Week in Review

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Week in Review

03/14/2020

For the week 3/9-3/13

[Posted 11:00 PM ET, Friday]

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*Special thanks to Dan C. for his ongoing support.  Dan, I truly appreciate your kind note.

And to Brad K., a longtime friend from back in the days when we were playing pickup baseball games.

Edition 1,091

I grew up in Summit, N.J., a block from a large park where many of the middle and high school teams practice their spring and fall sports and Wednesday, I was driving by after 3:00 and the field was filled with baseball and softball players.  I couldn’t help but muse, ‘things are about to change in a drastic way.’  I knew the sports world was changing.  I just didn’t know how fast the schools would be closed.  That announcement came in my town and the surrounding area on Thursday.  In Summit’s case, out a month.  I’m anxious to see what the kids do with this idle time.

Historians, 100 years from now, hopefully reading the archives of StocksandNews, will look back on this crisis and read how Americans, and the world, dealt with it.  What kind of example will we have set for future generations?

Thursday night, I stayed up to watch Stephen Colbert, as all the late-night hosts did their final shows for a while, in front of an empty studio (Colbert just with his staff in the seats), and CNN’s Dr. Sanjay Gupta was his guest.

Sanjay said something very profound.  We are going to learn through this coronavirus episode just how co-dependent we are on each other from a philosophical standpoint, as well as physical.  We are dependent on each other’s behavior.  As in we can’t have a president, like Trump in the Rose Garden today, openly flouting the guidelines in shaking all of the executives’ hands.  What a freakin’ asshole!

I’ve had friends ask me, ‘Are we overreacting?’  No.   Former Ohio Gov. John Kasich, in a heated discussion with Don Lemon on CNN the other night, said some might ask ‘Why did they overeat?’  “Sometimes it’s necessary.”

Our lives are being disrupted like few alive today have ever experienced.  But we have to soldier on. 

It’s time for all of us to behave.

Continuing….

Ignore Wall Street’s beyond stupid late rally today, some 7 percent in the last 20 minutes, on seeming optimism over President Trump’s new plan to combat coronavirus, after he ridiculed those concerned about the outbreak for weeks.

This week the World Health Organization officially declared a pandemic as cases spread to at least 114 countries.

“WHO has been assessing this outbreak around the clock and we are deeply concerned both by the alarming levels of spread and severity, and by the alarming levels of inaction,” WHO Director Tedros Adhanom Ghebreyesus told reporters on Wednesday, adding that it “therefore made the assessment that COVID-19 can be characterized as a pandemic.”

Today, literally, the global economy, not just in the United States, is seizing up en masse.   European countries are all either advising their citizens not to travel elsewhere, or attempting to physically stop people from, say, Italy, into crossing into the likes of Austria.  Ireland has advised its citizens to not just to travel to Italy, but to anywhere else in the European Union, to cite just two examples.

Denmark has been ratcheting things up all day and is now closing its borders for non-citizens.

Germany and Italy are spearheading a national scramble for ventilators as manufacturers warned today that hospitals everywhere face a lack of vital equipment needed to treat Covid-19 patients.  Germany’s Draegerwerk said its government placed an order for 10,000 ventilators for intensive respiratory care, the medical gear maker’s largest order ever and equivalent to a year’s normal production.  Italy tendered an order for 5,000 but is woefully short.

Nations across the EU are closing schools.  Spain’s government said its number of cases could top 10,000 next week, up from 4,230 today.  How many of you knew 120 have died thus far in Spain? 

But the bottom line here in the United States is we are woefully unprepared for the coming spike in coronavirus cases requiring hospitalization.  And it isn’t just a dangerous shortage of beds, respirators and ventilators.  It’s a shortage of basic equipment for health care workers; not just doctors and nurses, but those critical support staff in nursing homes, for example.  Gloves, masks.

We must, first and foremost, protect our doctors and nurses.   One nursing home employee in New Jersey told NJ Advance Media (NJ.com):

“I shouldn’t lay in my bed and wonder if I’m gonna have the proper supplies to protect myself and my residents.”

But that’s the growing feeling across America today, and we’re just getting started with this crisis.

Today, President Trump declared a national emergency and once again couldn’t even read the script.

“To unleash the full power of the federal government, I’m officially declaring a national emergency.  Two very big words.  The action I am taking will open up access to up to $50 billion of…very important (stuff) and a large amount of money for states and territories and localities in our shared fight against this disease.

“And in furtherance of the order I’m urging every state to set up emergency operation centers effectively immediately.  I’m also asking every hospital in this country to activate emergency preparedness plans to meet the needs of Americans everywhere.”

I think they’ve already done that, Mr. President.  Like weeks ago.  They just don’t have what they need.

Well, at least the critical testing has begun.  The case numbers will now skyrocket.  Hopefully the death rate settles into the 1% range.

And we’ll see what Congress is cooking up in terms of an economic aid package that should be passed in the next few days.  President Trump tweeted tonight he was on board with the House bill.

As I discuss further below, President Trump gave a disastrous speech (written by Stephen Miller, aka Rasputin, and Jared Kushner) from the Oval Office on Wednesday and didn’t tell his European allies, his “great friends,” beforehand he was announcing a travel ban applying to most foreign citizens who have been inside the EU’s passport-free travel zone.

European Council President Charles Michel and European Commission President Ursula von der Leyen issued a joint statement:

“The coronavirus is a global crisis, not limited to any continent, and it requires cooperation rather than unilateral action.”

Tom Bossert, former Homeland Security adviser who served under President Trump from 2017 to 2018, warned in a Washington Post op-ed that the U.S. is just over a week away from the nation’s hospitals “getting creamed” by the rapidly spreading coronavirus.

Bossert said it’s imperative for the country to “reduce the acute, exponential growth of the outbreak” as soon as possible “in order to reduce suffering and the strain on our health care system.

“The best way to put out the fire is a vaccine, but that is over a year away.  In the meantime, we must focus on reducing the height of the outbreak curve,” Bossert wrote.

“This requires coordination and implementation of non-pharmaceutical interventions.  School closures, isolation of the sick, home quarantines of those who have come into contact with the sick, social distancing, telework and large-gathering cancellations must be implemented before the spread of the disease in any community reaches 1 percent.”

Once it reaches that point, those “interventions become far less effective,” Bossert cautioned.

Dr. Scott Gottlieb, commissioner of the Food and Drug Administration during the first two years of the Trump administration, has emerged as a truth teller.  Sunday, on CBS’ “Face the Nation,” Gottlieb said, “We’re past the point of containment.”

“We have to implement broad mitigation strategies. The next two weeks are really going to change the complexion in this country.  We’ll get through this, but it’s going to be a hard period.  We’re looking at two months, probably, of difficulty,” Gottlieb said.

Peggy Noonan / Wall Street Journal

“Testing in the U.S. has been wholly inadequate; history may come to see this as the great scandal of the epidemic.  ‘Anybody that needs a test gets a test; they’re there, they have the tests, and the tests are beautiful,’ as the president said last weekend, is on a par with ‘if you like your doctor you can keep your doctor’ as a great, clueless lie.

“Because of the general lack of testing we don’t have a firm sense of the number of the infected and the speed and geography of spread.  Many people would be working sick, afraid of losing pay or job security if they take time off.  Some would be at home, unable for financial or other reasons to see a doctor or go to a hospital.

“In the past few days, the World Health Organization declared a pandemic. The physician used by Congress reportedly said behind closed doors that 70 million to 150 million Americans will be infected.  The Harvard epidemiologist marc Lipsitch estimated 20% to 60% of adults world-wide might catch the disease.  Cases are rising in Spain, France and Germany… The president gave a major Oval Office address Wednesday night aimed at quelling fears; it was generally labeled ‘unsettling.’  Immediately after, Tom Hanks announced that he and wife Rita Wilson have tested positive, and the National Basketball Association suspended its season after a player tested positive.”

The death toll from the coronavirus is over 5,000 worldwide. [These figures are as of posting time.]

China 3,176
Italy 1,266…196, 189, 250 the last three days!
Iran 514*
South Korea 70
France 79
Spain 120!
Japan 28
UK 10…but over 300 cases today.
Netherlands 10
United States 49

*U.S. intelligence, looking at satellite images, believes Iran is grossly underreporting their toll as they detected mass graves being dug.  Iran’s security forces have emptied the streets of its cities in a drive to fight the spread.

But China’s Wuhan city, ground zero for the coronavirus outbreak, reported five new cases on Friday (for Thursday), the second day in a row the tally has been less than 10, while no locally transmitted infections were reported in the rest of the country.  There were eight new cases total in mainland China Thursday, down from 15 the previous day, and the lowest since the health authority started publishing nationwide figures in January.  There were seven deaths, raising the death toll to 3,176.

In another glimmer of hope, Apple reportedly reopened all 42 of its branded stores in China today.

South Korea reported more recoveries from the coronavirus than new infections on Friday for the first time since its outbreak emerged in January.  The Korea Centers for Disease Control and Prevention recorded 110 new coronavirus cases compared with 114 a day earlier.  The national tally was up to 7,979, with the death toll at 70, rising three yesterday.

But vigilance was called for after new clusters emerged at a call center in a crowded part of Seoul.  At least 109 cases were linked to the center operated by an insurance company.

Then there is Italy, which started by locking down the northern part of the country, and then proceeded to lock down the entire country, with essentially just grocery stores and pharmacies remaining open. The mortality rate is nearly 7%, a staggering figure, as the health care system is overwhelmed.  The government is taking all manner of drastic economic measures to soften the blow, such as suspending mortgage payments across the country.  Lenders are offering debt holidays to small firms and families.

British Prime Minister Boris Johnson told a news conference: “It’s going to spread further. I must level with you, level with the British public – more families, many more families, are going to lose loved ones before their time.”

French President Emmanuel Macron said in a televised address Thursday night that the country was facing its worst public health crisis in a century and announced measures including the closure of all schools, creches and universities from Monday.

“We are only at the beginning of the epidemic.  Everywhere in Europe it is accelerating,” Macron said.

However, Macron also portrayed the coronavirus as a challenge in need of a global solution, just one day after Mr. Trump described it as a foreign virus that had arrived on U.S. shores.

“This virus doesn’t have a passport,” Macron said.  “Being divided won’t allow us to respond to what’s a global crisis.”

More than 2,500 companies in China have reportedly started making masks, among them 700 technology companies including iPhone assembler Foxconn and smartphone maker Xiaomi.

India, though, has decided not to issue visas for visitors, as the company has reported its first two deaths, and needless to say their travel/tourism industry will be decimated.

18 African nations now have coronavirus.  Just imagine if it explodes on the continent.

Canadian Prime Minister Justin Trudeau’s wife tested positive after a trip to the UK and a speaking engagement in London.                                       

Top Japanese government officials said Friday they were determined to hold “safe and secure” Olympics on schedule, a day after President Trump said Tokyo should consider delaying them for a year because of the pandemic.  Trump and Japanese Prime Minister Shinzo Abe then talked by phone on Thursday, with Trump tweeting after “that the just completed Olympic venue is magnificent.  He has done an incredible job…Good things will happen for Japan and their great Prime Minister.  Lots of options!”

After Trump had said the Games should be postponed, Olympic minister Seiko Hashimoto told reporters, “the IOC and 2020 organizers are not at all considering cancelling or postponing the Games.”

It’s true the Games don’t start until July 24, but a decision needs to be made by May.

You’ve seen all the closures in the United States.  It’s a time unlike any other in our lifetimes.

And then there was President Trump’s address to the nation on Wednesday night from the Oval Office.

There were conflicting statements about his ban on European travel and chaos at European airports in the immediate aftermath of the remarks as U.S. citizens scrambled to make arrangements to beat the Friday deadline.

Trump aides, many of whom were not aware of the address until just hours before he delivered it, rushed in to clarify the president’s meaning after the cameras cut.  Trump was forced to take to twitter to clear up some of the confusion, where he mistakenly said U.S.-bound cargo from Europe would be blocked.

“Not only did he miss the moment, he seemed clueless about what the moment was,” said Aaron David Miller, senior fellow at the Carnegie Endowment for International Peace.  “He seemed, in my view, to be…completely and utterly overwhelmed.”

Editorial / Wall Street Journal

“For all the foreboding about the novel coronavirus – foreboding that is justified – it is heartening to see the American people responding in ways reminiscent of the frontier spirit.  Most people are doing what they have to do to survive a clear and immediate threat to their lives and communities.

“The new watchword is ‘social distancing.’ That means minimizing the transmission of an infectious virus for which no personal immunity exists by minimizing the chance that any one carrier will pass the virus to others. The speed with which the American people and their institutions are executing that sound strategy is breathtaking.

“Private companies, where possible, are advising their employees to work from home.  To minimize large crowds, professional sports leagues are suspending seasons.  St. Patrick’s Day parades, held back to the 19th century, have been canceled.  Broadway’s theaters are closed.  Universities are voluntarily replacing in-person classes with online instruction. The list lengthens by the hour.

“Health emergencies in the U.S. mainly and appropriately remain the responsibility of state and local officials. Governors in states with the greatest outbreaks so far – Washington, California, New York and New Jersey – are closing schools and ordering limitations on the size of public gatherings. These closures will come at enormous cost to affected individuals and the broader economy.  The possibility that the virus will tip the U.S. into a recession is real, though unlike 2008 the economy was healthy when the virus struck….

“Given the scale and costs of voluntary mitigation underway, the moment has arrived for the relevant authorities in Washington to inform the American people more precisely about the purpose and parameters of social distancing.  President Trump’s 10-minute talk Wednesday evening wasn’t nearly enough, and his focus on travel bans from Europe is not adequate to explain the domestic disruption.  The answers have to come from the presidential task force headed by Vice President Mike Pence….

“Mr. Trump should assemble his specialists prominently to describe the realities and goals of all these voluntary closures.  They ought to explain the math behind minimizing person-to-person transmission of the virus – the so-called reproduction number.  Or why it’s important to suppress infectious spread before the onset of detectable symptoms.  They should explain how mitigation will ‘flatten the curve’ of the virus’ course by spreading it over 12 to 18 months, rather than letting it spike destructively across the population in two months.

“We no longer live on the frontier.  Science may not fully understand this virus yet, but it knows a lot about the reasons for dislocating a nation’s social and economic life.  It’s time for leaders to explain this to a worried but resilient American public.”

Editorial / New York Post

“President Trump was prescient in restricting travel to the United States from China on Jan. 27.  And he’s wise to widen those restrictions again now, as the coronavirus continues to spread, with cases continuing to rise exponentially.

“Targeting the European Union’s Schengen Area makes sense; these 26 countries allow free travel within the zone, with no passport or border control.  And one of them is Italy, the European nation hardest hit – and likely the country with the most cases outside of China and Iran – with 15,113 confirmed cases and more than 1,000 deaths.

“So shutting off travel from Italy alone wouldn’t have been enough to stall the wider spread of COVID-19 within America.  Leaders of other countries in the zone have warned their citizens to be prepared for the pandemic: German Chancellor Angela Merkel expects up to 70 percent of people in her nation to get the bug.

“Trump may have to do more soon.  Ireland and the United Kingdom, while not part of the Schengen Area, have quite a few cases, as do South Korea and Japan.

“Then there are the mixed messages over whether U.S. citizens and permanent residents who test positive will not be allowed back in.  On Thursday, Vice President Mike Pence – the administration point man – said all Americans will be welcomed home, regardless of condition.  Trump then contradicted him, saying those who test positive won’t be.

“Trump gets to set policy – but doing it on the fly is a huge mistake.  And it looks like he should leave all explaining-the-details stuff to others: His Wednesday night remarks wound up being misleading about whether European cargo is banned – it’s not.

“The administration needs to get its act together now, for the good of the nation.

“Either way, anyone allowed back needs to be screened.  Banning only some people and refusing to screen the rest makes no sense if the worry is travelers bringing back infectious disease.  The administration needs to define – and communicate – its procedures clearly.”

Walter Russell Mead / Wall Street Journal

“The coronavirus pandemic is the greatest challenge Donald Trump has ever faced.  As stock markets fall and patient numbers rise, the epidemic threatens the lives of some Americans and the prosperity of all – and it has already begun to disrupt the political methods that brought Mr. Trump to the White House.

“As he has done in other crises, the president is stalling for time as he processes the nature of the threat and tests rhetorical and policy responses to it.  But unlike human political adversaries, the coronavirus isn’t something he can bluff, threaten or placate.  If the epidemic follows the course medical experts believe to be largely inevitable, both the disease and its economic consequences will be immune to Mr. Trump’s standard tactics….

“Mr. Trump’s improvisational and chaotic approach to governance, rooted in his reliance on intuition and impulse as well as his use of conflict as a management method, will combine with the deep lack of trust between political and career officials across the government to produce highly public missteps and policy errors.  Critics will have an abundance of ammunition….

“Their loathing of the 45th president is so intense that their rhetoric can turn voters off.  Mr. Trump is a master at exploiting these sorts of missteps, and he will be looking for targets of opportunity.

“Despite all that, the coronavirus, if it continues on its present course, will soon become the most powerful adversary the Trump administration has yet faced.  Mr. Trump’s other opponents, from Nancy Pelosi and Chuck Schumer to the Iranian mullahs and Kim Jong Un, have nothing on a disease that can threaten the lives of Americans and bring the economy to a grinding halt.”

Trump World

--President Trump said on Thursday he was not concerned about being exposed to the coronavirus after dining last week with Brazilian President Jair Bolsonaro, whose press aide tested positive.  The aide took a picture standing next to Trump.

“Let’s put it this way: I’m not concerned,” Trump told reporters.  “We did nothing very unusual.”

But there were serious concerns over Bolsonaro back home, and reports early Friday said he had tested positive, only for a post on his Facebook page hours later saying it was negative.  [There’s a good chance this is a lie.]

Tuesday, President Trump said the coronavirus outbreak would “go away.  Just stay calm.  It will go away.”

--Tonight, Mexico is considering measures at its northern border to slow the spread of the coronavirus into its relatively unaffected territory! 

Construir ese muro! Construir ese muro! 

Quien va a pagarlo?

Estados Unidos!

--Canada rushed through ratification of the new U.S.-Mexico-Canada (USMCA) trade pact today before taking a three-week break to help stop the spread of the coronavirus.  Canada was the last of the three signatories to formally adopt the pact.

--David Ignatius / Washington Post

“Amid the chaos of the coronavirus, it was encouraging this week to see a bipartisan, blue-ribbon commission announce a coherent plan for dealing with the next potential catastrophe – a major cyberattack against the United States.

“Covid-19 has given us all a foretaste of what a crippling cyberattack would look like: Transportation, infrastructure and health-care services would all be severely disrupted.  We’d depend on good planning, trusted experts and competent leadership at the top – all qualities that have been in short supply in the Trump administration’s response to the pandemic.

“Democracies often aren’t great at planning; that’s the cruel efficiency of authoritarian governments.  But in a welcome change, Congress took the initiative more than a year ago to create a group to revamp cyber policy that would cut across political and bureaucratic lines – drawing in members of Congress from both parties; representatives of defense and intelligence agencies; and top private-sector experts.

“This rare exercise in preparedness was known as the Cyberspace Solarium Commission….

“Surviving a cyberattack is about resilience, and the commission proposed a series of measures: A ‘continuity of the economy’ initiative would clarify how banking, food supply, power and other essentials would survive a digital assault.  To aid private firms, and state and local governments, there would be a ‘Cyber State of Distress’ and a ‘Cyber Response and Recovery Fund.’

“The group made more than 75 recommendations in all, many to be pre-packaged as draft legislation….The coming turf war will be brutal, but that’s the price of preparation for cyberwar….

“Here’s a chance to get it right.  It’s Sept. 10 in cyberspace.  Congress united to create the commission.  Now it needs to enact the laws.”

--Trump tweets:

“So last year 37,000 Americans died from the common Flu. It averages between 27,000 and 70,000 per year.  Nothing is shut down, life & the economy go on.  At this moment there are 546 confirmed cases of CoronaVirus, with 22 deaths.  Think about that!”

“The Fake News Media and their partner, the Democrat Party, is doing everything within its semi-considerable power (it used to be greater!) to inflame the CoronaVirus situation, far beyond what the facts would warrant.  Surgeon General, ‘The risk is low to the average American.’”

“For decades the @CDCgov looked at, and studied, its testing system, but did nothing about it. It would always be inadequate and slow for a large scale pandemic, but a pandemic would never happen, they hoped.  President Obama made changes that only complicated things further….

“….Their response to H1N1 Swine Flu was a full scale disaster, with thousands dying, and nothing meaningful done to fix the testing problem, until now.  The changes have been made and testing will soon happen on a very large scale basis.  All Red Tape has been cut, ready to go!”

“Sleepy Joe Biden was in charge of the H1N1 Swine Flu epidemic which killed thousands of people.  The response was one of the worst on record.  Our response is one of the best, with fast action of border closings & a 78% Approval Rating, the highest on record.  His was lowest!”

“Pocahontas, working in conjunction with the Democrat Party, totally destroyed the campaign of Bernie Sanders.  If she would have quit 3 days earlier, Sanders would have beaten Biden in a route (sic), it wouldn’t even have been close.  They also got two other losers to support Sleepy Joe!”

“The Obama/Biden Administration is the most corrupt Administration in the history of our Country!”

“America is the Greatest Country in the world.  We have the best scientists, doctors, nurses and health care professionals.  They are amazing people who do phenomenal things every day….

“….We have the greatest healthcare system, experts, scientists and doctors anywhere in the world.  Together, we will PREVAIL!”

“Best unemployment numbers in the history of our Country.  Best employment number EVER, almost 160 million people working right now.  Vote Republican, unless you want to see these numbers obliterated!”

“Wow! @foxandfriends blew away the competition of Morning Joke (which did very poorly) on MSDNC (Another Comcast sleaze production), and @CNN’s New Day, in the Morning Television Ratings.  A total blowout, but that’s what you get when you treat ‘Trump’ fairly!”

“Tommy Tuberville (@TTuberville) is running for the U.S. Senate from the Great State of Alabama. Tommy was a terrific head football coach at Auburn University.  He is a REAL LEADER who will never let MAGA/KAG, or our Country, down!  Tommy will protect your Second Amendment…

“…(which is under siege), is strong on Crime and Border, and truly LOVES our Military and our Vets.  He will be a great Senator for the people of Alabama.  Coach Tommy Tuberville, a winner, has my Complete and Total Endorsement.  I love Alabama!”

[Trump was thus officially endorsing Tuberville for the Senate over former attorney general Jeff Sessions in the runoff for the nomination to then go up against incumbent Democratic Sen. Doug Jones.]

Wall Street

In another historic week of market action, stocks plummeted into bear market territory on Thursday, in response to President Trump’s actions (and poor messaging) on Wednesday night, which also happened to be the worst single day since Black Monday, Oct. 19, 1987.  It took only 16 trading days for the S&P 500 to decline from a recent all-time high, accomplished in record speed.

Thursday, the Dow dropped 2,352 points, or 9.99%, to close at 21209.  The S&P 500 slumped 9.51%, and Nasdaq 9.43%.

Declines off all-time closing highs as of Thursday, before Friday’s humongous rally.

Dow Jones -28.2%
S&P 500 -26.7%
Nasdaq -26.7%

The carnage was across the globe.  Europe’s equivalent to the S&P, the Stoxx Europe 600, had its worst day in history Thursday, down 11.5%.

The bloodbath on Wall Street came despite the Federal Reserve Bank of New York’s announcement of an additional $1.5 trillion in new liquidity to help address “highly unusual disruptions” in the Treasury market.  The Fed plans to offer banks at least $1 trillion of additional short-term cash loans each week and also expand the scope of the $60 billion in bond purchases it is tasked with making each month through April.  The market rallied well over 1,000 points in the immediate aftermath of this news, but then collapsed all over again.

And then today we had the best rally since 2008.

Here is the market volatility of the past week, Monday thru Friday…daily percentage gains and losses.

Dow Jones -7.8%, +4.9%, -5.9%, -10.0%, +9.4%
S&P 500 -7.6%, +4.9%, -4.9%, 9.5%, +9.3%
Nasdaq -7.3%, +5.0%, -4.7%, -9.4%, +9.4%
Russell 2000 -9.4%, +2.9%, -6.3%, -11.2%, +7.8%

FTSE (London) -7.7%, -0.1%, -1.4%, -10.9%, +2.5%
DAX (Frankfurt) -7.9%, -1.4%, -0.4%, -12.2%, +0.8%
CAC (Paris) -8.4%, -1.5%, -0.6%, -12.3%, +1.8%
MIB (Milan) -11.2%, -3.3%, +0.3%, -16.9%, +7.1%

Nikkei (Tokyo) -5.1%, +0.9%, -2.3%, -4.4%, -6.1%

We did have some inflation data this week for February, with consumer prices up 0.1%, 2.3% year-over-year; 0.2% ex-food and energy, 2.4% yoy.  Producer prices fell 0.6%, -0.3% on core; 1.3% and 1.4%, respectively, for the 12 months.

The Atlanta Fed’s GDPNow barometer for the first quarter wasn’t revised, 3.1%, but will be next week with more data.  As noted, everyone understands this is coming down significantly.  And the second quarter will be ugly.

But we had a release from the Treasury Department on the budget deficit for February, a record $235.3 billion, in line with expectations.  And this is before any potential fiscal stimulus that the White House and Congress may come up with to cushion the impact of the outbreak.

The deficit reflected $423.3 billion in outlays and $188 billion in revenue.

The gap was slightly wider than the previous record of $234bn in February 2019.

So far in the fiscal year that began in October, the nation is running a $624.5 billion, more than the $544.2bn shortfall in the same period of 2019.  The Treasury estimates the gap will exceed $1 trillion this fiscal year, the largest since 2012.

The only good thing is that the interest expense portion of the equation is being ameliorated by the record-low interest rates.

Lastly, the Federal Reserve meets again next week and is expected to lower rates further.

Trump tweet:

“Our pathetic, slow moving Federal Reserve, headed by Jay Powell, who raised rates too fast and lowered too late, should get our Fed Rate down to the levels of our competitor nations.  They now have as much as a two point advantage, with even bigger currency help.  Also, stimulate!”

Europe and Asia

There was a little economic news of note for the eurozone this week, with GDP up by 0.1% in the euro area (EA19) during the fourth quarter compared with the previous one, according to Eurostat.  In the third quarter of 2019, GDP had grown by 0.3%.

Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.0% in the euro area.  At the start of 2019, growth was running at 1.4%.

Germany 0.5% year-over-year
France 0.9%
Italy 0.1%
Spain 1.8%
Netherlands 1.5%

UK 1.1%

Separately, a reading on industrial production for January for the EA19 was up 2.3% over December, but down 1.9% year-over-year.

Italy blasted new European Central Bank President Christine Lagarde on Thursday after comments that reawakened fears over the country’s public finances as it battles Europe’s worst coronavirus outbreak.  Lagarde told the ECB’s monthly news conference the central bank was “not here to close spreads” between the borrowing costs of member states, as she called on governments to act to soften the economic impact of the coronavirus outbreak.

The comments sent Italian bond yields sharply higher, adding to the turmoil of a day that saw its benchmark stock index fall a record 17%.

Prime Minister Giuseppe Conte said Italy was working with other European countries and institutions to ensure the safety of its citizens and would not accept “formal and abstract” interpretations of the situation.  “Europe is asking member countries for decisive measures to combat the health emergency effectively,” Conte said in a statement.  “In particular, the job of the central bank should not be to hinder but to help such measures by creating favorable financial conditions for them,” he said.  “We expect policies and actions from the central bank and from all European institutions that are adequate for the challenges we are facing.”

Lagarde took to CNBC to say the ECB was “fully committed to avoid any fragmentation in a difficult moment for the euro area.”  That seemed to calm Italy down a bit.

Today, various European market regulators intervened in the stock and bond markets with a series of measures to help bring stability, including a ban on short selling in some major stocks in both Italy and Spain, though this was in place for Friday’s trading session only.

No news on the Brexit front, governments overwhelmed with the coronavirus.

Turning to Asia…China reported its inflation data from February, with consumer prices up 5.2% year-over-year; food up 21.9%, non-food 0.9%. Pork prices rose 135.2%, owing to African swine fever.  [China may be coming up with a vaccine for this.]

Meanwhile, China’s exports contracted sharply in the first two months of the year, down 17.2% from the same period a year ago, customs data showed on Saturday, more than expected.  This was versus a 7.9% gain in December.  Imports sank 4% from a year earlier.

Factory activity contracted at the fastest pace ever in February.  Even though the number of new virus cases has fallen significantly in China, few expect businesses to return to normal production until April at the earliest.

We will see China’s critical numbers on items like industrial production and retail sales for the combined Jan./Feb. (Lunar New Year holiday) period this Sunday or Monday.

In Japan, it turns out the economy shrank faster than initially estimated in the fourth quarter to mark the biggest drop in more than five years as capital expenditures slumped, casting a deeper shadow over the outlook as the coronavirus hit heightened recession risks. 

For the fourth quarter, GDP shrank at a whopping 7.1% annualized rate, vs. a preliminary decline of 6.3%.  Capex was revised down to -4.6% quarter over quarter.  Private consumption fell 2.8% qtr/qtr.

Well, tonight, Abe has instructed his top aide and ruling party heavyweight Akira Amari to consider tax cuts to help the economy weather the hit from Covid-19.

Abenomics has been a mess.

Street Bytes

--In the end, the Dow Jones fell 10.4% on the week, after a 12.4% decline two weeks earlier.  The S&P 500 declined 8.8%, Nasdaq 8.2%.  It would have been one of the worst weeks in history were it not for the irrational late rally today.  It was all too cute, as in get this…Bank of America, JPMorgan Chase, Citigroup and Goldman Sachs all rose 17.6% to 18.0%.  ETF action, Algos, whatever.  I’ll go out on a limb…back into the crapper on Monday once we weigh the immense damage in some key industries…airlines and energy, to name just two. 

--U.S. Treasury Yields

6-mo. 0.34%  2-yr. 0.49%  10-yr. 0.96%  30-yr. 1.53%

Time doesn’t permit me to write a full recap of the tumultuous action in the bond pits this week, but understand, at one point in overnight trading, the yield on the 10-year Treasury was under 0.40%, and look where it finished…0.96%, after trading over 1.00% today.  It closed last Friday at 0.77%.  Extraordinary, unprecedented, and very disconcerting action in this critical market.

Europe’s sovereign debt action was also totally chaotic, with yields soaring late, the Italian 10-year rising to 1.78% from 1.07% a week before.  France from -0.35% to 0.00%.  More next time.

--Talks collapsed last week between members of the OPEC+ alliance of OPEC states, Russia and other producers, which had propped up prices since 2016.  Russia rejected OPEC’s call to deepen supply cuts, prompting OPEC to scrap all production limits and Russia to say it would also boost output.

So Sunday, state-run Saudi Arabian Oil Co., Saudi Aramco, slashed prices on its own crude and signaled it would boost its output.  Oil then crashed 25% Monday, its sharpest decline since the first Gulf War in 1991.

On Wednesday, Saudi Arabia said it plans to boost oil production capacity for the first time in more than a decade, a day after it announced a record high hike in crude supply in the battle for market share that has hammered global prices.

Saudi Aramco will raise output capacity to 13 million from 12 million barrels per day.

Saudi Arabia has been described as the oil equivalent of a major central bank, holding nearly all of the world’s spare capacity.

Saudi Aramco is increasing oil supply in April to 12.3 million bpd, or 300,000 bpd above its maximum production capacity.  It has been pumping around 9.7 million bpd in the past few months, knowing it had extra capacity it could turn on at any moment.  And it has hundreds of millions of barrels in store.

Russian oil companies might boost output by up to 300,000 bpd and could increase it by as much as 500,000 bpd.

President Trump talked to Saudi Crown Prince Mohammad bin Salman on Monday to discuss developments.

Today, the president announced the United States would ‘top off” the Strategic Petroleum Reserve by buying oil at the cheap prices.

Daniel Yergin / Wall Street Journal

“The oil-exporting alliance between Saudi Arabia and Russia collapsed on Friday after almost four years.  The OPEC+ deal, which the two countries brokered in 2016 after a debilitating 2014 price collapse, is over, called off by the Russians.  Result: a free-for-all in the world oil market, lower prices and a battle for market share.  The No. 1 target in Russia’s crosshairs is the U.S. shale industry.

“John D. Rockefeller in the 19th century described this kind of battle as ‘good sweating’ – low prices that put pressure on competitors.  The term takes on added meaning now. The sweating in the market, as in a growing number of sick people, is a symptom of the new coronavirus.

“The outlook for oil looked much better at the beginning of the year. The ‘phase one’ U.S.-China trade deal appeared poised to boost the world economy and increase demand for petroleum.  But the coronavirus epidemic and subsequent shutdowns in China caused demand to plummet in the world’s largest importer of oil.  Elsewhere demand has tapered.

“The result has been an unprecedented shock to the global oil market.  IHS Markit, where I work, estimates that in the first quarter of 2020 global demand cratered by 3.8 million barrels a day compared with the same period in 2019.  This would be the largest drop ever, bigger even than during the 2008 financial crisis.  Before Russia’s decision on Friday, oil prices had already fallen almost 30% since the year began.

“The Saudis, who cut oil output in 2019, were pushing the idea of further cuts out to the end of the year by the Organization of the Petroleum Exporting Countries and its non-OPEC allies as a way to stem the price decline caused by the virus.  But on Friday Russian Energy Minister Alexander Novak delivered a clear message: Russia is not on board.  Prices fell another 10%.  On Monday Saudi Aramco announced it is slashing prices and boosting production, and the plummet followed.

“The Russians provided a clue to their thinking on the virus by canceling the St. Petersburg International Economic Forum, the global conclave that is Vladimir Putin’s answer to Davos.  It was scheduled for June.  The Russians see a global pandemic that will continue to bring oil prices down.  A production cut would be a Band-Aid that would work only for a few weeks.

“Consider also the relationship between Russia and Saudi Arabia.  Mr. Putin’s visit to Saudi Arabia last fall, during which he presented King Salman with a Siberian falcon, showed a growing relationship that extended beyond oil.  But relations have since cooled, especially regarding oil.  Moscow and Riyadh have different perspectives. Russia’s budget relies on $42 a barrel. Saudi Arabia needs a considerably higher price, particularly to fund its ambitious Vision 2030 reform program.

“The two countries have a fundamentally different view of the growth in U.S. shale oil production. Saudi Arabia has largely accommodated itself to the idea that American shale is here to stay.  Not Russia.  Moscow has asked why it should restrain its oil output and surrender market share to its strategic competitor, the U.S.  Since the 2016 OPEC+ deal, U.S. oil output has grown by 4.8 million barrels a day – almost a 60% increase.

“Russia may be an energy superpower, but it has been overtaken by America, which produces more oil and more gas – and considerably more oil than Saudi Arabia.  The U.S. is also on the way to becoming one of the world’s major exporters of natural gas, in its liquefied form.  That provided another reason for Moscow to promote the ‘good sweating’ to stem U.S. production.

“The market disarray is also Moscow’s payback for sanctions the U.S. imposed in December on the $11 billion Nord Stream 2 pipeline, which is meant to carry Russian natural gas under the Baltic Sea to Germany.  The sanctions forced the barge laying the undersea pipe to stop work abruptly – a week or so short of completion.

“One can surmise that Moscow interpreted the sanctions not as punishment for invading Ukraine or interfering in the 2016 U.S. presidential election, but as a way to favor U.S. natural gas exports to Europe.  Support for that theory came from President Trump, who in a tweet last summer announced that Europe would be buying ‘vast amounts of LNG’ from the U.S.  he signed the sanctions bill a few months later.  Moscow didn’t think this was a coincidence….

“In the past few years, U.S. shale companies have become more efficient and brought down costs.  And growth in U.S. output was already on track to slow.  Even so, shale is not low cost and this good sweating will put pressure on U.S. producers.  Companies will reduce or stop drilling. Some will go bankrupt or merge, and U.S. production will flatten out or, if prices stay down, decline.

“For how long?  That will depend on how long the virus continues to attack the health of the world economy.”

Separately, OPEC slashed its forecast for global growth in oil demand this year due to the outbreak and said further revisions may be necessary.  OPEC now expects global demand to rise by just 60,000 barrels per day in 2020, a reduction of 920,000 bpd from its previous forecast, it said in a monthly report.

OPEC expects a greater impact on demand than the U.S. government’s Energy Information Administration, which on Wednesday cut its 2020 world oil demand growth forecast by 660,000 bpd to 370,000 bpd.

Earlier, the International Energy Agency said it expected oil demand to be 99.9 million barrels per day in 2020, lowering its annual forecast by almost 1 million bpd and signaling a contraction of 90,000 bpd, the first time demand will have fallen since 2009.

Following the 2020 demand shock, however, the IEA expects oil consumption to bounce back strongly and rise by 2.1 million bpd in 2021.

--So with all the above, and prices having settled, at least for this week, in the $30s on both West Texas Intermediate and Brent, dozens of U.S. shale drillers face serious financial difficulties.  Companies will go bankrupt, job losses could soar.  Those operators with heavy debt loads are already cutting back on drilling, which isn’t profitable at these levels.  We should start seeing real numbers on the damages by next week.

Among larger producers, shares in Occidental Petroleum Corp. dropped about 52% on Monday.  Oxy’s recent acquisition of Anadarko Petroleum Corp., a rival nearly its own size, has seriously strained the company’s balance sheet.

--U.S. airlines on Tuesday ditched 2020 forecasts and unveiled significant capacity cuts and cost-saving measures, with United Airlines warning it could take 18 months for demand to recover. Domestically, net bookings are down about 70%.  100% when it comes to Asia and Europe (based on a combination of new bookings and cancellations).

United said on Tuesday it has raised an extra $2 billion in financing while slashing its 2020 capital expenditures by more than a third in an effort to prepare for a prolonged slump in travel demand due to Covid-19.  The move comes on top of previous announcements from United regarding capacity cuts and suspended earnings forecasts and will bring the airline’s total liquidity to $8 billion for 2020, while adjusted capex will fall to $4.5 billion from $7 billion previously forecast for the full year. 

Delta Air Lines said it will slash capacity and withdraw its previous Q1 guidance as it assesses the impact of the coronavirus.  The airline will cut total capacity by 15 points from its original plan, reducing international capacity by 20% to 25% and domestic capacity by 10% to 15%.

Pacific route capacity, which accounted for 6% of revenue last year, will be cut 65%, while Transatlantic capacity, which made up 15% of revenue in 2019, will be down 15% to 20%, Delta said.  Latin capacity, which accounted for 7% of revenue, will fall 5%.  Domestic capacity accounted for 72% of the company’s revenue in 2019. 

I suspect Delta and every other airline will soon be further lowering capacity.

Delta also said it will defer $500 million in capital expenditures, delay $500 million in voluntary pension funding and suspend share buybacks.

“This clearly is not an economic event. This is a fear event, probably more akin to what we saw at 9/11 than necessarily what we saw in 2009,” Delta CEO Ed Bastian told an industry conference.

Delta said it has seen bookings fall by as much as 25% to 30% and expected the situation to worsen further.

American, the No. 2 U.S. airline by revenue last year, said it would cut domestic capacity by 7.5% in April and international by 10% for the upcoming summer season.  The airline did say the fall in fuel prices, with Monday’s plunge, would allow it to drive about $3 billion in cost savings for 2020.

Numerous airline executives, including Gary Kelly, CEO of Southwest Airlines, told employees that they were either taking pay cuts or forgoing their base salaries for a period of time.

--Ryanair on Tuesday said it will cancel almost all of its flights to and from Italy for the next month, forcing it to cut its full year passenger forecast to end-March by 3 million.  Europe’s biggest low-cost airline said it would suspend all Italian domestic flights from midnight on Wednesday, and all international flights from the country midnight Friday.

--I got into the problems at Norwegian Air, another leading discount carrier, last week and Tuesday, the company said it will lay off staff and cut around 3,000 flights as the coronavirus outbreak sends shockwaves across the travel industry.  The 3,000 flights correspond to about 15% of its capacity.

But then Thursday, Norwegian said it was scrapping 4,000 flights and temporarily laying off up to half of its employees following President Trump’s ordering of sweeping restrictions on travel from Europe to the U.S. for the next 30 days.

Today, Norwegian Air said it needed access to cash within weeks and was optimistic the government will help secure funding.

Norwegian was a pioneer in transatlantic budget travel and the largest foreign airline serving the New York region and several other U.S. cities.

--Hong Kong flag-carrier Cathay Pacific announced a surprise profit for the second half of 2019 ($44 million), but that’s history for sure.    The airline said it was unclear when it would see tough conditions ease, as business continued to be “extremely challenging financially.”

Cathay put into place emergency measures, including getting 75 percent of staff to take three weeks of unpaid leave, while sharply cutting flights to match lower demand; a 65% reduction for March and April.

--Virgin Atlantic confirmed it has been forced to operate some near-empty flights after bookings were dented by the outbreak.  It is operating the flights, however, to try to retain take-off and landing slots at major airports such as Heathrow.  Under European law, if flights are not operated, slots have to be forfeited.

The airline’s statement, though, was made before President Trump’s travel ban on flights from Europe.

***But since I wrote all of the above on the airline sector, most of it Thursday, things worsened further today.  The CEO of British Airways warned the industry is facing a “crisis unlike any other,” adding BA will have to make significant job cuts, suspend routes and ground aircraft.  Alex Cruz called it worse than any other crisis including 9/11.  His message to employees was titled “The Survival of British Airways.”

And then we had further comments from the likes of Delta, American and United, who said they were in talks with the government about potential assistance.

Delta CEO Ed Bastian told employees today that it was pursuing government aid, adding he was now forgoing his salary this year.

“The speed of the demand fall-off is unlike anything we’ve seen.”

Bastian upped his capacity cuts to 40%, the largest in its history, including eliminating all flights to continental Europe for the next 30 days.  Delta is parking up to 300 aircraft, deferring new aircraft deliveries and delaying other investment initiatives, as well as implementing a hiring freeze.

United CEO Oscar Munoz has spent the last two days in Washington, meeting with senior officials in the Trump administration.

And KLM, the Dutch subsidiary of Air France-KLM, announced plans to slash up to 2,000 jobs and ask for government support amid the coronavirus outbreak.

Understand, things are moving so fast, earlier in the day a release said KLM was cutting 1,500 jobs…then it upped the figure an hour later.

--And this one late today.  A group representing major U.S. airports on Friday revised upward its forecast for estimated losses this year to $5.7 billion after President Trump’s new European travel curbs and as flight reductions rose.

--Boeing has stopped hiring and limited travel and overtime to preserve cash amid the disruption caused by the coronavirus, according to various reports on Wednesday.  Three Boeing employees reportedly tested positive, which presents another challenge.

The company announced it planned to draw the remaining $6.33 billion of a $13.83 billion loan it obtained last month from a group of bank lenders in preparation for the expected impact of current market conditions.

Boeing also said on Wednesday it took in 18 new orders for widebody planes in February but saw more customers cancel orders of its grounded and previously best-selling 737 MAX jet, as it faced another blow to demand from the coronavirus outbreak.

Boeing failed to secure any orders in January for the first time in decades, but said some customers swapped 737 MAX orders in favor of more expensive wide-body planes.  Boeing had received 49 new orders in the first two months of 2019.

Meanwhile, Boeing plans to separate 737 MAX wiring bundles, flagged by regulators as potentially dangerous, before the jet returns to service, another reversal from the U.S. planemaker’s initial recommendation to the FAA that it did not believe it was required to separate or move wiring bundles.  So this is another hurdle to the already-delayed return to service.

--And then there are Boeing’s suppliers, already reeling from the 737 MAX grounding, and now facing an even slimmer workload as flight cancellations pile up, meaning less demand for spare parts and services.

--Airbus failed to secure any new aircraft orders in February.

--Princess Cruises canceled all its voyages for the next two months and will cut short some current trips, after two of its ships suffered coronavirus outbreaks, becoming the first ocean carrier to suspend sailings as a result of Covid-19.  Princess is owned by Carnival Corp.  Current trips with less than five days remaining will continue, but those extending beyond March 17 will be cut short.

Two Princess Cruise ships – the Diamond Princess in Japan and the Grand Princess in California in March – halted trips and quarantined thousands of passengers because of the illness.

The U.S. State Department advised Americans not to take cruises.

Shares of Carnival, the world’s biggest cruise operator, plummeted 31% Thursday, and were off 74% from their highs, before rallying some Friday.

Viking Cruises, which has 79 smaller vessels, said it was suspending all voyages until May 1.

Royal Caribbean Cruises will continue to sail its planned itineraries.  Its shares closed the week at $33, down from its high of $135.

But tonight, President Trump tweeted that four cruise line companies had agreed to suspend outbound cruises for 30 days, at his request, effective midnight tonight; Carnival, Royal Caribbean, Norwegian, and MSC.

--According to a Reuters analysis of company disclosures, employees at the largest U.S. oil companies have lost around $5 billion in retirement savings since the end of 2018 because of outsized bets on their own slumping stock.  The losses, spread across the 401(k) plans of some 66,000 workers, underscore the dangers facing employees that do not diversify their retirement investments.

“A lot of people think their company’s stock is safer than an index fund,” said David Blanchett, head of retirement research at Morningstar Inc.

The biggest U.S. oil producers by market cap – Exxon Mobil, Chevron, ConocoPhillips, EOG Resources and Occidental Petroleum Corp. – held $44 billion of 401(k) assets for the 66,000 workers at the end of 2018, 36% of which was made up of company stock, according to the filings that contain the latest available data.  By contrast, only about 6% of 401(k) assets held at U.S. corporations across all industries were invested in company stock at the end of 2016, according to the Employee Benefit Research Institute.

The median total return for the five oil companies shares above amounted to negative 44% since the end of 2019, with a range of negative 22% to negative 77%.

--Smartphone sales in China fell nearly 55% in February, government data released Monday showed.  The China Academy of Information and Communications Technology showed that 6.3 million units were shipped last month, as 61% fewer models were released.

Apple sales were reportedly 494,000 in February in China, down from 1.27 million in Feb. 2019.

Leading analyst Daniel Ives said he expects sales in the first three months of this year to be down 50% from a year prior “given the massive disruptions from the supply chain and especially demand in the region.”

Apple said last month it would not meet its guidance for the fiscal second quarter due to manufacturing constraints caused by pressure on its supply chain in China and lower demand from consumers.

As noted above, however, at least its 42 branded stores in China are reportedly reopening.

--Dick’s Sporting Goods Inc. said it would stop selling firearms in more than half its stores this fiscal year, the latest move by the retailer to scale back its gun business.

The company’s plans to eliminate the hunting department at about 440 more Dick’s Sporting Goods locations follows the earlier removal of the department at 135 stores.  The company had 850 stores at the end of the last fiscal year.

After the mass shooting at a Parkland, Fla., high school in 2018, Dick’s said it would sell guns only to people at least 21 years old and would stop selling assault-style rifles at its 35 Field & Stream stores.  The company stopped selling assault-style rifles at its flagship Dick’s stores following the 2012 deadly shooting in Newtown, Conn.

Dick’s said it expects same-store sales for this year to be between flat to up 2%, which is less than the 3.7% pace of the previous fiscal year, and 5.3% in the last quarter.  And of course the company said coronavirus could impact sales further in the coming months.

“The company’s outlook balances the enthusiasm it has for its business with the rapidly evolving coronavirus situation,” Dick’s said in a press release. 

--New York’s Broadway League, a trade group, said that they were “closely monitoring evolving coronavirus situation on behalf of the Broadway community.”  Aside from increasing the frequency and disinfecting in all public and backstage areas, they’ve urged any theatergoers who aren’t’ feeling well, to stay home and contact the point of purchase for more information about ticket exchanges and policies.

But while the attitude is ‘the show must go on,’ the declines in weekly sales are going to accelerate.

For example, Disney’s “The Lion King,” the long-running musical, reported the biggest drop in dollar terms, with weekly sales falling $228,000 to $1.19 million.  But that was the week ending last Sunday.

More worrisome, more than 15 shows are scheduled to open by April 23, the last day for Tony Awards eligibility.

So then Thursday afternoon, Broadway shut down.  Industry professionals pegged the initial estimated loss at $100 million for ticket revenue alone, but the ripple effect is big.  For now, the shows aren’t set to resume until the week of April 13.  The Metropolitan Museum of Art, Metropolitan Opera, Carnegie Hall and the New York Philharmonic announced shutdowns through the end of March.

Foreign Affairs

Afghanistan: The U.S. warned the Taliban on Tuesday that the current high level of violence by the insurgents was “not conducive to advancing the peace process” as the UN Security Council backed a U.S.-led push to end the 18-year war.

The plan calls for the phased withdrawal of U.S.-led foreign forces if the Taliban keeps its commitments and for the start of talks between the insurgents and an Afghan government delegation on a political settlement to end decades of conflict.

“We acknowledge the Taliban have taken steps to stop attacks in cities and against major bases,” Deputy U.S. Ambassador to the UN Cherith Norman Chalet told the Security Council.  “But more needs to be done…to reduce violence against Afghan forces in the countryside to give intra-Afghan negotiations and peace the opportunity to succeed,” she said.

But compounding the challenges in the country these days is an escalating political feud that is also threatening political chaos.  Afghan President Ashraf Ghani was sworn in for a second term on Monday, but the ceremony was marred by a rocket attack and his political rival, former chief executive Abdullah Abdullah, held his own inauguration ceremony.

Both Ghani and Abdullah say they are Afghanistan’s rightful leader following a disputed election in September.

A major issue now is the prisoner release that was part of the U.S.-Taliban agreement.  President Ghani said he was preparing to release 1,500 Taliban prisoners in coming days, but the decree signed by Ghani requires all released Taliban prisoners to provide “a written guarantee to not return to the battlefield.”  The release is aimed at paving the way for direct talks with the insurgents.

But the Taliban said, “It is properly explained in the peace accord that the first 5,000 prisoners would be freed and then the Afghan dialogue would be initiated,” said a spokesman in Doha.

“We never agreed to any conditional release of the prisoners.  If someone claims this, it will be against the peace accord that we signed on February 29.”

Former U.S. Secretary of State Hillary Clinton appeared to take a swipe at the U.S. deal with the Taliban, saying: “It is difficult to have an agreement when you leave out the government of the country that you are expecting to uphold and live under that agreement.”

Speaking at an event on Afghan women’s rights, she also stressed the need for women to be at the negotiating table.  “Afghan women today are rightly afraid…that the gains they have made with all of our help will be washed away in a rush to achieve a peace that will not hold anyway,” Clinton said.  “This is not just morally wrong, this is dangerous.”

Editorial / Washington Post

“In short, the U.S.-Taliban deal is failing to take hold.  Yet the U.S. withdrawal is going forward; hundreds of troops are headed out of the country, officials told the Associated Press on Monday. This raises an obvious question: Does President Trump intend to hold the Taliban to its commitments to break with al-Qaeda and negotiate peace with the Afghan government, or will he yank U.S. forces from the country no matter what?

“The signals are not encouraging.  On Friday, the president offered the verbal equivalent of a shrug when asked whether the Taliban might overrun the country and reestablish its harsh dictatorship.  ‘It’s not supposed to happen that way but it possibly will,’ he answered.  ‘Countries have to take care of themselves.’

“His aides, meanwhile, offer conflicting signals.  Defense Secretary Mark T. Esper published an op-ed in The Post asserting that the U.S. troop withdrawal was ‘conditions-based’ and that a complete withdrawal depends on ‘progress on the political front between the Taliban and the current Afghan government.’  But that linkage appears nowhere in the agreement, which says a full pullout is tied only to a Taliban commitment to prevent Afghan territory from being used to stage attacks against the United States.

“Similarly, Secretary of State Mike Pompeo assured several members of Congress before the deal was announced that it did not include a release of Taliban prisoners.  Yet the text made public says that ‘up to’ 5,000 members of the Taliban would be freed by Tuesday, before the beginning of inter-Afghan talks, adding ‘the United States commits to completing this goal.’  The Afghan government understandably balked at that provision, which it said should be linked to the Taliban’s acceptance of a cease-fire.  No prisoners had been released by Monday, giving the Taliban cause to skip the negotiations.

“The prospect for talks is further complicated by the rift between incumbent Afghan President Ashraf Ghani and his opponent in last year’s disputed presidential election, Abdullah Abdullah. After U.S. mediation failed, both men declared themselves president Monday, and both indicated they would name negotiating committees for the peace talks.  The Trump administration should have headed off this entirely foreseeable split before signing a deal that excluded the Afghan government. But Mr. Trump pressed ahead, no doubt because he is eager to boast of bringing U.S. troops home during his reelection campaign.  If he does so heedless of the cost, voters ought not to give him much credit.”

Syria, Turkey, Russia:  Turkey said observations posts in Syria’s Idlib region will remain in place and function despite being encircled by Syrian government forces, the announcement today coming a week after Ankara and Moscow agreed to a ceasefire deal.

Turkey and Russia, which back opposing sides in Syria’s war, after largely abided by the ceasefire deal thus far after an escalation of violence brought the two sides to the brink of war.

The deal addresses Turkey’s main concerns – stopping a flow of migrants and preventing the death of more Turkish soldiers, after 60 had been killed in clashes in the region since last month.

Iraq: The United States said it carried out a series of strikes on Thursday against an Iran-backed militia in Iraq that it blamed for a rocket attack a day earlier which killed two American troops and a British soldier on Wednesday at the Taji air base north of Baghdad – the deadliest in years on a base used by U.S. forces in Iraq.  The Pentagon said its retaliatory strikes targeted five weapons stores used by Kataib Hezbollah fighters, including facilities housing arms used in past attacks on U.S.-led coalition troops.

Defense Secretary Mark Esper said on Thursday: “We’re going to take this one step at a time, but we have to hold the perpetrators accountable.  You don’t get to shoot at our bases and kill and wound Americans and get away with it.”

The attack and retaliation marked a dramatic uptick in violence less than three months after rockets killed a U.S. contractor in northern Iraq, unleashing a round of tit-for-tat attacks between Washington and Tehran on Iraqi soil.

Within hours of Wednesday’s attack, an air strike killed 26 Iran-aligned Iraqi fighters in neighboring Syria, the Syrian Observatory for Human Rights said.

The Iraqi military then condemned the U.S. air strikes, saying they had killed six people and describing them as a violation of sovereignty and a targeted aggression against the nation’s formal armed forces.

“The pretext that this attack came as a response to the aggression that targeted the Taji base is a false pretext; one that leads to escalation and does not provide a solution,” Iraq’s Joint Operations Command said in a statement.  “This action is against the will of the Iraqi state and a violation of its sovereignty, it strengthens outlaws.  No party has the right to substitute itself for the state, its sovereignty, or its legitimate decisions.”

Some 5,200 U.S. troops are stationed in Iraq as part of the coalition formed in 2014 to fight ISIS.

On Sunday, two U.S. soldiers were killed north of Baghdad while helping Iraqi forces battle ISIS remnants.  The U.S. has warned there is likely an ISIS resurgence in Iraq.

Israel: The battle against the coronavirus, with at least 100 cases thus far, has spurred calls from Prime Minister Benjamin Netanyahu for a unity government to combat the crisis.

Israel is taking some tough measures, forcing visitors from many countries in Asia and Europe into home isolation for 14 days, with non-Israelis seeking to enter the country needing to provide proof they have the means to self-quarantine.

Saudi Arabia: The scope of a new roundup of Saudi royals widened last weekend as a fourth senior prince was detained under orders from Crown Prince Mohammed bin Salman, according to the New York Times, in a sign he is determined to crack down on “even whispers of dissent.”  But the full extent of the roundup is still not clear.

The most senior family member detained was Prince Ahmed bin Abdulaziz, the father of Prince Nayef and the last surviving full brother of King Salman.

Lebanon: Prime Minister Hassan Diab, in a televised speech last Saturday, declared his heavily indebted state faced default on its sovereign debt, which would be a first for the country.

“Can a country’s economy be based on borrowing?  Can a nation ever be free if it is drowning in debt?  Today, we are paying the price for the mistakes of past years.  Must we bequeath them to our children and the coming generations?”

Lebanon has a debt to GDP ratio of about 170%, similar to Greece, with gross public debt exceeding $90 billion.  Diab is looking for a debt restructuring in negotiations with creditors.

China: U.S. National Security Adviser Robert O’Brien said on Wednesday that China did not initially handle the coronavirus outbreak properly and this likely cost the world two months when it could have prepared and dramatically curtailed the outbreak.

“It probably cost the world two months to respond and those two months, if we’d had those (and) been able to sequence the virus and had the cooperation necessary from the Chinese, had a WHO team been on the ground, had a CDC team, which we had offered, been on the ground, I think we could have dramatically curtailed what happened both in China and what’s now happening across the world,” O’Brien said at a think tank appearance.

Chinese Foreign Ministry spokesman Geng Shuang retorted, China’s efforts bought the world time.  Another Foreign Ministry spokesman, Zhao Lijian, wrote on his Twitter account that the U.S. military might have brought the coronavirus to Wuhan and the United States had to be transparent about its own cases.

[The State Department summoned the Chinese ambassador to the United States today to protest Zhao Lijian’s comments.]

This is part of a growing narrative from China.  That the coronavirus did not start in a live animal market in Wuhan, but was the responsibility of foreign agents.  It tells you everything about the place.

Chinese officials are saying the pandemic could be over by June if countries mobilize to fight it.

“Broadly speaking, the peak of the epidemic has passed for China,” said Mi Feng, a spokesman for the National Health Commission.  “The increase of new cases is falling.”

Zhong Nanshan, the government’s senior medical adviser, told reporters that as long as countries take the outbreak seriously and are prepared to take firm measures, it could be over worldwide in a matter of months.

“My advice is calling for all countries to follow WHO instructions and intervene on a national scale,” he said.  “If all countries could get mobilized, it could be over by June.”

Speaking to UN Secretary-General Antonio Guterres, President Xi Jinping similarly expressed confidence, state television reported.  “After hard work, China has shown a trend of continuous improvement in epidemic prevention and control,” the report cited Xi as saying.  “I am confident that the Chinese people will be able to overcome this epidemic and achieve their intended economic and social development goals.”

One other item…tragically, at least 10 people were killed when a building being used to quarantine people under observation for coronavirus collapsed in the city of Quanzhou (Fujian province).

North Korea: Pyongyang still hasn’t confirmed a single Covid-19 case, which is laughable, though they have talked of 10,000 people under quarantine.

Those who may have come into contact with foreigners have been isolated for more than 40 days.

But the battle over the disease hasn’t stopped Kim Jong Un from launching more missiles, including three off its east coast on Monday in the second weapons test in a week.  It is estimated they flew up to 124 miles, at a maximum altitude of 30 miles, falling in the waters between North Korea and Japan, South Korean defense officials said.

Russia: President Vladimir Putin ended any question about his political future by backing a constitutional amendment – quickly approved by both houses of parliament – that will allow him to stay in power until 2036.

The Kremlin-controlled State Duma passed the measure Wednesday 383-0, with 43 abstentions, to remove the constitutional barrier to Putin, 67, staying in office beyond 2024, thus scrapping Russia’s two-term limit for president or “resetting” the clock so Putin’s four terms wouldn’t count against him. The upper house, the Federation Council, voted 160-1 with three abstentions.

Regional parliaments and the constitutional court now have to give their blessing and the overall changes will be approved in a nationwide vote in April.

Putin will be 83 in 2036 and will have spent 36 years at the top of Russian politics should he make it that far, longer than Josef Stalin, but still shy of Tsar Peter the Great, who reigned for 43 years.

One unrelated tidbit…President Trump told the Kremlin he would not be able to travel to Russia to mark Victory Day on May 9.  Putin presides over an annual parade on May 9 to commemorate the Soviet Union’s World War II victory over Nazi Germany and uses the occasion to show off the country’s military hardware.

Random Musings

--Presidential tracking polls….

Gallup: 47% approve of Trump’s job performance, 51% disapprove; 92% of Republicans approve, 42% of independents (Feb. 17-28).
Rasmussen: 49% approve, 50% disapprove (Mar. 13).

In a Quinnipiac University national poll, among registered voters, President Trump has an overall job approval of 41%, 54 % disapproving of his performance.  He receives a 54% approval rating for his handling of the economy, while 42% disapprove.  But only 40% approve of his handling of foreign policy, 56% disapprove.

But now it’s about the coronavirus and its impact on all the above.  58% of American say they are either very or somewhat concerned the outbreak will disrupt their daily lives, but this survey was released Monday, for a polling period before then, and undoubtedly that percentage has risen further by now.

A Fox News poll has Trump with a 47% approval rating, 52% disapproval.

A CNN/SSRS survey has 43% approving of Trump’s performance, 53% disapproving.

--Former Vice President Joe Biden had another big Tuesday night with resounding wins in Michigan (53% to 36%)*, Mississippi, Missouri and Idaho, Michigan particularly devastating to the candidacy of Bernie Sanders…Biden now leading Sanders in the delegate count 864-710 [Associated Press].

*For the record, I just want to note a Monmouth University poll of Michigan Democratic primary goers prior to the vote had it 51%-36% Biden.  Pretty good.

Sanders won in North Dakota while the two each picked up the same amount of delegates in Washington state.

Biden said after of his continuing surge when he was deemed to have been knocked out after dismal performances in Iowa and New Hampshire, “It’s more than a comeback….It’s a comeback for the soul of this nation,” Biden said in Philadelphia.  “This campaign is taking off, and I believe that we are going to do well from this point on.”

“Tonight we are a step closer to restoring decency, dignity and honor to the White House,” he said.  “At this moment, there’s so much fear in the country.  There’s so much fear across the world. We need presidential leadership that’s honest, trustworthy, truthful and steady.”

About 60% of voters in Michigan, Missouri and Mississippi were women. 

In Mississippi, about two-thirds of ballot casters were African American.

According to exit polls from the Washington Post, 69% of black voters in Missouri supported Biden, 86% of Mississippi’s black voters went for him and 66% of black voters in Michigan backed Biden.

Biden was also backed by 63% of moderate and conservative voters in both Michigan and Missouri, according to exit polls.

Sanders scored big with young voters, taking 70% of voters under 30 in Missouri and 64% in Michigan.  But, the under-30 crowd accounted for just 15% of voters in Missouri and 13% in Michigan.

Prior to Super Tuesday, Part Deux, the above-mentioned Quinnipiac national survey had 54% of Democrats and independents who lean Democratic say they would like to see Joe Biden win the nomination, while 35% want Bernie Sanders.

A Reuters/Ipsos national poll released Monday showed 47% of registered Democrats and independents said they would vote for Biden, 30% for Sanders.

77% of Democrats and Democratic leaners have a favorable opinion of Biden and 71% have a favorable view of Sanders.

In head to head matchups with President Trump among registered voters, Biden leads Trump 51-41, while Sanders leads Trump 49-42.

So the pressure was on Sanders to drop out after Tuesday, with seemingly no path to victory, given next Tuesday’s slate of primaries includes delegate-rich Florida, where in a North Florida University poll he trails Biden 66% to 22%.  [Three other states are being contested March 17…Arizona, Illinois and Ohio.]

But first Sanders will march on to Sunday’s debate, now in Washington, D.C.  No doubt I’ll be writing a lot on this one next time.  This race is far from over and I’ll tell you why then after what I know will be a totally embarrassing performance from Uncle Joe in terms of his mental faculties.

Editorial / Wall Street Journal

“Democrats really, really want to defeat President Trump.  That’s the message from Joe Biden’s primary victories on Tuesday as he further deflated the hopes of Bernie Sanders and his revolution.

“If Democrats had buyer’s remorse after Mr. Biden’s stunning comeback on Super Tuesday last week, they didn’t show it as he rolled to easy wins in Mississippi, Missouri and Michigan. The victory was especially impressive in Michigan, where Mr. Sanders won narrowly in 2016 but Mr. Biden led by 14 percentage points by our deadline….

“Mr. Sanders tried to turn Democrats against Mr. Biden in Michigan by running against NAFTA, and charging that the former Vice President would slash Social Security and Medicare.  But Democrats don’t believe the latter, and trade has gained support among Democrats as Mr. Trump has co-opted the protectionist agenda.

“The mass voter mobilization of the proletariat that Mr. Sanders promises simply hasn’t materialized.  As that fact becomes clearer to Democrats who want to win in November, Bernie’s chances of a comeback diminish even more.

“Meanwhile, Mr. Biden showed strength among most voter groups that Democrats will need to win in November.  That includes older African-American voters in and around Detroit, but his reach extended to suburban voters in wealthy Oakland County and working-class whites without a college degree throughout the state.

“This coalition is remarkable considering that Mr. Biden barely had what you could call an organized campaign on the ground in Michigan and other states.  He was catapulted by free media after his wins in South Carolina and Super Tuesday, and by Democratic Party officials who rallied behind him to stop Mr. Sanders.  Turnout was also higher than in 2016.  If this coalition and enthusiasm don’t scare Republicans and the Trump campaign, they should.”

--For the record, Senators Kamala Harris and Cory Booker endorsed Joe Biden prior to Tuesday’s primaries.

--According to a new Gallup poll, more Americans approve of the job congressional Republicans are doing than of congressional Democrats performance – 40% vs. 35%.  The rating for Republicans in Congress has risen six percentage points since late October, before the impeachment of President Trump.  Over the same period, congressional Democrats’ approval rating has edged down three points.

Since Gallup began tracking such data in 1999, the average approval rating for Democrats has been 41% in Congress and 35% for Republicans.

Mitch McConnell’s approval rating has increased by six points since October to 33%, 48% unfavorable.

House Speaker Nancy Pelosi’s favorability is 39%, roughly the same as in October, but her unfavorable rating climbed from 50% in October to 55% now.

Senate Minority Leader Chuck Schumer’s current favorable, 31%, is in line with all of Gallup’s readings for him since 2017, but his 46% unfavorable rating is his highest.

--On the eve of its 10-year anniversary, the Affordable Care Act (ACA), signed into law by President Obama on March 23, 2010, is supported by a slight majority of Americans, 52%, per a Gallup poll.  This has occurred only twice previously in Gallup polling on the ACA since 2012.  Since Donald Trump has been president, the public has either tilted in favor of the ACA or been closely split.

But Americans’ views of the ACA remain starkly divided by party.  A record-high percentage of Democrats (94%) now approve of “ObamaCare,” while Republicans’ approval (11%) remains low and mostly unchanged over the past several years.

--Former movie producer Harvey Weinstein was sentenced to 23 years in prison on Wednesday following his sexual assault and rape conviction lats month in a case hailed as a victory for the #MeToo movement against sexual misconduct.  Weinstein’s defense team called the length of the sentence “obscene.”  He still faces charges in Los Angeles, but the 67-year-old is now likely to die in prison.

--In the largest study of known coronavirus cases world-wide, disease analysts at Johns Hopkins University said on Monday.  Most people who catch Covid-19 start showing symptoms roughly five days after infection.

The findings firm up estimates of the virus’ incubation period before signs of fever, coughing and respiratory distress appear, offering support for public-health control measures that recommend a 14-day monitoring and quarantine period for people who have been exposed to infection.

“We have a lot of confidence that the incubation period is around five days,” said Justin Lessler, an epidemiologist at the Johns Hopkins University Bloomberg School of Public Health who led the team that analyzed the progression of the disease in 181 cases.

“Some people will have really short incubation periods and some people will have really long ones,” he said.  “The goal is catching most cases that are infected and have symptoms developed before the deadline.”

Isolating people who may have been exposed can limit an epidemic in the early stages of an outbreak, but only if public-health officials are confident they know how long it takes for people to show symptoms once they have been exposed.  People are thought to be most contagious when they become symptomatic because the virus is typically spread when someone coughs or sneezes, according to the CDC.

--Finally, the National Oceanic and Atmospheric Administration announced last weekend that the U.S. winter (Dec., Jan., Feb.) was the sixth-warmest on record, NOAA’s records going back to 1895.

But this was for the lower 48.  Alaska had one of its coldest winters ever.

Now let’s all grab a beer.  But sit six feet apart.

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Pray for the men and women of our armed forces…and all the fallen.

God bless America.

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Gold $1528…$146 decline on the week!  This price action is nuts.
Oil $32.97

Returns for the week 3/9-3/13

Dow Jones  -10.4%  [23185]
S&P 500  -8.8%  [2711]
S&P MidCap  -14.0%
Russell 2000  -16.5%
Nasdaq  -8.2%  [7874]

Returns for the period 1/1/20-3/13/20

Dow Jones  -18.8%
S&P 500  -16.1%
S&P MidCap  -25.0%
Russell 2000  -27.5%
Nasdaq  -12.2%

Bulls 36.2
Bears 22.9

Have a good week.  Wash your hands.

Brian Trumbore

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