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The Addictive Drug That Everybody Thinks Is Okay, Until It’s Not

A report from “In sharp contrast with H1N1, COVID-19 comes at a time of contraction, after years of frantic expansion, with an economy on a slowing trajectory. Job creation, GDP, and consumer confidence are all decelerating but still at historically strong levels. The coronavirus also hits a housing market operating at post-peak after record level home sales and prices, but now struggling to rebuild supply amidst years of insatiable demand.”

“Through the lens of the last outbreak, the prevailing coronavirus has the potential to accelerate economic corrections and, with some lag, contribute to sharper but temporary drags on housing activity. However, if the virus threat remains relatively contained and within the boundaries of a short-lived pandemic, housing activity is likely to follow its current decelerating yet controlled trajectory.”

From NBC News. “The coronavirus is threatening the global economy and financial markets. But so is another, less obvious peril — the mountain of risky debt issued by companies and bought by investors during the recent economic expansion. Paying back this debt is going to be tough for businesses that have issued it if their earnings fall because of the coronavirus. Delinquencies, defaults and investment losses are likely, analysts say, possibly subjecting the economy to what economists call a negative feedback loop.”

“We’ve seen this movie before. In 2008, trillions of dollars in mortgage debt amassed during a huge run-up in residential real estate had to be unwound, contributing to a worldwide recession that was deep and destructive. ‘Not only has there been a surge in corporate debt, but the quality of the debt is the weakest it’s ever been,’ said David Rosenberg, chief economist at Rosenberg Research, an investment consulting firm. ‘The last cycle was about the household sector and commercial banks. This is about the business sector and the holders of the spurious debt are mutual funds, insurance companies and hedge funds.'”

“Because businesses have been humming and stock prices rising, debt has not been much of a concern, said Vicki Bryan, founder of Bond Angle, a high-yield bond research firm. ‘Debt has been completely ignored — it’s like the addictive drug that everybody thinks is okay, until it’s not,’ Bryan told NBC News. Coming into focus now, she added, is the problem of what the companies that issued loads of debt did with the proceeds. Rather than using it to invest in their operations or bolster their financial positions, many chose to buy back their shares or pay dividends to investors.”

“‘It’s weakened the system,’ Bryan said. ‘It shrinks the margin these companies have for when things go wrong.'”

The Wall Street Journal. “Hotel owners with heavy debt loads are grappling with the prospect the industry could fall into a tailspin from the spread of the coronavirus, leading to a potential uptick in defaults. The U.S. hotel industry overall had about $300 billion of mortgage debt as of the third quarter of last year, up 7.8% from one year earlier and 14.2% from two years earlier, according to data firm Trepp LLC. New York, Los Angeles, Las Vegas and other cities that count on foreign visitors could be especially vulnerable, analysts say.”

“In New York City, where a supply glut has pressured room rates and weighed on hotel revenue, at least 21 mortgages backed by hotels were on a watch list for potential default as of February, according to Trepp LLC. Some bank executives say they are now charging higher rates and imposing tougher conditions on borrowers, while others have stopped lending to hotel owners in certain markets.”

“Even before the spread of the virus, the hotel-debt market was showing some strain. At the end of the third quarter of last year, 1.33% of the hotel loans made by banks were delinquent, more than any other property type, according to Trepp. Banks and credit-rating firms have started to stress-test individual hotels and hotel portfolios to see how they would withstand declines in revenue. KBRA Kroll Bond Rating Agency found that the Four Seasons Resort Hualalai in Hawaii might not generate enough income to pay its debt service if it were hit with just a 15% decline in cash flow.”

“Some hotels that continue to pay their debt could face problems if their mortgages come due during the crisis. At that point, if the property’s value has fallen below the amount of debt, owners will either have to put in more cash or face the risk of default. An estimated $50 billion worth of U.S. hotel mortgage debt comes due every year, according to Jade Rahmani, an analyst with Keefe, Bruyette & Woods. If debt comes due during a tumultuous period for the market, he said, ‘that owner will not be able to get a refinance or if they were planning to sell the property before maturity, they may not be able to sell the property.'”

“Some investors are already contending with defaulted loans on major properties. Mortgage REIT Colony Credit Real Estate Inc. has been trying to sell the defaulted loan on the 1,331-room Row Hotel near Times Square. The loan had a principal balance of $260.2 million in 2018 but could now sell for as little as $50 million, according to people familiar with the matter.”

The Houston Chronicle in Texas. “Stocks plunged around the world Monday in a wave of panic selling that sent markets to their worst day in at least a decade and intensified fears of a global recession. Houston is getting battered on all sides. The region, because of its strong ties to international commerce, is more exposed to global market turbulence and oil prices than other areas of the country. Combined with a sustained drop in oil prices, the wide-ranging economic impacts of COVID-19, the disease caused by the new coronavirus, could very likely wipe out job gains in Houston this year, economists said, and in a worst-case scenario, could push the local economy into a recession.”

“For local exploration and production companies, the oil price collapse couldn’t come at a worse time. Many companies were already struggling with prices between $50 to $60; the oil and gas industry cut nearly 10,000 jobs in Texas last year. ‘Those firms have been holding on by their fingernails,’ said Patrick Jankowski, an economist at the Greater Houston Partnership. ‘They just lost their grip.'”

The Chicago Tribune in Illinois. “A five-bedroom, 6,200-square-foot Colonial-style mansion in River Forest once owned by legendary Chicago Outfit figure Anthony Accardo sold Friday for $1.13 million — exactly half what the sellers originally sought for the mansion when they first listed it in 2017. As Elite Street first reported in August 2017, the sellers first listed it in May 2017 for $2.25 million and then cut their asking price to $2.15 million, and then to just under $2.1 million, before taking it off the market. They relisted it in 2018 for just under $1.9 million before undertaking close to two years of price cuts. Their final price reduction was to just under $1.2 million in October.”

“‘The price reflects what’s happening overall with huge houses everywhere,’ listing agent Stephen Scheuring of Compass told Elite Street. Scheuring also said the mansion’s pool and coach house were sticking points for some buyers. ‘Pools are hard to sell, and it also had a coach house, which is more space to take care of,’ he said. ‘Pools and coach houses aren’t always selling points.'”

This Post Has 149 Comments
    1. Starting to see a trend. Less YOY inventory and lower per square foot and sale prices. All with record low rates. But now’s a good time to buy right?

    1. Are you suggesting preventing this person from bringing their ‘support’ animal into the McD’s?

  1. ‘Even before the spread of the virus, the hotel-debt market was showing some strain…Many companies were already struggling with prices between $50 to $60; the oil and gas industry cut nearly 10,000 jobs in Texas last year’

    Notice how many situations were already sinking like a turd in a well, and now pundits are “shocked”? Howz that LA $100M spec mansion going?

    Which one, you ask?

    1. how long does it take from finding a plot of land to completing
      1. a hotel
      2. an office biuilding

      ? tia

      1. I’ve been watching the construction of a nearby office building and another apartment complex. They seem to take 10-12 months from breaking ground to completion if it’s worked on continuously. But from finding the land to breaking ground? Heh, depends on the number of green handshakes.

        (wait, how do you give a green handshake in a time of coronavirus? Venmo? 🤔 )

        1. “Heh, depends on the number of green handshakes.”

          It’s easy to see that you are innocent. You are referring to what is better known as, “a brown envelope.”

          1. You do have to be careful with the Brown Envelopes. Take too many, too indiscriminately and you’ll end up with a stretched out prison wallet.

    2. AirBNB is what I am waiting to hear about. All those AirBNB “hosts” (more like parasites) who Ruined neighborhoods and condos and need the money to keep from losing their “investment “.
      Them visiting BK Will be the one positive thing from the virus and reaction to it.

      1. I think certain vacation markets will see a blood bath if travel plans are curtailed for a high enough percentage of vacationers. Myself and a couple other folks on the HBB watch some of the Tampa area beach properties and many of them have been sitting for a long time unsold (I’m looking at you Clearwater Beach). What happens when these sellers see the demand completely dry up? That tiny filament of hope will be gone.

      2. I have mentioned before that every once in a while I peruse AirBnb to see what’s available, and it seems every property is available at any time. I do not think these “hosts” are really making the money they had thought they would.

        1. “Robinhood, which was founded in 2013 by Vlad Tenev and Baiju Bhatt, pioneered commission-free trading, a move that’s since been copied by larger online brokers including Charles Schwab Corp. The startup has attracted 10 million users and is now backed by venture capital firms including Index Ventures, Andreessen Horowitz and Sequoia.”

          VCs not only back unprofitable companies but facilitate offloading their pre-IPO shares via IPO and a “free” app to moron retail investors.

          1. professional investors are also morons

            Professional investors are banking on greater fools.

    1. Need to Know
      Extreme market volatility will last two more weeks. Here’s how to trade it, strategist says
      Published: March 10, 2020 at 7:43 a.m. ET
      By Callum Keown

      Investors should be prepared for another two weeks of “extreme volatility” as the coronavirus continues to spread and oil prices come under pressure, Nordea Asset Management said.

      “What we are faced with is a capitulation trade coming in waves, compounded by an oil crisis and eventually buffeted by a credit crisis,” senior macro strategist Sebastien Galy said. “Faced with a period of elevated volatility, we prefer flexible solutions and to keep some eventual upside listed real estate and listed infrastructure.”

      He added: “We remain steadfastly proponents of covered bonds as a safe position.”

      “As the market capitulates and the credit crisis hits first hedge funds as sovereign wealth funds sell equities, we expect the regime of extremely elevated volatility to last longer than we expected – another two weeks are likely ahead of us,” Galy said.

      1. I always find it curious how these market pundits pretend the market operates in a policy vacuum. Of course massive stimulus measures are planned to make the stock market go back up again, and ignoring these is to ignore a key factor determining where the market is headed.

      2. compounded by an oil crisis and eventually buffeted by a credit crisis

        Sorry about your “trades” Sebastian. The accident was caused by a pebble on the train track. Ordinarily such a thing would not result in catastrophe. The train was operating outside it’s safe range, the tracks having been laid atop the existing credit crisis.

        Oh, and there isn’t so much an oil crisis now as there was when prices were driven up by speculators.

        1. “…as there was when prices were driven up by speculators.”

          It’s strange how market pundits routinely ignore the mania that precedes a crisis!

  2. ‘John F Kennedy had such a voracious sexual appetite that he would sleep with up to three different women a night and told Harold Macmillan that if he did not “have a woman for three days, I get terrible headaches”.

    ‘His extra-marital pursuits included interns, secretaries, actresses and call girls, with little compunction shown for his wife or about being uncovered by the media. However, notes written by Kennedy on the 1960 election campaign trail show he was concerned that victory might mean an end to his philandering.’

    ‘In a message thought to date from October 1960, when asked about post-election holiday plans, he wrote: “If I win maybe Florida or Puerto Rico. If I lose around the world in 180 days. I suppose that if I win my poon days are over.”

    ‘His fear of being asked difficult questions by the press proved unfounded as he continued to carry on an extraordinary number of affairs with reckless abandon after entering the Oval Office.’

    ‘Madame Claude, a French brothel-keeper in the 1960s, claimed that Kennedy was among her high-profile clients. Sally Bedell Smith, author of Grace and Power: The Private World of the Kennedy White House, said she was surprised by Kennedy’s apparent concern about being questioned and the potential end to his behaviour.’

    “The press was notable for looking the other way,” she said. “One of the reasons why Jack was such a flagrant philanderer was because he was quite confident that the press wouldn’t call him out. It was just part of the code of silence at the time.”

    ‘She said the anxiety in the messages may have been “a little pang of guilt or maybe good intentions which were quickly lost”. The 98 pages of notes are being sold by Heritage Auctions in Dallas on April 23.’

    1. Well I guess that’s what happens when you are jacked up on steroids for
      Addison’s disease and you have enough money to access whatever you need to stay alive.

      “Kennedy subsequently began treatment with the synthetic adrenal hormone desoxycorticosterone acetate (DOCA). By 1950, when cortisone became more widely available, Kennedy added a 25-mg dose to his daily regimen.”

  3. “Coming into focus now, she added,…”

    NOW it is coming into focus.

    “… is the problem of what the companies that issued loads of debt did with the proceeds.”

    Do tell.

    “Rather than using it to invest in their operations or bolster their financial positions, many chose to buy back their shares or pay dividends to investors.”

    Bahahahahahaha … what a bunch of dummies. So these companies borrow a bunch of money and then pay out some of this borrowed money to their investors in the form of dividends. And the investors are apparently okay with this.

    A nation of fools.

  4. ‘In California, where there is traditionally strong U.S. real estate buying activity each year from Chinese property investors, some Southern California Realtors have privately commented that their real estate business activities have been cut in half in early 2020 from the impacts of the Coronavirus hitting China, and now the U.S.’

    ‘The National Association of Realtors chief economist Lawrence Yun tells The World Property Journal, “The coronavirus is leading to fewer homebuyers searching in the marketplace, as well as some listings being delayed. In the latest flash survey, 11% of Realtors indicated a reduction in buyer traffic and 7% are reporting lower seller traffic when asked directly about the coronavirus impact on the market. Given that a home transaction is a major commitment, the uncertainties on how the economy will play out and the spread of the virus itself are barriers to home buying and selling.”

    ‘Yun further comments, “The stock market crash is no doubt raising economic anxieties, while the coronavirus brings fear of contact with strangers. At the same time, the dramatic fall in interest rates may induce some potential buyers to take advantage of the better affordability conditions. It is too early to assess the likely impact as to whether lower interest rates can overcome the economic and health anxieties. But the survey is implying in the short-term at least that home sales will be chopped by around 10%, compared to what would have been the case, due to the spread of coronavirus.”

    ‘some Southern California Realtors have privately commented that their real estate business activities have been cut in half in early 2020’


    1. ‘It’s beginning to seem as if many leading elected officials in California believe state government knows best about almost everything in virtually every phase of life. That goes on both macro and micro levels.’

      ‘Over the last year, this state has threatened city after city with lawsuits for not authorizing enough new housing units to satisfy state officials, even when developers have no great interest in building them. A state commission is demanding other lawsuits if cities and counties don’t do more to reduce homelessness, even where many of the homeless aren’t particularly interested in moving into new shelters, and even while courts in some other states continue issuing bus tickets to California to minor criminals in lieu of sending them to jail.’

      1. It’s nothing but grandstanding and pandering; they aren’t the least bit serious about fixing the problem.

    2. Ben, is this alot????

      In California, where there is traditionally strong U.S. real estate buying activity each year from Chinese property investors, some Southern California Realtors have privately commented that their real estate business activities have been cut in half in early 2020 from the impacts of the Coronavirus hitting China, and now the U.S.

    3. I recently interviewed someone from a major SoCal market who had unwound a brokerage and was looking to re-enter my industry after about a decade away. I find the timing very interesting.

  5. A report from “In sharp contrast with H1N1, COVID-19 comes at a time of contraction, after years of frantic expansion, with an economy on a slowing trajectory. Job creation, GDP, and consumer confidence are all decelerating but still at historically strong levels. The coronavirus also hits a housing market operating at post-peak after record level home sales and prices, but now struggling to rebuild supply amidst years of insatiable demand.”

    – COVID-19 is hitting after the peak of the longest, central bank- induced, artificial expansion in history, which includes, and is largely the result of “The Everything Bubble,” which funded consumer spending (~70% of economic activity), and drove income inequality to extremes via massive asset inflation.

    – The business/credit cycle was already turning down due to debt saturation. The virus will only accelerate the decline, which will be proportional to the bubble expansion on the way up.

    – The business/credit cycle, contrary to Fed and Administration propaganda, hasn’t been suspended, only extended. The bill is now coming due. All of the inflated asset bubbles are now popping. Employment is the next shoe to drop. This will be one for the history books, IMHO.

  6. Hoarding update for my local Walmart (Arroyo Crossing in Las Vegas) this morning.

    The paper towel aisle was nearly completely wiped out. But more astonishing was that there was not a single roll of toilet paper on the shelves. And in this store, the TP section basically runs the length of an entire aisle.

    Kind of glad I grabbed two 12-packs of TP just in case, last week…

    1. I don’t get it with the toilet paper. Water either. I recently saw a bunch of women grabbing multiple bottles of bleach.

      1. A Blast from The Past … from 1973:

        The Great Toilet Paper Scare of 1973

        (snip snip snip)

        When Johnny Carson cracked a joke about toilet paper on his television talk show, things got serious. “You know, we’ve got all sorts of shortages these days,” he told 20 million viewers. “But have you heard the latest? I’m not kidding. I saw it in the papers. There’s a shortage of toilet paper!”

        Absolute madness ensued. Millions of Americans swarmed grocery outlets and hoarded all the toilet paper they could get their hands on. “I heard it on the news, so I brought 15 extra rolls,” one customer told The New York Times. “For my baby shower,” said another, “I told my party guests to bring toilet paper.” In the chaos, company officers and industry leaders told the public to remain calm; store owners ordered astronomical quantities of toilet paper, and set limits of two rolls per customer. Nobody seemed to play by the rules.

        “If people wouldn’t hoard and get so excited about this, everything would be okay,” a supermarket executive told the St. Petersburg Times. He subsequently increased his toilet paper from 39 cents to 69 per roll, but customers still cleared his shelves each day. Merchandisers struggled to re-stock supplies, as the boxcars they relied on for shipments were in high demand by thousands of other stores.

        For four long months, toilet paper was a rare commodity. It was bartered and traded, and a black market even emerged before the whole ordeal subsided in February of 1974. Slowly but surely, the American public realized that there had never been a shortage to begin with: rather, it had been artificially created by a pop culture frenzy.

      2. “But have you heard the latest? I’m not kidding. I saw it in the papers. There’s a shortage of toilet paper!”

        May Johnny RIP.

        But that was a very dumb and irresponsible thing for him to say.

      3. The one good thing about
        C-19 is it isn’t killing young healthy people like the Spanish flu did.

        Older people and compromised people just have to be more careful. But, if people clean more and wash their hands more it’s a good thing.

        Further, people need to adopt healthy life styles to further combat this stuff rather than relying on a medical system that might not have a magic pill.

      4. “I don’t get it with the toilet paper.”

        I guess the thinking is, if we have to quarantine for 8-ish weeks, you need to prepare not only for what goes in but also for what comes out?

        If it comes to that, I’ve got enough trees in the woods behind my house (with leaves on the ground from the fall) to make my own.

        1. Be very careful making your own toilet paper. It’s not difficult to clog a sewer pipe. If you’re running short on TP, better to adopt a rinse protocol and ration teh goods.

          1. My assumption was that if he was using leaves from the woods, nothing would be going into the sewer system…I assumed a “just in time” delivery/usage system.

        2. I guess the thinking is, if we have to quarantine for 8-ish weeks, you need to prepare not only for what goes in but also for what comes out?

          I find that a single roll lasts me quite a few days, maybe even a week. Why would anyone need 100+ rolls for an 8 week quarantine? Or are they planning on bartering for cans of Campbell’s Chicken Noodle Soup?

          1. Why would anyone need 100+ rolls for an 8 week quarantine?

            Are there any women in your house?

      5. I’m surprised there was any bleach left. At least bleach makes sense. I’ve read that 1% Bleach, 70% alcohol, 0.5% hydrogen peroxide, and actual soap seem to be the most effective against this virus. The other cleaners, usually alkyl benzyl ammonium chloride wipes are not as effective.

    1. 😉

      BTW, the bottled water aisle in that store was quite well stocked. The only other shelves wiped out were the cleaning supplies. Definitely no tubs of wet wipes to be had. And over in the pharmacy area, the spot for hand sanitizer was of course empty, and had a sign saying it was out of stock until March 17th.

      1. Speaking of bums, we used to not have disposable paper diapers. We used cloth, which got laundered. I wonder if younger people can even imagine such a situation.

        1. I dont think my wife would appreciate that. Reusable diapers??? LOL

          Update on Me: Our son is now close to 5 months. I am working from home as my company recommended it and I am not taking any chance. Not with a baby at home.

        2. I can imagine a lot of extra parent time spent, in an era when both parents generally have to work in order to financially survive, and dirty water discharged, in exchange for reduced landfill waste and less money spent on disposable diapers. Not sure which is better, but neither is a free lunch.

          1. a lot of extra parent time spent

            If you had a washing machine, not so much.

            If you had more money than time, there was actually a diaper service which picked up soiled diapers and dropped off clean ones.

          2. When I was a kid, a neighbor employed one of those services. We knew this because the white van which came to their house had a large plastic naked baby (wearing only a diaper and little white hat) glued to the roof. yikes

            Thankfully those tacky times seem to be over. Now these companies are a little more discreet, and the labeling on the van says things like “linen services.”

          3. We rent for a fraction of the owning cost so no financial difficulty here. As a matter of facts, my wife is at home with the baby. She has been day trading the last few years (7?) and has been making a ton of money. She even gloated to me and said “Why The Hell Are You Even Working?” Like quit your stupid tech job and wipe that baby poop now 🙂

            Of course, she only learned about stocks after we marry in 2012. With the FED backing, she BTFD everytime and did well. Not sure about this time but we will be fine. I am working from home until end of this month based on company and manager recommendation. I wish I can work remotely permanent so I can get the HELL out of SV LOL.

        3. I wonder if younger people can even imagine such a situation.

          Plenty of new parents using cloth diapers. It’s supposedly greener despite consuming more water and electricity for laundry.

          1. It’s supposedly greener

            I costs less. That’s usually a tell. One of my daughters told me she used them.

          2. Some parents I work with said it saves tonnes of money, especially if you have several kids.

  7. California’s Sacramento County is calling off automatic 14-day quarantines that have been implemented for the coronavirus, saying it will focus instead on mitigating the impact of COVID-19.

    The change is an acknowledgement that the county cannot effectively manage the quarantines while its health system copes with coronavirus cases. It also reflects problems with the U.S. government’s coronavirus testing program — issues that slowed efforts to identify people with the deadly virus and to contain COVID-19.

    “With the shift from containment to mitigation, it is no longer necessary for someone who has been in contact with someone with COVID-19 to quarantine for 14 days,” the county says.

    Effective immediately, people in Sacramento County should not quarantine themselves if they’ve been exposed to the COVID-19. Instead, they should go into isolation only if they begin to show symptoms of the respiratory virus, the county’s health department says.

    Sacramento County has at least 10 coronavirus cases, including one person who recovered.

    1. the county cannot effectively manage the quarantines while its health system copes

      I don’t get the logic. Quarantines should relieve pressure on the “health system”, buying time.

    2. “With the shift from containment to mitigation, it is no longer necessary for someone who has been in contact with someone with COVID-19 to quarantine for 14 days,” the county says.

      I had to explain that one to my wife over lunch. She didn’t understand that meant they were giving up on stopping/slowing the spread through the community and just focusing on who should get care and who should just hide at home from the virus now assumed to be everywhere.

  8. People have been conditioned to think that Big Government, or the Medical Cartel are going to save them. Look at how Government has been handling the homeless health crisis.

    I hope people become more self relient as a lesson from this C-19 virus.

  9. Watched the CBS evening news with New World O’Donnell I mean Norah O’Donnell earlier. First 15 minutes Coronavirus, next 7 minutes how Bernie and Biden campaigns were dealing with Coronavirus, next 5 minutes a bulldog was retiring as a mascot after a long time from some college, the last minute tease… We will have more on the Coronavirus tomorow on CBS This Morning.


    Steve Watson | – MARCH 10, 2020

    “A bad flu season is 80,000 dead, we’ve got about 18,000 dead from influenza this year, we have a hundred from corona,” Dr. Drew said in an interview with CBS.

    “Which should you be worried about, influenza or Corona? A hundred versus 18,000? It’s not a trick question.” Drew noted.

    “What I have a problem with is the panic and the fact that businesses are getting destroyed that people’s lives are being upended, not by the virus, but by the panic.” the physician continued.

    “The panic must stop. And the press, they really somehow need to be held accountable because they are hurting people.” he asserted.

    “I think there was it was a concerted effort by the press to capture your eyes and in doing so they did it by inducing panic.” he added.

    1. “Coronavirus panic”

      What is coronavirus panic? I haven’t seen anybody panicking. Are they talking about the toilet paper buyers? Most people I know aren’t even thinking or talking about this virus. Sounds like Dr. Drew is the one panicking. I usually like him but he sounds a bit hysterical here.

        1. “Coronavirus panic”

          A few people get an unfamiliar disease, which makes everyone else want to sell all their stocks and load up on toilet paper, bottled water, and surgical masks.

      1. “What is coronavirus panic?”

        The cattle are blindly grazing in our area despite the prevalence of morbid obesity and diabetes. It’s going to be like getting a paper-cut in a leprosy colony.

    2. Opinions
      It’s now or never for the U.S. if it hopes to keep coronavirus from burning out of control
      An empty playground outside Achievement First charter school in Providence, R.I., on March 7. (David Goldman/AP)
      By Tom Bossert
      March 9, 2020 at 2:04 p.m. PDT
      Tom Bossert served as homeland security adviser to President Trump from 2017 to 2018.

      The first phase of the coronavirus outbreak was a domestic challenge for China and a border containment one for the United States and others. Now we are in the second phase: community mitigation. Math and history must guide our next steps.

      The near-term objective should be to reduce the acute, exponential growth of the outbreak, in order to reduce suffering and the strain on our health-care system. That will require significant effort, but it can work, as we have seen: Hong Kong and Singapore have achieved linear growth of covid-19 cases, staving off the terrifying exponential upward curve confronting Italy and pushing both the infection rate down and new cases out on the timeline.

      The United States needs to take note.

      1. Realize that everything in this country is viewed through the Wall street lens, i.e., how will this affect the markets? Nothing else matters. Anyway, thanks, that was a good read.

        1. It’s like the Wall Street folks and even their bailout authorities have no idea how to process this situation or how to appropriately respond. Pushing Treasury yields towards the zero bound isn’t going to make Joe Sixpack buy anything besides toilet paper and surgical masks.

    1. Pro Tip:

      Methanol will kill you. Straining it through toast does not help.

      Ethanol (AKA Saudi Water) is toxic, as in intoxication, but in a good way.

  10. Coronavirus conference in New York canceled due to coronavirus
    MARCH 11, 2020 04:21
    A swab to be used for testing novel coronavirus
    (photo credit: REUTERS/DAVID RYDER)
    The cancellation of these events, while ironic, is nonetheless part of a growing trend of canceled or postponed conferences, confabs and gatherings throughout the United States.

    Many events and conferences have been canceled due to the coronavirus outbreak, including a conference about the coronavirus.
    A roundtable conference organized by the Council on Foreign Relations titled “Doing Business Under Coronavirus” was scheduled for Friday in New York before being forced to be cancel due to the aforementioned contagion, Bloomberg reported.

    1. “Coronavirus conference in New York canceled due to coronavirus”

      I hope the historians record this headline.

  11. So much for the dead cat bounce in the Fed’s Ponzi markets, despite the massive repo pumping and CNBC hopium. Oh dear…are we about to see true price discovery asset itself at long last?

    1. I got my hopes up almost 12 years ago only to have them dashed by the Fed. It’s hard to let myself hope again…

  12. Bailout authorities better get on this and rescue stocks before long-only funds dump their shares and tank entire markets!

    Markets Briefing Equities
    Oil prices extend rebound as Treasuries rally
    Futures point to Wall Street fall with markets still jittery from coronavirus and crude plunge
    Hudson Lockett in Hong Kong and Leo Lewis in Tokyo
    19 minutes ago

    Crude oil extended gains even as haven assets rallied on Wednesday, with US Treasuries and the Japanese yen gaining ground as investors remained on high alert in choppy markets.

    Brent crude, the international benchmark, rose 4 per cent in Asia trading to $38.71 a barrel, while US marker West Texas Intermediate gained 3.2 per cent to $35.45.

    Brent is now up more than 12 per cent from its closing level on Monday, when prices crashed by a quarter after Saudi Arabia launched an oil price war.

    But unease was evident in futures markets, which were tipping a 2.5 per cent fall for the S&P 500 when Wall Street opens. Overnight, the S&P 500 climbed 4.8 per cent. The yield on 10-year US Treasuries dropped 12 basis points to 0.68 per cent, though was still comfortably above recent lows. Yields fall when prices rise.

    “There is a very grim sense of foreboding . . . the real risk is that, in the coming weeks, we start to see redemptions from some of the big long-only funds pushing entire markets lower,” said one Tokyo-based broker.

    Traders said doubts were rising over whether policymakers in the US and elsewhere could restore investor confidence with stimulus to offset the economic blow from the coronavirus.

    1. That’s yet another outstanding article on the coronavirus outbreak from The Financial Times writers.

  13. Key Words
    Think it’s bad now? Wait a month, says hedge-fund manager Kyle Bass
    Published: March 9, 2020 at 2:46 p.m. ET
    By Shawn Langlois
    Hayman Capital Management’s Kyle Bass Getty Images for Vanity Fair

    Kyle Bass, chief investment officer of Hayman Capital Management, believes “this too shall pass,” when it comes to Monday’s deep selloff — the Dow Jones Industrial Average (DJIA, +4.89%) was down more than 2,100 points — but he’s in no hurry to buy up stocks at bargain prices.

    Yet, anyway.

    If you’re asking for when the financial markets see peak virus, I think it’ll be about a month from now.

    That’s Bass talking on CNBC early Monday about how long this weakness will last. He said that until the results from the first round of widespread testing for the coronavirus infection are tallied in the U.S., he’ll remain in holding pattern.

    According to the latest numbers, there are now 111,284 cases of COVID-19 and 3,892 deaths. In the U.S., 22 people have died, with 564 confirmed cases as of Monday morning.

    At this point, Bass says he’s not buying or selling, instead he’ll just be watching “one of the most interesting financial collapses that we’ve seen in the past 15 to 20 years.”

  14. Market Extra
    This chart of the stock market’s ‘fear’ index in 2020 illustrates how unhinged markets have been over coronavirus compared to the 2008 crisis
    Published: March 10, 2020 at 4:20 p.m. ET
    By Mark DeCambre
    The Cboe VIX boasted a nearly 300% year-to-date return at its peak on Tuesday

    How volatile and anxious is Wall Street amid this evolving worry about a potential global pandemic that could shake the global economy to its core?

    Perhaps, the best gauge of that deep-rooted concern is one of the market’s most closely watched measures of volatility.

    The Cboe Volatility Index VIX, 10.275%, or VIX, hit its highest intraday level since 2008 on Monday, amid a stock market slump that also registered as the ugliest one-day plunge for the Dow Jones Industrial Average, the S&P 500 index and the Nasdaq Composite Index in 12 years.

    But what’s arguably more impressive than the daily move for the gauge, that uses S&P 500 options to measure trader expectations for volatility in the coming 30-day period, is its year-to-date surge so far (see attached chart).

    Compared against the move for the VIX at the same point this year in 2008, the differential between the two is dizzying. The VIX so far this year is on pace for a 280% surge, compared against a 108% return for the fear index in 2008—a period marked by the global proliferation of esoteric mortgage bonds and derivatives that brought world-wide financial markets to their knees and ushered in the 2007-09 recession.

    1. The top hats and umbrella hoop dress would like the fed to buy their shares at par before attending the grand ball.

  15. The entire US yield curve plunged below 1% for the first time ever. Here’s why that’s a big red flag for investors.
    Theron Mohamed
    Mar. 9, 2020, 08:03 AM
    Mario Tama/Getty Images
    – Investors bought up US government bonds on Monday in response to the growing coronavirus threat and signs of a brutal price war between oil producers.
    – The entire US Treasury yield curve fell below 1% for the first time ever as yields on the benchmark 10-year and 30-year bonds slumped to record lows.
    – “It signals the market is worried about a global recession and aggressive monetary easing by the Fed,” one analyst told Business Insider.
    – The yield declines came as investors ditched stocks, commodities, and cryptocurrencies and braced for the Federal Reserve to make further cuts to interest rates.

    Investors plowed cash into US government bonds on Monday as they braced for the global economic fallout from the coronavirus outbreak and a brutal oil-price war after Saudi Arabia and Russia failed to agree on output cuts.

    Surging demand drove up the price of US Treasuries, dragging down their yields and sending the entire yield curve below 1% for the first time ever. The yield on the benchmark 10-year Treasury touched a record low of less than 0.4%, while the 30-year Treasury yield slid below 1% — an unprecedented event.

    The falling curve underscores the worsening outlook for the world economy.

    “It signals the market is worried about a global recession and aggressive monetary easing by the Fed,” Neil Wilson, the chief market analyst for, told Business Insider in an email on Monday.

    “It will eventually settle down, and the real risk is when rates snap back,” he added.

    Taking cover

    The fall in bond yields is a product of investors fleeing volatile markets and seeking shelter in government bonds. They sold off oil and ditched stocks, commodities such as silver and soybeans, and even cryptocurrencies on Monday as they worried about the coronavirus outbreak hitting global demand and an oil-supply glut.

    Moreover, the fact that investors are willing to buy bonds offering record-low yields underlines how worried they are about a global slowdown and a wide sell-off of higher-risk assets.

  16. Thoughts of TSA screeners with coronavirus and spreading outbreaks among retirement communities are enough to keep me up at night.

    1. Coronavirus caseload passes 1,000 in U.S., as West Coast cities ban large gatherings
      Published: March 10, 2020 at 11:59 p.m. ET
      By Associated Press
      Washington governor to ban events with more than 250 people in Seattle area
      Passengers from the Grand Princess, a cruise ship carrying multiple people who have tested positive for COVID-19, exit a bus before boarding a chartered plane in Oakland, Calif., on Tuesday. Associated Press

      Alarming clusters of the coronavirus swelled on both coasts of the U.S. on Tuesday, with 70 cases now tied to a biotech conference in Boston and infections turning up at 10 nursing homes in the hard-hit Seattle area.

      Presidential candidates Bernie Sanders and Joe Biden abruptly canceled rallies because of worries about the virus, and New York’s governor announced he is sending the National Guard to scrub public places and deliver food in a New York City suburb that is at the center of the nation’s biggest known cluster of infections.

      On Wednesday, Washington Gov. Jay Inslee will announce a ban on gatherings and events of more than 250 people in virtually the entire Seattle metro area to try to stop the spread of the outbreak, said a person involved in the planning of the decision. The ban would apply to sporting events like Seattle Mariners baseball and Seattle Sounders soccer games.

      The order would not prohibit the operation of workplaces and is not expected to include school closures, said the person, who spoke on condition of anonymity because they weren’t authorized to discuss the matter publicly.

      Santa Clara County in California, home to San Jose and Silicon Valley, on Monday announced a ban on all gatherings of 1,000 people or more. But Tuesday night, three TSA officers who work at San Jose International Airport tested positive for the virus, the San Francisco Chronicle reported. All employees who came into contact with them are being quarantined, but it is unknown how many passengers they potentially came into contact with.

      At least 24 people have died in Washington from COVID-19, most in the Seattle metro area. Nineteen of the deaths are linked to one suburban Seattle nursing home and authorities in King County said the virus has spread to at least 10 long-term care facilities.

      1. Only 13 states remain without cases.

        US coronavirus cases reach 1,000 as millions more testing kits are on the way to labs across the country
        By Christina Maxouris, CNN
        Updated 6:15 AM ET, Wed March 11, 2020
        NYT: Testing delays set back US coronavirus response

        (CNN)Health officials are calling for “all hands on deck” in communities across the US as coronavirus cases reached 1,000 and millions more testing kits are on the way to labs across the country.

        The appeal comes as the federal government prepares to release specific recommendations on next steps for the areas hardest hit by the outbreak, including California, Washington state, New York and Florida.

        “Keeping the workplace safe, keeping the home safe, keeping the school safe and keeping commercial establishments safe. This should be universal for the country,” said Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases. “When you have community spread, you obviously are going to ratchet up the kinds of mitigations that you have. But at a minimum, this is the minimum we should be doing.”

        Cases of the virus have been reported in 37 states and the District of Columbia.

    2. Do you $uppo$e the “China.germ.viru$” can $survive on gasoline.pump handle$ & grocery shopping cart$?

  17. The Financial Times
    Spain steps up virus efforts to avoid ‘Italian scenario’
    Madrid under fire for not acting faster to contain spread of outbreak
    Passengers on a metro train in Barcelona, Spain on Monday.
    Spain’s health ministry is calling for people throughout the country to avoid all but essential travel, both inside and outside the country
    © Angel Garcia/Bloomberg
    Daniel Dombey in Madrid yesterday

    Spain announced it was suspending plenary meetings of parliament, halting flights to Italy and banning large scale gatherings in Madrid and elsewhere as the government came under fire for not acting faster to contain the spread of coronavirus.

    The capital city has become the focus point of the virus’s spread — accounting for almost half of Spain’s 1,622 cases as of Tuesday afternoon — and schools, kindergartens and universities will be closed in the Madrid region for at least two weeks.

    The socialist government of Pedro Sánchez said it is seeking to avoid an “Italian scenario”, the transmission of coronavirus throughout the country, but its critics have attacked it for an abrupt shift in policy over the past 48 hours.

  18. The Bank of England initiates a surprise rate cut, and Wall Street resumes cratering in response.

    Go figure…

    1. “Bank of England initiate$ a $urprise rate cut”

      Did Wale$, Iri$, & $cotland get a $ay in that deci$ion?

    1. March 03, 2020 – 02:11 PM EST
      Democratic lawmaker calls out CDC for removing data on number of Americans tested for coronavirus
      By Justin Wise

      Rep. Mark Pocan (D-Wis.) is demanding information from the Centers for Disease Control and Prevention (CDC) about its decision to stop sharing data about the number of people tested for the novel coronavirus in the United States.

      In a letter sent to CDC director Robert R. Redfield on Monday, Pocan noted that up until Sunday, the agency had been publicly disclosing statistics related to the coronavirus and its spread in the U.S.

      The data included numbers on the total confirmed and presumptive cases of the coronavirus, as well as stats on how many tests had been administered and how many deaths had been attributed to the disease. By Monday, the CDC stopped disseminating figures on the number of people tested and the death toll.

      Judd Legum, a journalist who authors the Popular Information newsletter, first reported the change.

      “Americans are dying,” Pocan wrote in the letter. “We deserve to know how many Americans have perished from COVID-19, and we deserve to know how many people have been tested for it.”

      1. Government loves to talk-up transparency, but I suppose it’s not good for Wall street or the markets.

    2. The number tested is very important for getting a handle on the number of cases, unbeknownst to the Housing Bubble Blog’s resident coronavirus expert in absentia.

      ‘We don’t know’ how many Americans have been tested for coronavirus: Azar
      By Yaron Steinbuch
      March 10, 2020 | 10:33am | Updated
      A researcher tests an antibody at Dowell Clinical Laboratory in Shanghai, China.
      Visual China Group via Getty Ima

      Health and Human Services Secretary Alex Azar on Tuesday said his department did not know the number of Americans who have been tested for coronavirus.

      “We don’t know exactly how many because of hundreds of thousands of our tests have gone out to private labs and hospitals that currently do not report in to CDC,” Azar said on CNN, referring to the Centers for Disease Control and Prevention.

      “We’re working with the CDC and those partners to get an IT reporting system up and running hopefully this week where we would be able to get that data to keep track of how many we’re testing,” he said, adding that there are 2.1 million testing kits on hand and that over a million have been shipped.

      1. “the Housing Bubble Blog’s resident coronavirus expert in absentia”

        aqdanny.boy, is restin’ himself from all those $wing$&mi$$e$$, & looking @ his batting average on Boeing & Oil & impact$.of.China.germ.death$, must be quite di$.heartening!

        Boeing: @ $205.55 … $ad.

  19. The Tell
    Goldman Sachs analyzed bear markets back to 1835, and here’s the bad news — and the good — about the current slump
    Published: March 11, 2020 at 8:58 a.m. ET
    By Steve Goldstein
    Not all bears are created equal.
    Getty Images

    If the stock-market decline triggered by the coronavirus outbreak is like past slumps, there’s both good and bad news.

    First, the bad. According to Goldman Sachs chief global equity strategist Peter Oppenheimer, “event-driven” bear markets, on average, result in 29% declines.

    That’s bad because, at the moment, this isn’t a bear market. Though Tuesday’s close, the S&P 500 (SPX, -2.477%) has dropped about 15% from its record high on Feb. 19. A bear market is typically defined as a 20% drop from a high.

    “We’ve never before entered a bear market because of a viral outbreak. But if you believe we haven’t hit the trough and we are in fact headed for bear territory, it’s useful to look to the history of bear markets to get a sense of their duration and intensity,” Oppenheimer said in an interview sent out by the bank to its clients.

    The good news, however, is that bear markets triggered by exogenous shocks typically regain their previous levels within 15 months.

    Not all bear markets are created equally. Goldman Sachs analyzed bear markets going back to 1835, and then classified them as structural, cyclical or event-driven.

    Structural bear markets, on average, see drops of 57%, and cyclical bear markets see drops of 31%.

    Oppenheimer does see differences, however, between the current situation and other “event-driven” declines.

    “They’re all different, but typically it has been market driven, so a monetary response has often been more effective, whereas this time it’s not clear that it will be. This is partly because interest-rate cuts may not be very effective in an environment of fear where consumers are forced, or just inclined, to stay at home,” he said.

    The starting point of already-low interest rates is another difference.

    1. as structural, cyclical or event-driven.

      What’s the prognosis if it is a perfect storm, structural, cyclical and event driven, all at once?

  20. The Wall Street Journal
    Treasury Yields Resume Fall as Stocks Slide
    Some signs of stabilization in debt markets are emerging
    By Matt Wirz
    March 11, 2020 9:41 am ET

    U.S. government bonds opened to relative calm Wednesday, then rallied as a decline in stock indexes at the open augured another whipsaw day in equities over fears about economic damage from the spread of the coronavirus.

    The 10-year U.S. Treasury yield dropped to around 0.704% Wednesday morning from 0.743% Tuesday, according to data from Tradeweb, as investors resumed buying the debt as a safety play.

  21. Key Words
    Warren Buffett on the ‘one-two punch’ market panic: It took me 89 years to experience something like this
    Published: March 11, 2020 at 10:15 a.m. ET
    By Shawn Langlois
    Warren Buffett shares his thoughts on coronavirus fears. Getty Images

    ‘It wasn’t October 1987, but it was an imitation… [and the financial crisis] was much more scary, by far, than anything that happened [on Monday].’

    That’s Berkshire Hathaway boss Warren Buffett putting the recent market plunge — which he described as a “one-two punch” of coronavirus and falling oil prices — in perspective in an interview this week on Yahoo Finance.

    “If you stick around long enough, you’ll see everything in markets,” he said from his Omaha headquarters. “And it may have taken me to 89 years of age to throw this one into the experience, but the markets, if you have to be open second by second, they react to news in a big time way.”

    While it may have been scarier in 1987 and 2008, at least to Buffett, there’s no denying that it’s been a brutal stretch for investors. On Monday, the Dow Jones Industrial Average US:DJIA dropped more than 2,000 points before recouping a chunk of those losses on Tuesday.

    1. a “one-two punch” of coronavirus and falling oil prices

      Nobody wants to mention the Elephant in the room, the seized up machinery of the Miracle Economy, the Engine of Global Growth shuttered.

      Falling oil prices is a stimulus to the economy.

    2. a “one-two punch” of coronavirus and falling oil prices

      I can vividly recall when farming was caught in the grip of high energy prices and high interest rates of the late 70s and early 80s. The little farms got swallowed whole by the big boyz.

    3. “It took me 89 years to experience something like this”

      Hmm…maybe my calls for Dow 17K are too high. Others here suggested 12-15K, IIRC.

      …Recalculating route…

  22. Key Words
    Angela Merkel to the German people: You’re likely to get coronavirus
    Published: March 11, 2020 at 11:20 a.m. ET
    By Shawn Langlois
    Czech PM says her comments could ‘cause panic’
    Angela Merkel shares a troubling projection for the coronavirus outbreak. Getty

    ‘When the virus is out there, the population has no immunity and no therapy exists, then 60 to 70% of the population will be infected.’

    That’s German Chancellor Angela Merkel talking about the spread of the coronavirus in widely reported comments made at a news conference in Berlin.

    “The process has to be focused on not overburdening the health system by slowing the virus’s spread. It’s about winning time,” she said, adding that the government’s priority should slowing the spread of the virus.

    The latest tally from Johns Hopkins University shows there are more than 1,500 cases in Germany, including three deaths. Spain now has 2,026 cases and 47 deaths; Italy, which is under a countrywide quarantine, has 10,149 cases and 631 deaths; France has 1,784 cases and 33 deaths.

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