ANOTHER STARK REMINDER

Equities came under pressure, the result of FRB Chairman Powell’s remarks. Powell did not break any new ground but it was yet another validation of the impact of the virus. Powell stated “the recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems.”

He further stated “additional fiscal support could be costly, but worth it if it helps avoid long term economic damage and leave us with a stronger recovery.” Powell categorically rejected the notion of negative interest rates.

Yesterday was the second consecutive day that the markets were reminded by top officials about the major issues the economy and society is facing.

I reiterate my view the next 2-3 weeks could be pivotal. If hospitalizations and deaths do not surge in Georgia, Texas, Florida and South Carolina, the pressure for other states to reopen will rise considerably.

All will acknowledge we are living in unprecedented times. Expert opinions about the virus are not questioned, accepting that their outlook as definitive albeit the forecasted outcome is based on theory not precedent.

Similarly, the potential ramifications of the massive increase in debt has also not been discussed albeit unlike the coronavirus there are many real-time precedents of such.

I must write, like most I think the Fed has acted accordingly and without intervention today could look entirely different. However, but as stated above there is little dialogue about potential ramifications with even more spending/borrowing in the cards.

Is the cost of fighting the disease worse than the disease itself? Yesterday Kaiser Health reported 4 out 10 Americans stated stress related to the pandemic had negatively impacted their mental health. The National Suicide Prevention Hotline has reported a 40% surge in calls since the pandemic commenced.

According to the CDC in 2017 47,000 people committed suicide, the tenth leading cause of death in the US. The CDC also reported in 2017 1.4 million people attempted suicide and 10.6 million considered. In other words, 0.44% of people who considered suicide took their life.

Wow! As noted above, calls to the National Suicide Prevention Hotline has surged 40%. Will suicide death rate surpass that of the virus? Wow! This is a daunting thought.

I could argue the government has done an incredible job scaring society, perhaps way to effective.

As stated above, the reopening of Georgia, et.al. can have a massive impact. It might be regarded as the transitory event.

Just as aside, according to Apple, last week twenty-five million more people travelled more than 5 miles from their homes, the greatest total number since March 10. Can I argue that society is already breaking quarantine?

What happen today? Jobless claims are released at 830. Analyst are expecting 2,500,000 claims to be filed, the lowest number since the week of March 13 when 282,000 claims were filed.

Last night the foreign markets were down. London was down 2.83%, Paris down 2.37% and Frankfurt down 2.37%. China was down 0.96%, Japan down 1.74% and Hang Sang down 1.45%.

The Dow should open nominally lower as the markets continue to digest the gloomy sounding truth from central bankers. The 10-year is up 10/32 to yield 0.62%.

 

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