The increase we’ve seen in the last two weeks make zero sense to me. It’s almost making me lose trust in the market as I feel like it’s rigged. We’re in a complete state of unknown, nobody knows when this will be over, unemployment raises like crazy, the US now realizes that coronavirus is hitting them the hardest...
The increase in the last two weeks is because it's becoming obvious that:
1) The US's response to this was competent.
2) The measures put in place are working.
3) The projections are improving substantially.
4) The time horizon is shrinking.
5) We are starting to understand how to treat this.
(+ "in the us").
Two weeks ago we were looking at places like Italy, and extrapolating that the US could see deaths in the millions. A week ago that projection went down to 100-200k, and yesterday it went down to 60k. Obviously that is still a massive catastrophe, but it's nowhere near the catastrophe we were fearing two weeks ago.
Additionally, the writing is on the wall that manufacturing is going to be moving away from China as much as possible in the near future. Much of that, for American companies at least, is going to come back to the US, probably at the hands of massive tariffs.
That's all good news for the US economy.
>US realizes the coronavirus is hitting them the hardest.
Where did you hear this? It is absolutely not true.
What should the US have done that other countries are doing?
We closed travel early, we started closing businesses early, and we hold daily press conferences with multiple medical and financial experts that are directly informing the entire population of what measures they should be taking.
edit: it seems like the general response to "what should we have done" is "the federal government should have shut down travel/businesses nationwide".
We still haven't really closed travel: even the source of the biggest current outbreak, NYC, still has airports operating! And not only for medical flights... you can just buy yourself a plane ticket from NYC to Miami if you want to visit. The first significant US outbreak was in Washington state in February, and there were no real travel-restriction measures to/from the Seattle area back then either, which is part of how it spread across the country. It probably wouldn't be possible to do a China-style quarantine of an entire region, like the way they completely locked down travel to/from Hubei, but we didn't do anything even 25% of the way there... SeaTac kept operating for weeks as if there was no issue, with large volumes of passengers exiting the source of the then-biggest outbreak.
We were also quite late on shutting down businesses, although some places later than others. Fairly high-ranking officials (the Oklahoma governor, the NYC mayor, etc.) were openly encouraging people to go out to big events as late as mid-March, weeks after there was evidence of community spread.
Testing, if they had spun up testing in January and mandated testing of every International traveler that had been to a country with an outbreak in the past two weeks they probably could ahve avoided a total shut down like we have now. The bungled testing is the original sin that got us to where we are now. The ventilator thing is a bit of a side show because by time you have a problem big enough to need a ton of ventilators it is already out of control.
The federal government should have enacted stay at home measures.
By leaving it up to the states, it's been bungled and the covid outbreak is lasting longer and killing more people. This leads to stay at home needing extensions and a further drain on the economy.
The Federal government does not have the authority, it is expressly prohibited. What you think “should” have happened is literally impossible without dissolution of the US government. This is not remotely controversial, the Supreme Court has visited this many times. States are sovereign and autonomous entities for this purpose, same as for most things.
A surprisingly small number of Americans have any understanding of the structure of our government, a glaring failure of our education systems. It is no wonder that foreigners have so many misconceptions about the nature of US government given how few Americans understand it.
It's a failure of our eduction system, but it's also a complete failure of traditional media.
My guess is that it is because most major traditional media outlets are national entities. It's easier for those national media entities to talk about a government that appears relevant to their entire audience (the federal government), instead of 50+ articles each scoped at the state level.
This damages peoples' ability to do correct sensemaking because they overweighting entertainment sources as if they were data sources.
Germany also has a strict Federal structure, but they managed. They called a meeting of all the state governments, together with the Federal government, and agreed on a set of procedures. Each state does things a bit differently, but they're largely on the same page now.
Why wasn't anything like this attempted in the US?
The US Federal government is similar to the EU; member States have considerable amounts of absolute sovereignty, their own forms of government, and their own legal systems. Importantly, the Federal government cannot operate in a State except with consent of the State, which is withheld in numerous instances. The Federal government works for the States, not the other way around, and the States are free to ignore requests by the Federal government on most matters. Why wasn't the response coordinated across the EU? Same answer applies to the US. It would be like herding cats. The Federal government can ask nicely but no one is required to listen
Externally, the US presents a common negotiating front. Internally, it is 50+ separate countries. Americans interact almost exclusively with their State governments when in the country, not the Federal government. This explains, for example, why there is no "national" ID in the US. Americans are citizens of their States, first and foremost, and each State has their own independent ID systems. What makes the US somewhat unique is that Americans have an absolute right to change their citizenship among the member States at any time. There was a time not that long ago when many Americans more closely identified with their State citizenship than their Federal citizenship.
The EU is not at all comparable to the United States. The US is most certainly not composed of 50 sovereign countries, and the US has a powerful central government - something the EU almost entirely lacks.
A much better comparison is the Federal Republic of Germany, which has a strongly federal constitution, much like the United States. The Federal government in Germany has very little formal ability to impose quarantine measures on the states, but it effectively managed to do so. The Federal government called a meeting with all of the state governments, which are individually run by different, competing political parties, and managed to have all the states agree to take a similar set of measures.
The Federal government in the United States could have done the same, but chose not to. The political reason for that inaction is clear. The President's #1 priority is the economy and, specifically, the stock market. He doesn't like the idea of quarantine measures, because of their impact on the economy. He spent two months downplaying the virus, and has now shifted to blaming the WHO for his own government's failure to contain the outbreak.
> There was a time not that long ago when many Americans more closely identified with their State citizenship than their Federal citizenship.
That is a strange but understandable misunderstanding of the relationship between the Federal government and the States in the US, it is not remotely like Germany. German states are much weaker both in theory and practice. The Federal government often cannot intervene unless the States ask them to, and the States control the terms of that intervention. People raise this issue in every major natural disaster under every administration, baffled why the Federal government doesn’t do more, oblivious to the legal and practical structure of the US government. In my own lifetime there have been many cases where States actively restrict Federal operations within their jurisdiction, with full support of the Federal courts.
By convention, the States typically allow the Federal government to operate freely within their jurisdiction, but it is not an obligation as it is strictly at the pleasure of the State. When there are strong disagreements between the Federal and State governments, this is a major point of leverage. Many Federal programs have been successfully killed by States prohibiting Federal operation in their States.
I'm very familiar with the constitutions of both the United States and Germany. From what you're saying, I strongly suspect that you're only familiar with one of them.
The German Federal government is highly constrained in what it can do in many areas of life, because those areas are under the control of the states. This is why there are 16 different high-school diplomas (Abitur) in Germany, for example.
Formally, there is a strong division of powers and responsibilities between the federal and state level in both countries. But in both countries, the Federal government wields a great deal of informal power. The Federal government has access to much greater financial resources, which it can wield to coerce states. My personal view is that this Federal power is even greater in the US than in Germany, due to the enormous political power of the President and the greater financial power of the US government (Germany has to deal with the ECB, while as Trump has shown, the President can directly bully the Federal Reserve).
If Trump had made strong statements about the need to impose quarantine measures early on, that would have had a big effect. There are many instruments at his disposal that he could have used to coerce recalcitrant state governments with. Instead, he downplayed the virus until mid-March, and has continually argued against the shutdown (see his Twitter thread). In Germany, Merkel met with the state governments, they agreed on a set of common measures, and she gave a televised address explaining those measures. She's been pretty consistent in her messaging, unlike Trump. Maybe that's because she's a physicist, and he's a real-estate mogul, or maybe it says something about what plays well in each country.
I was born a citizen of both Germany and the US and have worked in both countries. Using Germany as your exemplar was to your disadvantage. I have also worked internationally for the UN, and with multiple major governments at a high level. I am under few illusions.
That aside, you did not actually provide evidence contrary to my assertion.
You vastly understate the power of the US Federal government when you compare it to the EU, and understate the power of German states. I don't know what you mean by "evidence" here. We're not discussing some sort of experimental result. We're discussing the basics of the American and German constitutions.
"Enacting" stay at home measures are as simple as recommending them or working with states to set a standard set of measure, which did not happen. Instead, the focus was on keeping people working for the economy.
You're too quick to interpret something illegal just so you can jump on the complaining-about-education band wagon.
It has nothing to do with legality and everything to do with Republican governors being scared to act without Trump’s approval since they’re scared of losing their power. All Trump had to do was recommend stay-at-home orders be implemented by the states and it would’ve happened. You saw it with Florida and Georgia, and the Georgia governor had the nerve to claim he didn’t know there was asymptomatic spread.
I really think martial law at the federal level would have been the end of our democracy. I don’t think it’s a good trade off. The current measures aren’t doing so bad in the realm of possible outcomes.
Hell, have the President do a public address from the Oval calling on the states to issue a coordinated stay-at-home order. Lay out the reasoning, the benefits.
> “I’m in contact with [the White House task force] and I’ve said, ‘Are you recommending this?’ ” DeSantis said. “The task force has not recommended that to me. If they do, obviously that would be something that carries a lot of weight with me. If any of those task force folks tell me that we should do X, Y or Z, of course we’re going to consider it. But nobody has said that to me thus far.”
You’re being pedantic. Some Republican governors were scared to enact stay-at-home without Trump’s blessing. It has nothing to do with what’s legally possible in the US.
Competent would have been starting production of masks and ventilators in January, and closing borders at the same time, and mandating mask wearing in public in early February.
2. Shut down public life weeks earlier, once it became clear there was community spread.
The Federal press conferences feature a few informative experts, but they also feature one very prominent source of disinformation: the guy in charge. He downplayed the virus for months, and gives rambling, poorly considered, sometimes damaging statements (e.g., causing a run on a drug needed by Lupus patients, because he likes the idea that this drug is a miracle cure that will allow America to go back to work). His latest performance was a dishonest attack on the WHO, meant to redirect blame for mismanagement of the crisis onto that organization.
Comparing the Federal press conferences to those in other countries is really eye-opening. If you want to see what good, factual, relatively unpolitical press conferences look like, take a look at the daily updates in Singapore or Germany.
How about waiting for 4-6 weeks while the CDC shipped a buggy test before we started actually ramping up testing. We could have had a trajectory like South Korea.
Trump has been true to form in his lying and aggrandizing at every point, but I think the public has just gotten used to it. The CDC and state governors have been mixed, but the hardest hit states (WA, NY, CA) have been pretty aggressive.
If the US had does as well as South Korea it would have 1,300 deaths and ~200 new infections per day. Instead we have 10x as many deaths per capita and at least 150x as many new infections per capita today.
The implication of your assertions is that the market is irrational right now. You could make a lot of money buying some puts in July.
(And I hoped you’d appreciate the ambiguity in the opening sentence :-) Ultimately we’re all in this together and we all want what’s best for the country and world.)
Back in February, there were a handful of cases popping up here and there. And then growing in each hotspot from 5 to 10 to 20, etc. It didn't take long for things to get out of control.
Without some major game-changer in the next two months, its hard to see a reason why the same thing won't just happen again. Hopefully over the summer it's not as contagious due to hot weather.
The first game changer is widely-available testing, and contact tracing. The second game changer is a vaccine. We should have the first in a month or two. The second... who knows?
The reason why Trump went from "its a democratic hoax" to "100k-200k dead" was literally the Overton Window. Pick the biggest, most unlikely number, get everyone used to that, and deploy the puffery when it doesn't happen. Markets are responding to that. It was a pretty good move because that argument co-opted the opposition who was claiming a million or more would die. That was BS, and the administration's position calls them on it and puts them in a position of declaring a win because the unreasonable number is... unreasonable. But as for the market? This is all a game.
EDIT: My post will probably age-like-milk when we're still in lockdown in November with 300k dead and we all have long hair and are wiping our butts with the lawn like sick dogs.
What’s so strange to me is how much trust is being placed in these test results. Across the country doctors are telling people they can’t test people so stay home in self quarantine until you have difficulty breathing. Consider, 1/2 of all tests in New Jersey have been positive, nationwide it’s 1/4th for a disease that shares many symptoms with the flu.
While the official infection rate might have more or less stabilized it’s not going down and it’s vastly low. So, what’s making them think 100-200k is a high enough to call it a safe benchmark?
By official numbers NYC infection rate is already 1%, for that to be low and infection rates steady it’s going do easily hit double digits very quickly.
I don’t understand the obsession with testing. Ok, if we are doing random samples or antibody tests, then I agree it’s important so we can understand the true prevalence and mortality rate. But that’s not what we are doing right now.
Otherwise, it just seems like a political exercise to boost the numbers and cause panic. If you’re symptomatic, is the best course of action really to leave your house for a test? It seems like it would be better to call the hospital and let them know your condition (so they can estimate upcoming hospitalizations). Then, stay at home and only go to the hospital when your symptoms worsen. Get tested when you go to the hospital.
Many people are infectious without symptoms, others have yet to show significant symptoms. So to actually stop the spread you need to discover these people and quarantine them. South Korea very effectively used this policy and they turned a significant outbreak to near total containment. https://en.wikipedia.org/wiki/2020_coronavirus_pandemic_in_S...
Going from a peak of 1,062 cases per day to 27 yesterday is huge.
Manufacturing will be moving to places like Vietnam and Malaysia. Nothing significant is going to be domesticated. The vaunted Foxconn factory in Wisconsin is still vapor. China would have already had it done and running.
A bunch of people sold off in a panic, a lot of volatility hit, people like Buffett bought at the bottom (and publicly advised others to do so), so who knows.
Unemployment is artificially high for now. Companies are incentivized through PPP to lay people off, especially with UI bonuses.
How are companies incentivized to layoff staff through PPP? My understanding is one of the eligibility requirements is that you can't have reduced your staff since Feb 15th, and if you have, you need to re-hire them to become eligible.
The entire point of PPP is to incentivize companies _not_ to layoff their staff.
You can lay them off. You just have to rehire them by June 30th. And 75% of the loan must go to payroll, so you can't axe the entirety of your staff. If you can layoff someone who makes close to the maximum for UI, with the $600/week bonus, the laid off make an adjusted $1000/week for the duration of the bonus + qualifying period. That's a pay raise for many employees in the service sector - so the employee is also incentivized to be laid off to make close to as much as they did (or more!) and do absolutely nothing.
This is all contingent on you re-hiring them, of course. Otherwise it's bad for the employees and you might get penalized under PPP. But restaurants around the nation are axing their entire staff and promising to bring them back June 30th, while maxing out PPP loans. Plenty of other businesses, too.
>> The entire point of PPP is to incentivize companies _not_ to layoff their staff.
Yes, I am aware. Would you also believe that the government had competing incentives with another program in unemployment insurance that caused this situation inadvertently?
We almost did this at my company; our accountant ran the numbers and we would have benefited to the tune of nearly six figures in doing so (spending the excess on "qualifying purchases" with the remaining 25% like rent), but I felt bad exposing my employees to the phone trees and websites of the unemployment office. They're overloaded AND incompetent.
There's no downside risk. The USG and Fed will do everything in their power to keep us in a continuous state of "numbers go up." Borrowed billions of dollars to buy your own stock, and now you're underwater? Don't worry! We'll bail you out.
"Inflationary spiral" is the explicit policy. The assertions seem to be that stocks must always go up, and housing must always go up. That's inflation. Manufactured goods don't go up as much because they continually cost less to make and distribute, usually through offshoring and consolidation, hollowing out local economies.
There's a difference between a couple percent a year to convince people to invest rather than hoard, and becoming Zimbabwe or post war Germany where we're printing new larger denominations of dollar bills like a real inflationary spiral causes.
You say "invest rather than hoard", I say "waste rather than save". With how the rent treadmill is presently binding up, it certainly looks like we could have used more saving by all players, large and small.
These moves by the Fed have essentially been necessitated by most everyone having to put their savings in the Wall St casino ("the Line always goes up"), a circular causality that will be harder and harder to repudiate - ie a "spiral". It's just a slow-starting spiral due to being the world reserve currency.
It doesn't make much sense to me either, but I have a couple theories. One is that the spending bill that made it through congress and/or action by the Federal Reserve have caused a temporary bump. Another is that the infection rates in the U.S. have slowed somewhat and this is being interpreted (correctly or incorrectly) that we're at or near the infection peak, and that the worst-case scenario is probably averted. A third theory is that even with all that's happening, most people who had money before all of this began still have money, and they're using it to buy stocks while they're on sale.
My wild-ass-guess is that many companies can go into hibernation of some type. Furlough enough staff, take some government aid, stop wearing out tools, stop consuming raw materials. If you're a car manufacturer, for example, sure you have _some_ costs rights now with production lines stopped, but just how much?
VW, is burning 2bill a month in cash, just by sitting idle....
Furloughing can save maybe %20 of the costs.
A lot of the fixed recurring costs (costs and obligations that keep going even if you are not producing anything) make at least 30% of the producing value....
So, just for VW, if it sits idle for 6 months it will cost 12 Billion dollars.....
That's just one example, but there plenty of companies with the same spot. They can absorb few months of this situation, but after that all bets are off.
Your article is 2 weeks old, since which VW have furloughed many staff (also worth noting it's $2bn per _week_). Where do you get your minimum baseline on staff cuts only saving 20% from?
a lot of investors have a lot of cash equivalents on their hands after the market plunged few weeks ago. That cash is set on fire with $2T in stimulus and more coming. There are not that many investment alternatives with interest rates becoming negative elsewhere
