THE REALITY IS REALLY UGLY

The economic reality of the coronavirus is now upon us. A large minority are now overtly questioning whether or not the draconian actions that have decimated the economy is worth it based upon a vastly different outcome than what was first hypothesized.

I ask how can government walk back its panic inducing comments and may now instead double down on its draconian policies via the possibility of the proverbial second wave?

A minority of epidemiologists are now stating the country may emerge less healthy and weaker because of the lockdown, all that was accomplished was delaying the spread of the virus at a humongous cost.

As written last week, the decision to lock the economy was based on the best data at that time. While I do think there was some hyperbole to ensure that society abides by government dictums, I do not think government intents were misguided at that time. The greatest fear was the crashing of the health cares system that would vastly increase the death rate.

But that was then and this is now. The amount of data gathered is incredible, data that should permit pragmatism and offer some perspective as compared to original estimates and to past diseases.

The “at risk” groups are clearly identified. Last week Governor Cuomo stated that over 25% of NYC residents have tested positive for antibodies. The CDC has consistently stated for the vast majority of people who contract the virus, most are asymptomatic or possess mild symptoms.

The virus is now a political issue. What are the odds Silicon Valley’s political views radically change? Amazon stated it will lose money this quarter because of protections for its workers.

Most businesses are paralyzed by the possibility of massive legal liability if they reopen, the result of some workers/customer contracting the virus at the workplace. Will companies back Senate Majority Leader McConnell’s proposal for legislation to shield companies from such liability?

There are several outspoken mega sized tech leaders that are now demanding the economy to reopen, comments that sound extremely Libertarian as opposed to their traditional progressive dogma.

Wow! Life is stranger than fiction

Speaking of which, a possible scenario that could potentially unfold that could give government “cover” to reopen in quick order is the emergency approval of Gilead’s drug. A pharmaceutical agent would then be available to treat those who are sick offering time to develop a vaccine.

If this scenario unfolds, I could envision a possible inflationary environment given the massive stimulus that has been injected coupled by pent up demand.

Continuing the theme of life is stranger than fiction, Friday Tesla’s CEO Elon Musk stated “Tesla stock is too high.”

Wow! I have heard a lot of unique comments from CEOs but never this one.

I wonder how Deutsche Bank feels after boosting its target price Thursday to $850. Probably not as bad as Goldman as Thursday it boosted its target price to $925. Or Oppenheimer and JMP Securities who boosted their target price on Thursday to $968 and $1,020, respectively.

The stock closed down over 10% at $700.

What will happen this week? Friday April’s unemployment data is released.

Analysts are suggesting a 21,500,000 plunge in non-farm payrolls and a 22,050,000 implosion of private sector payrolls. These numbers are unfathomable!!!! The unemployment rate is expected to surge to 16% from 4.4%.

As I am writing this, I am thinking about the Tom Hanks line in Saving Private Ryan; “Ryan better be worth it. He better go home and cure some disease or invent a longer lasting lightbulb.”

Last night the foreign markets were down. London was down 0.25%, Paris down 3.77% and Frankfurt down 3.44%.. China was up 1.33%, Japan down 2.85% and Hang Sang down 4.18%.

The Dow should open moderately lower. The 10-year is up 4/32 to yield 0.61%.

 

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