Category Archives: banking

Follow The Science of the Covid Pandemic

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We’re often told told that truth is relative. That is except when it comes to “The Science.” Then it’s absolute. And we must follow the science.

But it’s kinda tough to pin down “The Science.” It’s always changing. Especially when it comes to Covid 19 models.

A piece by an economist named Brian Wesbury appeared in Real Clear Politics comparing the 2008 mortgage crisis to the current covid crisis. Lenders in 2008 were required to value their assets at market prices. It’s called marking to market. The idea was to “insist on the truth.” But the truth was that the mortgage market didn’t want the stuff. So the banks failed and the larger markets crashed.

Now Wesbury says pandemic authorities want us to mark to scientific models. But the models have never been accurate:

States and municipalities shut down their economies — based on models that predicted 2.2 million deaths in the United States. Hospitals, they said, would be overwhelmed, so we must flatten the curve.  The result? They flattened the economy, risking even more lives in the process, and generated panic that made the markets illiquid!

Brian Wesbury – Real Clear Politics

Oil Has a Negative Attitude

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Now even oil has a negative attitude. The price of West Texas Crude went negative yesterday. Nobody wants to buy the stuff. So producers were theoretically willing to pay you $37.63 at one point to take a barrel off their hands.

That was the price on a May contract which expires today. So if you have a tanker parked somewhere, now’s the time. The price on June contracts and later should move back up to positive territory.

Pippa Stevens at CNBC explains why.

Meanwhile, negative interest rates could be on the way to a bank near you. Thanks to negative rates in Europe and Japan, savers pay institutions there to store their money for them.

And, if you’re feeling nostalgic, here’s a cartoon in memory of high gas prices.

Race Against Time, Virus vs. Savings

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It’s a race against time. Can the virus be spent before your savings?

701,000 American jobs were lost in March and the unemployment rate rose from 3.5% to 4.4% in one month according to the WSJ.

Meanwhile, The Guardian says about 35 companies are working on a vaccine and Moderna is about to begin human testing. And “many many‘ groups are working on immunity-giving antibody tests that provide results in minutes.

Economy Not Sheltering in Place

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The economy isn’t sheltering in place. It’s heading down. Fast.

Goldman Sachs forecasts 15% unemployment and a 34% decline in GDP in the second quarter. And the stock market just finished its worst quarter since 2008.

Goldman Sachs is still predicting a “V-shape” recovery, however, meaning the steep drop-off will lead to a bigger bounce of 19 percent in the third quarter.

The Hill

Economy Not Sheltering

The election is seven months away. Can Trump pull the economy out of its Corona nose dive by then?

Scott Brennan, an Iowa Democratic National Committee member and a former state party chairman, said, “If the economy pops back … it’s hard to know what people are going to think.”

Politico

 

Two Trillion Dollar Stimulus Brings Back Bull, For Now

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The Senate passed a two trillion dollar stimulus bill Wednesday night. And the Dow lurched forward 6.4% on Thursday. And that followed an 11% bump from the day before. But the 401k party was over by Friday and it was still down over 20% for the year.