps we are doing better? But then again that might be a function of us being a bigger country.
Hi,
It’s lack of testing and we’re a few weeks behind Italy on the exponential curve. Numbers in us are about to get very big very fast. Just what experiential spreading does.
Trump hotels are shut and he is going broke?
“What’s the perfect solution? There is none or if there is, I do not know what it is.”
There is probably no solution that will make every happy. What would make me happy would be the dissolution of the United States into 50 independent countries. It might not make me nor anyone else rich but I’d love to see everyone in Congress, the White House and the Federal bureaucracy, just lose their jobs and become poor.
The collapse of the American empire in 2020
And I feel fine. If you’re diversified and have a net worth of at least $10M or more, there’s no problem. I have assets in three different countries. But good luck if you work at McDonalds, that much is clear.
Y’all are missing the most important issue: Both Government and private debt at all levels is astronomical and completely unpayable. Until this gets resolved you can kiss any recovery goodbye.
False statement, every single debt has always been paid. The question is rather is it going to be the debtor or the debtee that’s going to be doing the paying?
Mish, I hate to say this, but I believe that the polarization in America is so irreconcilable that the ONLY thing that stopped it from breaking the nation up was the shared nationwide prosperity (more or less, sure life was still hard for the bottom 60% or so, those that could not come up with $500 in an emergency) but as long as unemployment was so low and the economy was moving people would bitch about politics but not much else.
Now though that prosperity is history. The larger blue urban regions are going to demand a systematic overhaul in the way we operate. And to a degree I see them as being right about some things, the problem is they want to throw out the baby with the bathwater, I say we need to reform capitalism, they want to simply extinguish it entirely.
They have a lot of special problems living in urban regions that the rest of the nation does not have, those call for special answers and policies and those are not always cheap. But, the rural rest of the nation resents both the cost of those solutions as well as the liberal free thinking that flourishes in cities and universities. But it is all complex, like the right has always attempted to gay people back in the closet, they fear change. Even though the freedom to love and marry the right person for YOU should never be dictated by legal policy ever, in any way. Yet, I can empathize with the fear of change because there are many changes the younger urban dwellers want that I abhor. Cloud com[puter driven cars for example, I will leave America if they ever become fact. Battling greenhouse gasses, and so called climate change. The climate is an unstable thing so large that it takes a lot of propaganda and even more hubris to think we seriously affect it at all. But they want to uproot all that made us what we are in order to “save” the planet and the only outcome to that will be to lower the population back to a sustainable carrying capacity of between 2 and 2.5 billion people.
In short there is a lot of fat in the fire right now and our very future depends on getting it right because the margin for error we can survive is very narrow when there are this many people on a planet that can’t sustain them.
Fundamental policy will indeed have to change or nature will do it for us. But I assure you NOBODY is going to be happy with it. Most especially conservatives.
I think the USA will break up this year. It will all come to a head in the election, even if the virus is forgotten Trump will have so little to run on, to defend his record with. He has a proven track record of using division and exploitation, if he is to come back he will have to employ that to the last degree, at least in his mind.
I believe that all this is on display with the current attempts to pass a stimulus bill.
McConnell wants nothing but a historic no strings attached blank check to Wall Street, with a few expanded benefits for unemployed, and a tax credit for some middle class that they will eventually get when they file taxes. Democrats are saying NO! NO blank check for businesses that spent the last ten years buying back stock and feathering their own nests until we are at the apex in all of human history of wealth inequality that would have SHAMED the Romans. Any bailouts will be for things that help PEOPLE get through this and the largest share of bonus to business will be via checks to individuals who will then spend as needed with a few industry specific assists to vital defense companies, but that will be repayable over the long run.
The senate is utterly divided and will not come to a deal. It is an election year and Moscow Mitch is giving the finger to actual people. There is no limit to the largess he is willing to show to corporate America even as families break up and the men become hobos so their wives and kids can get some assistance.
In many ways it will resemble Hoover’s America for a while, but unless we get a genuine FDR we are dead. FDR came along at just the right moment in history, because he did the USA survived. Had he not we would not have and we would have remained isolationists to the point the Axis powers would have won the war. This time we just do not have a FDR, I thought Mayor Pete had that mental and emotional strength, but FDR only got into office because he was both American aristocracy as well as a populist and defender of the little guy. Mayor Pete is not American aristocracy, had he been the number of people suspicious of his gay identity would have been smaller.
Given the problems, and the lack of solutions, and the polarization, I think it will either be civil war which I doubt, or a break up ala the old Soviet Union.
No one is breaking up anything, the Union is eternal or as close as anything that humans can create. As FDR said in an hour truly darker than this, “this great nation will endure as it has endured.”
Why would the USA be immortal? When the big reset hits, I’d expect not only the US, but China, India, and most of the larger countries to break into pieces. Russia would keep losing bits on the periphery too.
We’ve already seen social anger ramp up around the world and that was when everyone’s paper wealth was intact. This is a natural consequence of letting central bankers run the planet for too long.
No disrespect but “the Union is eternal or as close as anything that humans can create” is an absurd statement.
Trump loves Russia so much, of course he wants a Soviet-style breakup. Then he and his cronies can become oligarchs, just like their Russian mentors.
England exists and has existed. France exists and has existed. The same model applies to China and India. Your topical exegesis of current problems is no more divisive or dire than a half dozen other periods of American history. Your opinions -not premises- do not support your conclusion. It can easily be argued that we need each other now just as in the past. We are blessed on this continent with the greatest river system and most fertile lands in the world. We have our constitutions and our inalienable rights, which FDR said so well, “this great nation will endure as it has endured.” There will be no separation, not as long as I endure.
Nothing is Working Now: What’s Next for America?
Good Question
Answer: greatness
Why: because our society is the planet’s quickest society to adapt. We do not see or experience roadblocks – we see only opportunities.
Flexibility: In Europe (the epicenter of Socialism), a business could NOT change their business model withOUT permission of the Government. Think about it!
America is about INNOVATION and our BEAUTIFUL country makes that possible…
Did you see our businesses pivoting quickly to meet the needs of this Coronavirus crisis. Still seeing zero masks made in America. Where are the ventilators?
Drive through testing also came from the Koreans.
Must be nice to be deluded. Perhaps that’s what America is. Delusion and Delusion.
“Did you see our businesses pivoting quickly to meet the needs of this Coronavirus crisis. Still seeing zero masks made in America. ”
Yes I did and how hard did you look?
Here’s a few headlines/quotes:
“Prestige Ameritech typically makes 250,000 masks a day. Now it’s manufacturing 1 million daily, and turning away orders for 100 million more.”
(https://www.wired.com/story/surreal-frenzy-inside-us-biggest-mask-maker/)
and
“Hanes, Zara start producing masks and other supplies for first responders
Hanes plans to manufacture 1.5 million cotton masks every week.”
and
“Gap Inc., which is headquartered in San Francisco, also said it’s ready to help.”
Both from:
Bottom line is we don’t need the government to manage the production of anything. If a buck is to be made, businesses will pursue it on their own volition!
Not sure I believe that. The Governor of New York has to scour the globe to look for medical related equipments including masks and they are still short. Just look at reports coming out New York. Also you conveniently forgot about ventilators, and other PPEs. There’s a BIG shortage everywhere.
Face it, the number one skill American businesses have is sending jobs overseas. That’s why we are in such a bind.
Yes, I did not address ventilators, but let’s be real: If there is a buck to made, businesses will pursue it on their own volition! Governments can assist to that end by ensuring our domestic manufacturers are competing on a level field (they haven’t for the past 30 years) and not trying to interfere with how the businesses are run (i.e., mandating to business owners how they must compensate employees).
Also, regardless of the system in place, let’s cut ourselves a little slack. The pandemic is what, a once-in-a-hundred years type of event? So the idea that some form of government (from socialist to free market) is going to be adequately prepared is just not realistic. Everyone is going to be a little flat-footed. Of course, if we had an economy more resembling the 1950’s; i.e., wealth produced from domestic manufacturing, as opposed to the huge leaching FIRE economy we now have, then YES, we would be much better off!
With all respect tokidoki (clever handle BTW)…
In a ‘hardcore’ socialist society, each business is issued a ‘license’ to conduct business. That license is specific to what the business is authorized to do. It is ILLEGAL for a business to conduct or operate (despite how competently and with as high quality as such business might produce) OUTSIDE of the specific grant of authority.
As such, the idea that Hanes underwear can start making ‘masks’ to fill a need would have local prosecutors encircling their company and locking up their executives for violating their license. Most likely, their lawyers would stop them. AND, the suppliers would have refused to sell them the materials because the supplies knew Hanes was not authorized to make ‘masks’. Think I’m kidding. Check EU regulations. Check Nazi Germany and the way the Nazis ‘oversaw’ businesses.
This is what I meant when I said America’s greatness is its ability to innovate. This is the single characteristic that makes America truly exceptional. American culture does not lock people into ‘castes’. At least not until now, but my fear is that’s all about to change – and change hard and fast.
America is so corrupt it doesn’t stand a chance. Unless there is a change. Interestingly if you look closely at all the historical innovation America is famous for and built a lot of wealth on… you’ll find a German. One taken from the reich. It’s sad but look hard you’ll find them. The innovation was really just monetizing and selling someone else’s idea.
All the while we were running on our hamster wheels for toys and treats they were building a cage around us, thanks to this opportunity soon it will be complete. I guess we’re f#$ked.
“despite all my rage I’m still just a rat in a cage” Billy Corgan, Smashing Pumpkins.
Nothing, aside from a set of crass theft rackets, have worked since 1971. That was back when Boeing managed to build planes, people walked on the moon, ICs and arpanet were invented, and Sinatra, Elvis, Zeppelin and Kraftwerk were all active. Then, facilitated by removing the last vestige of restrictions of complete and total debasement, came financialization….
The virus just made covering up the undifferentiated failures that are financialization, judicial activism, “the war on everything” and “the ownership society”, a tiny bit harder than it was before.
Also, the virus demonstrated quite clearly that Chinese style communism, is a vastly superior form of government than Post -71 Western style financializationism. Vastly superior. And that is not even remotely on account of Chinese style communism being anything even resembling a decent form of government.
“Chinese-style communism is the worst form of government — except for all the others.” — Winston Churchill 2020
I tend to agree. A reasonably well managed human anthill society is going to beat chaos and corruption. To me, the Greatest sign that the US is doomed to decay has a name: Joe Biden. The Democrats complained about Trump as crazy, incompetent, amoral and anything else they could come up with – and what have they created as the alternative? A corporate Democrat warmonger with likely dementia who may be guilty of sexual assault. This is a country saying, “we don’t care”.
I predict that unpredictable political changes are what’s next. So many groups just awoke to the fact that there’s FAR less wealth in the world than previously hoped, the fighting over the scraps has just begun. This will go from ugly (who the heck even had time to write an 1100-page bailout wish list?!) to uglier. This will go on in different ways, on different stages, for many years. Frankly this culture, which doesn’t even WANT capitalism — individual rights including private property — after having it served up on a silver platter to us by the Founders and a few geniuses like Mises and Rand, is getting what it deserves. The fumes of the Enlightenment have run out.
That’s the big picture, anyway. The small picture, which is more important, is up to each individual.
My two college roommates from nearly 20 years ago openly decry capitalism and beg for socialism…but neither can properly define it as it is in the dictionary.
Here, tell them this: “Everything you ever worked for now belongs to everybody”.
As usual Brad I agree with your sentiments but this time I will say that all those things have been going on for years resulting in polarization so intense that we will now experience it coming to a head. And the end result will be as you say UGLY. But not for many years, the many years are up, the current emergency is a lot like the subprime fiasco that pricked the bubble in the GFC. Only this time people are already dying. (By the way, you said the fumes of the enlightenment, I automatically read the Humes of the enlightenment, let’s enjoy that while it sails over the heads of the conservatives here)
I want capitalism, more important capitalism is what it is because it has to provide the basics for 7.75 billion people on a planet that in any other economic system can only support well under half that, in fact 2.5 to 3 billion at most with current technology. No other system would even keep half of us alive and those that survived would be at bare subsistance. You think a pandemic under these circumstances is bad wait till there is no more decent nutrition or vaccines. Or hospitals, or pharmaceuticals. Or transport system to get them to every corner of the globe, or government to pay when most can’t. Wait till people start plunging wells on their prepper sites unaware that their well has to be 100 feet from where they crap. Talk about sickness. My sister actually got hepatitis in high school after staying at a friends house. The people in that subdivision were outside the city limits and rejected city water because they would have to pay a $3,000 connection fee, so they kept using their wells. Unfortunately they also at the same time rejected city sewer service, so kept using their septic tanks and leech fields. The outbreak of hepatitis that happened in 1974 meant they had no choice after that. But sure as the sun will rise in the east tomorrow there were some that refused to pay and sold out. They would rather drink water contaminated with their neighbors feces and urin than to pay for anything. We call those republicans.
You say the smaller picture is it is up to each individual. That I really have to disagree with on it’s face. Unless you meant it another way. Especially when you invoke the image of the founders. You make it sound like we are all a lot of yoeman farmers self sustaining and protcting our own. And that just is not how it is. Factions will form, two or more, and when that happens it will not be brave individuals but civil wars. Urban dwellers such as yourself will not be able to self sustain, at the very least when the nation does come apart according to Putin and his puppet Trump’s plan, what we will likely see is city states in which major urban areas like PDX where you live will simply lay claim to everything from 200 miles out on the Pacific and all the way up the Columbia Gorge to Hermiston and down the Willamete as far as some line between Salem and Eugene. That will give the city enough natural resources and defensible border as well as arable land to take care of itself. On that level you are right about up to the individuals, but it will be individual city states not individual persons.
But, this would be a disaster for the environment. And eventually that has to come back to bite us.
“polarization so intense that we will now experience it coming to a head”
Agree with you and others about the polarization. It was very ugly in the 1960’s as far as I can tell (I wasn’t there), and has been ugly ever since. … Appears to me that, rather incredibly, we are having a “moment” where there is LESS rage right now because everyone is in SHOCK. But that won’t last. In a couple months it will be all rage, all the time. By the time we get to the election, 2016 will seem like a five-year-old’s tea party. If Trump loses, being the most ungracious human on the planet he’s likely to do anything and everything, legal and illegal, to remain in power. Might not work, but he will try it. … And if he wins, the riots are going to be something to tell the grandkids about.
Agree with you that the plate tektonics of the political system is going to change. We were already at the breaking point in the US. It’s fairly impossible to imagine the seams NOT ripping apart in the 2020’s. IMO the major socio-political trends are all irrational — and therefore irreconcilable as well.
What I mean about “the small picture” is not that each person can be self-sufficiently untouched in their own life without being hurt by the big picture. A veteran knows more than me about how world headlines can invade one’s life. What I mean is that so long as we are in a semi-free nation, there’s still always (almost) a way to thread the needle and find a way to enjoy life. Enjoy one’s job, hobby, family and friends. And books, and pets, and music…. Being rich is overrated anyway. 🙂 My grandparents lived through two world wars and the Great Depression and certainly had bad times, but still had lives worth living.
You “predict” the “unpredictable?”
There is prediction and then there is probability. They are similar but not the same. A prediction is a statement of how you think things will turn out, where probability is a rational array of potential outcomes that might not be as direct but which does follow a trend. I say we are trending towards idsolving the union one way or another, whether by civil war, or simply walking away from the old constitution because it is no longer functioning to serve the needs of the people. Regions have different assets and different liabilities, different problems that need solving and different resources for solving them. If the government in DC can no longer solve those problems and it certainly appears to be the case now, those regions will take it upon themselves to do so, thus my idea that we will see city states arise, and you can ponder the nature of those if you think that is a probability. But, don’t get caught up in semantics in an effort to look clever, this is not a place to post college level theses, it is an internet board. If you have alternate views of our future please enlighten us 🙂
Insightful analysis of the situation, and the line “The fumes of the Enlightenment have run out” is absolutely brilliant!
Cut the Defense budget in half, as a start, and it will still be too much of the pie. We have to quit with the bipartisan warmongering. War — it’s what we do.
AIPAC and the dual citizens will never let that happen.
Now that’s some subtle Jew-hate!
The warmongering defends US dollar, your money is worthless
“When the panic selling started, the dealers bought, bought, and bought, but then hit the limits of what they could hold on their balance sheet. This is more important in fixed income because fixed income operates under a dealer system.” What exactly were they buying? Treasuries, MBS, corporate bonds? Primary dealers are conduits for Treasuries only I thought. If they were only buying Treasuries whats the problem. They can just get a repo loan on those, correct? If they were buying corporate bonds and MBS why were they buying them? Are they obligated to or were they thinking they could profit from buying them and got stuck when pricing went down after buying them? Sorry I just can’t get the whole concept of what he is saying there.
Any clarification by you Mish would be greatly appreciated.
His whole narrative (Bianco)on what is happening in the bond market, seems, well, apocryphal.
I got the clarification after listening longer. The bond dealers I guess did buy commercial bonds but after buying them they couldn’t swap or resell them unless at a loss. A giant clusterfuck .
Best thing I have watched in a long time. Hopefully OPEC is finished, for good.
Nasdaq is still wildly overpriced. Twitter today suspended their forecast because of “ad revenue crash”. Why is Google still at 1000? Should be at 500. I am going to buy puts tomorrow.
I have no readings on international matters. I agree China as it is right now will not replace the US, but if the US were to foolishly go to war, the combination of both China and Russia will throw the US back to Flintstone time. Israel is also inching for a fight with Iran, and I think that might happen this year.
Replacement for US Dollar. Digital currency backed by Gold. Seems like a perfect fit.
“Why is Google still at 1000?”
Do sovereign funds/ non-EU central banks own it that print money from thin air and buy up shares? I’m wondering the same thing.
My kids always try to push those high tech “Apps” on me. Oh. it does this and it does that… what want an app that will reroof my house, mow the lawn, go get me a beer, ect. Big tech always try and take your life over for no good reason at all or shuffle business the their preferred partners. Apps can be helpful but are mostly destructive in nature.
“both China and Russia will throw the US back to Flintstone time.”
The Russians? Conventionly the US military would own Russia.
Why is it always Russia and China? Russia has nothing in common with China, has not been Pseudo communist for a lifetime, and activity dislikes China. They are being economically destroyed by them the same as the US. For God’s sake they are not communist anymore. They are more capitalist than American capitalists! You can buy ANYTHING in Russia (even police, but that’s different). Russia likes America, just they hate the American government. Can you honestly disagree with them?
They might dislike China, but they dislike Americans more. Why them together? It’s easy. The Democrats hate Russians and the Republicans hate China. It makes tons of sense of those two to finish off the US. Afterwards, they can fight each other for global domination.
Probably pointless to reply since it seems you didn’t actually read… but I’ll try. Russia does not hate America. The Russian people do not hate Americans. The politicians in Russia do things Americans politicians don’t like. However if you actually could see what the American government does overseas you’d know why America is forcing others to treat it this way. The Russian people actually very much like America. If you saw more of your country you’d be amazed how many have moved there. The Russian politicians absolutely hate Chinese politicians. If you see it otherwise it’s due to the fact your constantly being misinformed. There is and never will be an alliance by choice. Having been there and then marrying a Russian I’m not talking out the side of my head. I see news from both sides, not the one sided view you get. I see news and hear information from all the extended family still living there. Your flatly wrong.
because u are using internet right now. With work from home being the new norm forever, google gets more usage than ever , more market share, which is really what share prices care about these days, not earning
Google does not earn money from people entering search terms. 90% of their earnings come from advertising.
This is the true end of the secular bear market. We thought it started in 2001 and ended in 2017 or 2018 but the real historical cycle is 18.5 years. From fall 2001 add up 18.5 years and you get to – wait for it – March 2020. So in the end valuations will go to the start of a secular bull market that will start sometime later this summer or fall. Remember in these cycles we always overshoot to the upside but also overshoot to the downside. I suspect maybe we could see S&P 1500 at the bottom and Dow 12,000. The global financial crisis in 2009 masked things and many were fooled into believing by 2010 that the secular bear market was ending. The question is do we get the cycle that Ray Dalio is predicting and a new form of monetarism or does the system stay in tact. The last time we had this cycle was in the 1930s and it wasn’t this short. It took a world war to get enough jobs and spending to get out of the depression.
The economy had started improving by the time WW2 began, so the war did not get us out of the Great Depression. If anything, the debt incurred in WW2 and the Cold War that followed forced coin debasement and closing the gold window.
Exactly! Conditions were improving and then nosedived during the war. It was as miserable, if not worse.
It wasn’t until after – when the US was basically the only fully-functioning industrial country – that our economy “recovered”…
The war provided jobs and work. It sent Germany and Japan so far back that the US had no peer again until the 1980s.
If you display the wiltshire index or russell index (acurate representation of small and midsize business) from march 1998 to march 2020 on a logarithmic scale. and you depress the rise in price by accounting for 2.5 percent CPI inflation the entire time, then it displays as a massive dome , with some inversion exactly in the center on march 9 2009. The right side is tracing out perfectly. Distribution dome, if you can call it that, with beautiful right and left sides.
The “Justice” Department went further than that. The wanted to strip state district court judges from arraigning suspects. Nobody worries about the Patriot Act until it’s too late. Sorry to say, this country is no longer ours.
Mish when do we get the first essay where you blame Coronavirus for the failure of your predictions on self-driving vehicles? We almost got it here but not quite.
Also I think it’s funny, the feds can’t get enough masks or test kits out into the world, but they’re going to switch us to some kind of cyber currency? Color me skeptical on the grounds of incompetence.
Appropriately inappropriate. It fits.https://www.youtube.com/watch?v=XskIem_iFCE
Stable genius of love?
I agree with this entirely, think it’s one of your best ever. Thanks.