SOURCE: Credit Bubble Bulletin column
Friday, November 20, 2020
http://creditbubblebulletin.blogspot.com/2020/11/weekly-commentary-scorched-earth.html
"U.S. daily COVID-19 infections surpassed 100,000 for the first time on November 4th. And just over two weeks later, we’re on the cusp of a 200,000 day ...
... outgoing Treasury Secretary Steven Mnuchin released a letter to Federal Reserve Chair Jerome Powell demanding the return of money the government provides the central bank so it can lend to certain markets in times of stress. ... markets brushed off Mnuchin’s surprising termination of several of the Fed’s emergency programs."
COVID-19 NEWS
November 16 – Reuters (Michael Erman and Julie Steenhuysen)
:(1)
Moderna Inc’s experimental vaccine is 94.5% effective in preventing COVID-19 based on interim data from a late-stage trial, the company said on Monday, becoming the second U.S. drugmaker to report results that far exceed expectations.”
:(2)
November 18 – Associated Press (Linda A. Johnson and Frank Jordans):
“Pfizer said… new test results show its coronavirus vaccine is 95% effective, is safe and also protects older people most at risk of dying — the last data needed to seek emergency use of limited shot supplies as the catastrophic outbreak worsens across the globe.”
:(3)
November 18 – Washington Post (Joel Achenbach):
“More than 3 million people in the United States have active coronavirus infections and are potentially contagious, according to a new estimate from infectious-disease experts tracking the pandemic. That number is significantly larger than the official case count, which is based solely on those who have tested positive for the virus. The vast — and rapidly growing — pool of coronavirus-infected people poses a daunting challenge to governors and mayors in hard-hit communities who are trying to arrest the surge in cases. Traditional efforts such as testing, isolation of the sick and contact tracing can be overwhelmed when a virus spreads at an exponential rate, especially when large numbers of asymptomatic people may be walking around without even knowing they are infectious.”
:(4)
November 18 – Associated Press (Paul J. Weber and Sarah Rankin):
Conditions inside the nation’s hospitals are deteriorating by the day as the coronavirus rages across the U.S. at an unrelenting pace and the confirmed death toll surpasses 250,000. ‘We are depressed, disheartened and tired to the bone,’ said Alison Johnson, director of critical care at Johnson City Medical Center in Tennessee…”
:(5)
November 19 – Reuters (Maria Caspani, Gabriella Borter and Sharon Bernstein):
“California’s governor… imposed a curfew on social gatherings and other non-essential activities in one of the most intrusive of the restrictions being ordered across the country to curb an alarming surge in novel coronavirus infections. The stay-at-home order will go into effect from 10 p.m. until 5 a.m. each day, starting Saturday night and ending on the morning of Dec. 21, covering 41 of California’s 58 counties and the vast majority of its population… The virus is spreading at a pace we haven’t seen since the start of this pandemic, and the next several days and weeks will be critical to stop the surge,’ Newsom… said…”
:(6)
November 16 – CNN (Melissa Alonso and Susannah Cullinane):
“Thousands of people lined up for groceries at a food bank distribution event in Dallas, Texas, this weekend, with organizers saying the Covid-19 pandemic has increased need in the city. North Texas Food Bank (NTFB) distributed more than 600,000 pounds of food for about 25,000 people on Saturday… There were 7,280 turkeys distributed to families, Kurian told CNN.”
:(7)
November 18 – Reuters (Rocky Swift and Hyonhee Shin):
“Daily coronavirus cases in Tokyo and South Korea hit fresh highs on Wednesday, as pollution-cloaked New Delhi struggled with rising cases and Australia reported a highly contagious virus strain which forced a state-wide lockdown. South Korea tightened social distancing rules and Tokyo said officials would meet on Thursday to discuss if the city needs to raise its infection alert to the highest level.”
:(8)
November 16 – Reuters (Giselda Vagnoni):
“The new coronavirus was circulating in Italy in September 2019, a study by the National Cancer Institute (INT) of the Italian city of Milan shows, signaling that it might have spread beyond China earlier than thought.”
:(9)
November 17 – CNBC (Jacob Pramuk):
“Congress
appeared nowhere close to passing another coronavirus relief bill… as
infections surge across the country and new public health restrictions
threaten businesses and jobs. Lawmakers have not passed new aid in
months during the health and economic crisis. As the virus again
overwhelms hospitals and forces state and local officials to restrict
economic activity, Republicans and Democrats have not budged from their
positions on stimulus. Senate Minority Leader Chuck Schumer and House
Speaker Nancy Pelosi have not spoken with Senate Majority Leader Mitch
McConnell about another relief bill since the Nov. 3 election… They
appear stuck in their pre-election stances, when Democrats pushed for a
package that costs at least $2.2 trillion and Republicans sought a
roughly $500 billion bill.”
:(10)
November 17 – Bloomberg (Ksenia Galouchko):
“Fund managers overseeing $526 billion are the most bullish they’ve been this year following the U.S. election outcome and progress on a vaccine, prompting a call from Bank of America Corp. strategists that it’s time to start selling risk assets. The monthly survey, conducted Nov. 6 through Nov. 12 saw investor optimism about stocks skyrocket, with allocation jumping to the highest level since January 2018. Cash holdings plunged to the lowest level since April 2015, while economic growth expectations surged to a 20-year high. Investors snapped up more volatile assets, such as small-caps, value, banks and emerging-market stocks, while shifting away from bonds and staples.”
:(11)
November 18 – Financial Times (Jonathan Wheatley):
“Global debt rose at an unprecedented pace in the first nine months of the year as governments and companies embarked on a ‘debt tsunami’ in the face of the coronavirus crisis, according to new research. The pace of debt accumulation will leave the global economy struggling to reduce borrowing in the future without ‘significant adverse implications for economic activity’, the Institute of International Finance warned… The total level of global indebtedness has increased by $15tn this year, leaving it on track to exceed $277tn in 2020, said the IIF… It expects total debt to reach 365% of global gross domestic product by the end of the year, surging from 320% at the end of 2019.”
:(12)
November 16 – Reuters (Karin Strohecker):
“Debt levels of emerging market governments ballooned to record highs in 2020 and are expected to continue rising next year, JPMorgan said in a note…, as policymakers battle to restart economies battered by the coronavirus pandemic. General government debt across 55 developing nations jumped to an all-time high of 59.0% of gross domestic product in 2020, with levels ex-China rising to 57.7%, JPMorgan analysts found.”
:(13)
November 18 – Bloomberg (Robert Schmidt and Ben Bain)
: “The U.S. Securities and Exchange Commission is pushing ahead with a plan that threatens to kick Chinese companies off U.S. stock exchanges, setting up a late clash between Washington and Beijing as the Trump administration winds down. By the end of this year, the SEC intends to propose a regulation that would lead to the delisting of companies for not complying with U.S. auditing rules, according to people familiar… Agency officials have been moving quickly on a rule since August, when the President’s Working Group on Financial Markets… urged the regulator to pass restrictions that could take effect as soon as 2022…”
:(14)
November 16 – Bloomberg (Lisa Lee and Tom Contiliano)
“They were once America’s corporate titans. Beloved household names. Case studies in success. But now, they’re increasingly looking like something else -- zombies. And their numbers are swelling. From Boeing Co., Carnival Corp. and Delta Air Lines Inc. to Exxon Mobil Corp. and Macy’s Inc., many of the nation’s most iconic companies aren’t earning enough to cover their interest expenses (a key criterion, as most market experts define it, for zombie status). Almost 200 corporations have joined the ranks of so-called zombie firms since the onset of the pandemic, according to a Bloomberg analysis of financial data from 3,000 of the country’s largest publicly-traded companies. In fact, zombies now account for nearly 20% of those firms. Even more stark, they’ve added almost $1 trillion of debt to their balance sheets in the span, bringing total obligations to $1.36 trillion. That’s more than double the roughly $500 billion zombie companies owed at the peak of the financial crisis. The consequences for America’s economic recovery are profound.”
:(15)
November 19 – Bloomberg (Henry Goldman, Michelle Kaske and Natalie Wong)
“New York City’s public school shutdown and the prospect of a crippled mass transit agency brings a new sense of vulnerability to a city that had been making a comeback from its dark days as the world’s Covid-19 epicenter. And more bad news is imminent. New York Governor Andrew Cuomo said the city’s rising test rate could force indoor dining, gyms and some other nonessential businesses to close, and Mayor Bill de Blasio said he expects those actions to be taken ‘quite soon.’”
:(16)
ovember 17 – Reuters:
“U.S. retail sales increased less than expected in October and could slow further, restrained by spiraling new Covid-19 infections and declining household income as millions of unemployed Americans lose government financial support. Retail sales rose 0.3% last month… Data for September was revised down to show sales surging 1.6% instead of shooting up 1.9%... Economists… had forecast retail sales would gain 0.5% in October. Excluding automobiles, gasoline, building materials and food services, retail sales nudged up 0.1% after a downwardly revised 0.9% increase in September.”
:(17)
November 19 – Reuters (Lucia Mutikani):
“U.S. home sales increased for a fifth straight month in October, but record-high house prices because of tight supply could slow momentum. The National Association of Realtors said… existing home sales increased 4.3% to a seasonally adjusted annual rate of 6.85 million units last month… Existing home sales, which account for the bulk of U.S. home sales, jumped 26.6% on a year-on-year basis in October."
:(18)
November 19 – Bloomberg (Lauren Coleman-Lochner, Natalie Wong and Noah Buhayar)
“Eight months into the pandemic, clothing stores, restaurants, gyms and other businesses find themselves in a $52 billion hole. That’s the total amount of retail rent that’s been missed since April, according to CoStar Group Inc. While some of the overhang has since been paid back, the remainder will be a drag on merchants as they try to rebuild and landlords demand their money. In some cases, the unpaid balances could drive them into bankruptcy. ‘You’re going to have big bubbles that are going to be hitting next year or even in the fourth quarter,’ said Andy Graiser, co-president of A&G Real Estate Partners… ‘I’m not sure if they are going to be able to make those payments in addition to their existing rent.’”
:(19)
November 17 – Wall Street Journal (Shane Shifflett):
“About 300 companies that received as much as half a billion dollars in pandemic-related government loans have filed for bankruptcy, according to a Wall Street Journal analysis... Many of the companies, which employ a total of about 23,400 workers, say the funds from the Paycheck Protection Program weren’t enough to keep them going as the coronavirus and lack of additional stimulus payments weighed on their businesses. The total number of companies that failed despite getting PPP loans is likely far higher.”
:(20)
November 18 – Bloomberg (Liz Capo McCormick and Vince Golle):
“The share of U.S. debt being held by foreign investors just keeps on shrinking. China’s holdings fell in September to the least since February 2017, and by some measures the nation was the biggest seller of Treasuries. The largest non-U.S. holder -- Japan -- offloaded American government debt for the second straight month. Foreign ownership of the $20.4 trillion market has been on a decade-long retreat with domestic buyers -- from mutual funds to pension plans -- filling in the gap.”
:(21)
November 18 – Bloomberg (Anjani Trivedi):
“As Beijing reins in its largesse and credit stresses rise in China amid a wave of defaults, investors should wonder where the ructions will appear next. Going by the numbers, local government financing vehicles – with trillions of yuan outstanding – seem primed to come under pressure. Their debt is meant to help raise capital for infrastructure and other public projects. Issuance in the first seven months of the year totaled 2.5 trillion yuan ($381bn), up 32% over the same period in 2019.”
:(22)
November 15 – Bloomberg
“China’s economic rebound gathered pace in October, cementing the nation’s status as the only major economy tipped to grow this year… Industrial output rose 6.9% in October from a year earlier…, higher than the 6.7% median estimate… Retail sales growth accelerated to 4.3% from 3.3% in September, though missing expectations for a 5% increase.”
:(23)
November 16 – Reuters (Francesco Canepa):
“The German economy is likely stagnating or contracting as measures taken at home and abroad to contain the second wave of the coronavirus pandemic hit leisure activities as well as exports, the Bundesbank said… ‘Overall economic performance could stagnate or even decline after very vigorous growth in the summer,’ the Bundesbank said in its monthly report.”
:(24)
November 15 – Reuters (Leika Kihara and Tetsushi Kajimoto):
“Japan’s economy grew at the fastest pace on record in the third quarter, rebounding sharply from its biggest postwar slump… The world’s third-largest economy expanded an annualised 21.4% in July-September, beating a median market forecast for an 18.9% gain and marking the first increase in four quarters…”
:(25)
November 18 – Reuters (Jeffrey Heller and Hesham Abdul Khalek):
“Israel launched air strikes against the Syrian army and Iran’s Quds Force in Syria on Wednesday after explosive devices were planted in the Israeli-held Golan Heights, the Israeli military said. The Syrian state news agency reported that three military personnel were killed and one was wounded in ‘Israeli aggression’ over Damascus. In a statement, the Israeli military said its planes hit storage facilities, military compounds and Syrian surface-to-air missile batteries.”
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