• GB Davis

A 4-5yr Recession is a Depression - 5/16/20

CDC website link for Cumulative COVID-19 Death Data and corresponding third party academic models, including 1, 2, 3, 4-week forward projections downloadable via Excel (this is one source I refer to frequently for projected deaths, headed towards 100k by June, 200k by August) à https://www.cdc.gov/coronavirus/2019-ncov/covid-data/forecasting-us.html


"Los Angeles to shut off water, power of nonessential businesses that refuse to close amid coronavirus"  The power grab in Socialist California is unbelievable - California will have the lowest death rate per million capita of any state in the U.S. - their measures are simply unnecessary and 100% for political gain, seeking to use "science" to fool the unintelligent and those in social need of state assistance.

Put Activity Open Interest for 0619 Expiration has increased for Financials (proxy $XLF).  Buffett selling off more than $GS. CDS for U.S. banks continues  to widen.  European banks trading very low.  Short interest in $CAT up.  Short interest in $C up.  $WFC price targets lowered.  $UBS lowers price target on $CBRE to $41 from $59, CFRA cut $CBRE price target to $35 from $57

ING Macro Team: "Copper seems to be struggling to extend further gains from here as it now stands at a crossroads. We doubt risk appetite will return to copper and the broader industrial metals group in the near term"

Google in the anti-trust cross-hairs - funding for gov (fed, state) all but cratering - where you going to look, who got money? Yet, Facebook ($FB) is a much more obvious anti-trust violator than Google.


St. Louis Fed 2Q20 GDP Nowcast: -48.1%; Atlanta Fed 2Q20 GDP Nowcast -42.8%, NYFed 2Q20 GDP Nowcast -31.05%.  ECRI Fwd US Weekly Growth is at -32.6% and week-over-week "improvement" is nothing to be excited about - the 8-week average rests at an all-time low.  By ECRI's "Level" for this metric, the U.S. is running at 4Q11 speed (over 8 years of growth, poof).


With 90% of companies reported, S&P 500 Q1 GAAP earnings down 64% year-over-year. This will be the lowest quarterly earnings for the S&P 500 since Q1 2009. via Charlie Bilello

Equifax insider selling increasing - will credit ratings with 20% unemployment mean less?  Also, not to sound any alarms but Unemployment (U3) is headed towards 20%, unprecedented since the Great Depression.  For the last five (5) recessions, the duration, measured in quarters of the recession in the U.S. has an 80% correlation to the absolute peak-to-trough change in U3.  As the last recession, GFC, was 7 quarters in length, we believe that this recession will likely be two times in length or more than the GFC, or 3.5-4.5 years. The United States will have many choices ahead of it: (1) to burn fiat and the lives of its children and grandchildren via further indebtedness and currency debasement, the path that France took during the French Revolution; (2) to stop being charitable outside the U.S. (OUS) while many in the U.S. suffer - a prudent decision, one that Obama and most Democrats are incapable of making in their perpetual grasp for power (I am not a registered GOP, and believe steadfastly in balanced budgets and LOW-to-NO government involvement in the lives of citizens) (3) to continue the Congressional dual-party blame game, while Congressional approval ratings continue to sit in the low-teens at a fraction of that of either President Trump or former President Obama - best the obvious question, is popular opinion and populism sufficient to have these parties maintain office?  The U.S. is a sickly patient, yet if attended to be doctors, wouldn't they have to TEST and be qualified - why do we not have this requirement for politicians left to steward the country?  It is time for a legitimate multi-party system a la Canada, France, Germany, Mexico, etc. - if you cannot be objective, compromise and "cross-the-aisle" you have no place in Congress or receiving tax payor dollars to live. (4) to engage in war (e.g. Venezuela) under the guise of liberation and capitalism (5) to use a carrot-and-stick approach for any and all federal funding provided to insolvent or illiquid states (6) calls for a New New Deal, something the Dems will be doing, need to be heeded: coming out of WWII, the U.S. had more options than it has now: Productivity was high, influencing the Velocity of Money worked, every dollar of additional sovereign debt had a higher effect on GDP than it does today, Infrastructure projects (think something as simple as the interstate highway system, roadside hotels, food outlets) high productivity projects - infrastructure this go, needs to do the same: think healthcare infra, think 5g (both things China is doing), think MagLev (why not?) - and think government optimization as WEF ranks the U.S. #73 in terms of Government Waste - the U.S. could legitimately move 20+ spots, be ranked #50 globally - still horrific, and not lose services (the big Dem fear mongering) in the process - but we need legitimate checks and balances for that to happen - otherwise we continue on the path that has led to massive corruption in Brazil. We believe with most major economies clearly well in excess of 60% Debt : GDP levels and now many strong CBs taking similar debt onto their books - the game of cards is up - COVID is a pause in time - and with it, rather than war, rather than negative interest rates - this is an opportunity for a global re-set in debt stocks Paris Club style.  This is the most prudent and best path - far superior to negative interest rates. This is only the beginning. The beauty of economics is in (mostly) objective display of alternatives for policy making purposes - we know that Debt : GDP over 60% does not work.


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