IS REALITY SETTING IN?

Equities slumped amid dire economic warnings, more dismal data and corporate results that reflected the coronavirus’s toll on businesses. Oil extended its rebound as gasoline demand is rising from extremely depressed levels.

Jobless claims were nominally higher than expected, increasing by 3.8 million. In six weeks about 30.3 million workers have applied for jobless benefits. A staggering one in six American workers have lost their jobs, an amount greater than the population of Texas. Some are suggesting Friday’s BLS Labor Report could report a 20% unemployment rate.

The rate could be even higher given the difficulties of applying for benefits because of overwhelmed systems as some analysts believe over 34 million jobs have been lost.

I do not think it is an embellishment to write government has induced a Covid-19 terror.

Fortunately, the expected scenario of the February 28 CDC report that was the basis for the March 16 national shutdown—a scenario based on the lack of and faulty assumptions that produced erroneous conclusions—did not materialize.

I must write I believe government acted on conclusions based on the best information at the time. But as time passed this information proved to be erroneous, or at best lacking.

That was then. This is now. The hyperbole is intense with many becoming closet epidemiologists. The blogosphere is not short of information to validate anyone’s preconceived biases.

As noted above, fortunately the initial estimates vastly missed their mark. But the impact on the economy has not.

Fortunately, the economy is nascently reopening, a reopening that I think will accelerate if Gilead’s drug obtains FDA emergency approval. All will breathe a collective sigh of relief that a pharmaceutical agent is perhaps at hand.

[Note: Under section 564 of the Federal Food, Drug, and Cosmetic Act (FD&C Act), the FDA Commissioner may allow unapproved medical products or unapproved uses of approved medical products to be used in an emergency to diagnose, treat, or prevent serious or life-threatening diseases or conditions caused by CBRN (chemical, biological, radiological, nuclear) threat agents when there are no adequate, approved, and available alternatives.]

This is just the first step for as noted yesterday there are over 70 companies racing to produce a vaccine. As stated above, under an emergency use authorization (EUA), the testing period to allow the use of a drug is greater reduced from the standard 12-18 months to one of immediacy with the caveat the company or companies can not immediately profit from the drug if emergency approval is given.

Volumes can and will be written to what is next. I think the next crisis will be in public finance. Tax revenues have fallen off a cliff and it is not a question if state and local spending is cut, but rather by how much and how many jobs will be eliminated. This crisis will not be resolved overnight and I am certain the political rancor may be great.

What will happen today?

Last night the foreign markets were down. London was down 1.87%, Paris down 2.12% and Frankfurt down 2.22%. China was up 1.33%, Japan down 2.84% and Hang Sang up 0.28%.

The Dow should open moderately lower as several mega sized tech companies gave sobering comments about the impact of the virus. The 10-year is up 7/32 to yield 0.62%.

 

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