America

Now media has an issue with Trump’s $3,100 stake in Sanofi

The story just keeps getting more deranged. Now The NY Times is taking umbrage at the fact that Trump’s family has a $110k stake in a Dodge & Cox global mutual fund that just happens to have Sanofi, the maker of Plaquenil (hydroxychloroquine sulfate), as its largest holding. A whopping 2.9%! Which means his family stake would be c.$3,100.

One imagines if that same fund owned stakes in GM or Boeing that he should be accused of skimming off the top because he is ferried in The Beast and flown around in Air Force One. FedEx is in there too. Better keep an eye on Melanie and Ivanka’s outgoing courier mail to ensure that UPS is also getting a fair share.

For the benefit of The NY Times, it might help to know that Trump has no legal control over the asset allocation choices made by a global mutual fund other than choosing to buy or sell it. Furthermore Sanofi has been a dud stock over the last 5 years in terms of performance.

It would be better had the NYT taken pot shots at Trump’s dreadful choice in asset manager given Sanofi has been such a dog.

Perhaps it would be nicer to think that the drug actually works. Certainly seems more promising than anything else out there to date.

Sad to think that The NY Times would seemingly prefer the drug fails and people die than Trump get an windfall off his 401k.

Trump Derangement Syndrome heading to The Hague for crimes against humanity?

Hague

You have to hand it to Democratic lawmakers who get triggered over anything. When collusion and impeachment failed domestically, why not call upon The Hague for charges of crimes against humanity? Hmmm.

Never mind that Speaker of the House Nancy Pelosi was encouraging San Franciscans to “come to Chinatown and join” crowds at a parade in late February. Forget the Democratic NYC Health Commissioner Oxiris Barbot downplaying the health warnings by telling the residents to immerse themselves in Lunar New Year festivities because stigmatization is a far bigger threat to people than a pesky virus.

Guess who is now telling people to stay at home? Yep, you guessed it – Oxiris Barbot. Even though she retweeted someone’s praise of her status as the first Latino female to occupy the post after it had all gone pear-shaped! If only one’s abilities were seen as more important than their identity…NYers would have been happier with an old white guy provided his medical advice kept the city from holding the highest infection rates.

Never mind that The Hill had criticized Trump’s travel ban on Feb 7th as unnecessary, parroting none other WHO, to then write on April 5th that he hadn’t done enough to block travel into the US. Which is it? The NY Times was happy to run a story on Feb 24th saying Trump’s travel ban was more an “emotional or political reaction.

Do Democratic House representatives hold such little faith in the domestic judiciary that Trump needs to be tried in an international court over supposed domestic crimes against innocent civilians? It won’t be long before Nancy Pelosi launches another impeachment trial over coronavirus. We encourage her to do it for the sake of revealing just whether she has any ties to America.

Rep Tavia Galonski’s tweet came shortly after Trump’s media briefing in which he once again spoke of hydroxychloroquine sulfate, a drug which he has previously reported has shown promise as a means of treating COVID-19.

How is it that the mainstream media outlets backflipped on their initial criticism on hydroxychloroquine to acknowledging its potential as reported by the medical profession to flip back to “irresponsibility” again. No country has a silver bullet and in such circumstances

Rep Galonski may have a case if the state was force-feeding strapped down patients against their will. The FDA says otherwise.

On March 28, 2020, the FDA issued an Emergency Use Authorization (EUA) to allow hydroxychloroquine sulfate and chloroquine phosphate products donated to the Strategic National Stockpile (SNS) to be distributed and used for certain hospitalized patients with COVID-19. These drugs will be distributed from the SNS to states for doctors to prescribe to adolescent and adult patients hospitalized with COVID-19, as appropriate, when a clinical trial is not available or feasible. The EUA requires that fact sheets that provide important information about using chloroquine phosphate and hydroxychloroquine sulfate in treating COVID-19 be made available to health care providers and patients, including the known risks and drug interactions. The SNS, managed by ASPR, will work with the Federal Emergency Management Agency (FEMA) to ship donated doses to states.

The FDA’s latest fact sheet on hydroxychloroquine is here.

To be honest, who needs the FDA when we can rely on the tweets from a NY Times best-selling author with a law degree, Kurt Eichmann, who proposed 11 questions the White House press corps should ask of Trump with respect to hydroxychloroquine.

1. What dosage should people take?
2. How long should people take it?
3. What studies are you relying on for dosage and time?
3. Are you saying this is prophylactic or post-diagnosis?…(while he won’t know what the last question means if he says anything close to prophylactic)
5. How does hydroxychloroquine prevent viral infection?
6. Since hydroxychloroquine is an immunosuppressant, how isn’t there a risk that it will *increase* the risk of infection?
7. What studies have you reviewed showing it has a preventative effect because I can’t find any. (they don’t exist.)
(If he says for treatment…)
8. At what stage of infection should people take the medicine?
9. What should people with lupus and other autoimmune diseases do to find their medication, since your recommendations have led to a national shortage of hydroxychloroquine?
10. Will the government subsidize lupus & rheumatoid arthritis patients, given the price-gouging happening with these drugs?
11. Are you concerned about lupus and autoimmune patients who can’t find their medication refusing to vote for you because they’re now in pain?

As with any drug, a doctor prescribes medication based on the severity of illness and a whole range of other factors – size, age, gender. Trying to get Trump to answer a series of “gotcha” questions in the hope he bungles some of them just smacks of how little integrity there is in journalism. If Trump told journalists that drinking Drano was great for fixing stomach ulcers, would they believe him? Wouldn’t readers prefer medical opinion?

Let’s deal with the facts.

Hydroxychloroquine sulphate is an FDA approved drug dating back to April 1955. It is best known under the brand name of Plaquenil. There are generic manufacturers such as Teva and Mylan are already making the drug. In the US, it is strictly prescription-only medication. It has been approved to treat malaria

The 65-year-old Plaquenil and its 25-yo generic brothers haven’t been approved for the application of COVID19, which, as we know, in and of itself is a brand new strain of pathogen. So the “drug” has been approved but the application has not.

It is worth noting that it takes on average 12 years and over US$350 million to get a new drug from the laboratory onto the pharmacy shelf. At the company level, it undergoes around three and a half years of laboratory testing, before an application is made to the U.S. FDA to begin the testing on humans. Only 1 in 1000 compounds that enter lab testing will ever make it to the human testing stage.

Which is exactly why the FDA stated in its release late last month that there isn’t enough hard data due to a lack of clinical trials. Stands to reason that a drug we’re trying to find a cure for hasn’t a cure.

The FDA Accelerated Approval pathway was introduced in 1992 so that drugs to treat life-threatening diseases could be brought to market to make a significant impact on the course of diseases. For example, many antiretroviral drugs used to treat HIV/AIDS entered the market via accelerated approval, and subsequently altered the treatment paradigm.

Clearly, there has been no chance to conduct clinical trials on Plaquenil on COVID19 to get official FDA approval. The side effects of Plaquenil, when taken for malaria, are well known with 65 years of data. It is a question of whether the impact of the drug causes other side effects when used to treat COVID19. Hence why the FDA is trying to ensure that people are aware of the risks if they elect to take it.

Yes, the president has a habit of saying unnecessary things. He can be unpresidential at times. We have never hidden that.

However, at what point is Trump deserved of standing trial in The Hague given the timeline of events and an insane liberal media? Perhaps President Xi of China would be a more worthy respondent in the International Criminal Court for the cover-up which led to the outbreak in the first place.

If FDR had to deal with Trump’s press gallery

Image may contain: 16 people, possible text that says 'Mr. President!! Do you feel guilty for all the sailors we lost lost Sunday? Why do you insist on calling it"the "the attack on Pearl Harbor? Many say that your oil embargo Japan led the war. there blood on your hands? What about the sailors trapped in Arizona? You've had years to prepare. Why wasn't our Navy ready? Are you going to resign? If FDR had to deal with a press corp like President Trump's.'

There can be no doubt the mainstream media has been utterly lacking in journalistic integrity since Trump took office.

Just when we thought lower depths couldn’t be plunged, COVID19 has proven that ethics in reporting will only return when the media loves America more than they hate Trump.

Who left the currency printer on?

CBs

This chart shows how fast he printing presses have been flying to boost the “asset” line of the Bank of Japan (blue), the US Federal Reserve (red) and the ECB (green).

The BoJ has grown its “assets” from ¥100 trillion in 2008 to ¥585 trillion today. Yes, that is right the Japanese central bank has printed so much money that the assets on the book are the equivalent of 100% of GDP, 5x that of 12 years ago.

Does MMT predicate that it is ok to print another 100%? After all the existing Japanese national debt pile is ¥1000 trillion. So who is counting?

We note that the shares in Japan’s biggest currency printing press maker Komori (6349) quadrupled during the boom and only tapered off as the BoJ slowed the rate in early 2018. Maybe coronavirus will get the BoJ back to its wicked ways as it buys up even more of the stock market??? It already owns 58% of outstanding ETFs and by stealth has become a top 10 shareholder in almost 50% of listed stocks. In a sense, we have a trend which threatens to turn Japan’s largest businesses into quasi-state-owned enterprises (SoE) by the back door.

The US Fed has grown “assets” from just shy of US$1 trillion at the time of GFC when the economy was worth US$15.7 trillion or around 6%. There was a nice breathing period between 2014 and 2018 before tapering started.

However, in October 2019 we noted that the Fed was getting a LOT more active in the repo market. Now with coronavirus upon us and the volatility in capital markets at the start of 2020 we can see that another $1.6 trillion has been added to the asset line to a record $5.8 trillion or around 30% of current GDP.

The European Central Bank (ECB) has powered up its balance sheet too from around Eur 1.4 trillion to Eur 4.7 trillion. or 40% of Europe 19’s Eur 10.7 trillion GDP. At the time of the GFC, Europe 19’s combined GDP was Eur 9.3 trillion meaning ECB assets were only 15% of the total. Note the ECB has discontinued reporting its assets.

The point is with the world economy about to hit a brick wall, will markets just face more central bank distortion? Surely no one honestly believes that central banks have got this under control with such an appalling record.

To be honest, if modern monetary theory (MMT) was truly working to date, there should be no unemployment, no poverty, no taxes and we could have easily funded all that renewable energy without even having a debate. Just print and spend.

Therein lies its fatal flaw of MMT. Eventually, conjuring money out of thin air hits terminal velocity. Truth be told the tales above show that each asset that the central banks have bought has created less and less impact in the real economy. Velocity has been sliding for decades.

It is a bit like taking morphine to kill the pain. Take too much and the side effects are:

  1. nausea and vomiting
  2. constipation
  3. itching
  4. loss of appetite
  5. lower body temperature
  6. difficulty urinating
  7. slow breathing
  8. sleepiness
  9. changes in heart rate
  10. weakness
  11. dizziness upon standing up
  12. confusion
  13. nervousness
  14. erectile dysfunction
  15. osteoporosis and risk of fractures

Not unlike the symptoms being shown by the global economy today.

When the people you least expect praise Trump on COVID19 response

The View, hosted by Joy Behar is about as liberal as a show can get. The members of the panel are all suffering chronic Trump Derangement Syndrome.

Instead of wishing that Americans are safe, she tried to pillory California Governor Grant Newsom over his positive remarks about Trump, making out as though he was kissing the ring to get help. He replied,

Let me just acknowledge the frame of your question. We’re involved in over 68 lawsuits with the Trump administration, and so there’s no question we have had our differences of opinion on many issues but I just want to remind you that you and many others that maybe are not aware of this. We have been at this since late January. California got a head start in many respects where no one was really paying much attention. We started working with the administration directly to get these repatriated flights from mainland China into the state of California. Many states turned their back on those flights and those repatriation missions. California embraced them. We also had that “Grand Princess,” that large cruise ship where we worked very collaboratively with the federal government developed strong relationships of trust with emergency planning and how we can bring those passengers back into our diverse communities and all across the rest of the country.

As a consequence of that, our relationship began earlier than most, and so from that perspective, all I can say is from my perspective, the relationship has been strong and I’m not doing it to kiss the ring. I’m not doing it in a way, you know — I’m just being forthright with the president. He returns calls. He reaches out. He’s been proactive. We got that “Mercy” ship down here in Los Angeles. That was directly because he sent it down here. 2,000 medical units came to the state of California, these fms, these field medical stations, and that’s been very, very helpful and to the extent we’re going to need more, and I’ll let you know in a few weeks if that relationship continues.

What were we saying about media narratives that are so removed from the truth?

Why haven’t the media picked up on this Executive Order?

When Barack Obama became president in 2009, he eliminated the White House Health and Security Office, which worked on international health issues such as pandemics. However, after grappling with the 2014 & 2015 Ebola outbreaks he eventually set up the White House National Security Council Directorate for Global Health Security and Biodefense team in the final year of his 2nd term.

If we truly believed the media narrative, the spread of the COVID19 outbreak was a direct consequence of the Trump administration disbanding Obama’s 430 person team.

The truth is that during the summer of 2018, Trump’s NSC merged three directorates to make preparation for bioterrorism threats or pandemics seamless. The name was disbanded. Not the function.

Journalists had no qualms shaping the story as yet another Obama legacy torched based on ego alone. Trump Derangement Syndrome rules absolutely.

Which begs the question why there was no widespread reporting or recall of Trump’s Executive Order from September 2019? His demand prioritizes coordination and response to pandemics and the establishment of a National Influenza Vaccine Task Force.

Point 1(e) states clearly,

The seasonal influenza vaccine market rewards manufacturers that deliver vaccines in time for the influenza season, without consideration of the speed or scale of these manufacturers’ production processes.  This approach is insufficient to meet the response needs in the event of a pandemic, which can emerge rapidly and with little warning.  Because the market does not sufficiently reward speed, and because a pandemic has the potential to overwhelm or compromise essential government functions, including defense and homeland security, the Government must take action to promote faster and more scalable manufacturing platforms.

Section 2 goes further,

Policy.  It is the policy of the United States to modernize the domestic influenza vaccine enterprise to be highly responsive, flexible, scalable, and more effective at preventing the spread of influenza viruses.  This is a public health and national security priority, as influenza has the potential to significantly harm the United States and our interests, including through large-scale illness and death, disruption to military operations, and damage to the economy.  This order directs actions to reduce the United States’ reliance on egg-based influenza vaccine production; to expand domestic capacity of alternative methods that allow more agile and rapid responses to emerging influenza viruses; to advance the development of new, broadly protective vaccine candidates that provide more effective and longer lasting immunities; and to support the promotion of increased influenza vaccine immunization across recommended populations.

In short, before coronavirus was even on the radar Trump had already enacted a policy to better prepare industry to be able to supply an actual “response”. Furthermore the team wasn’t disbanded. It was merged on efficiency grounds.

As Mark Twain said,

“If you don’t read the newspaper you’re uninformed. If you read the newspaper you’re misinformed.”

The Fed firemen are also the arsonists

Jim Grant of Grant’s Interest Rate Observer has a great article pointing out the irresponsibility of the US Fed. It criticises the very conditions that made the outcomes of coronavirus way worse than had they administered sensible monetary policies decades ago. FNF Media has been saying this for years. Now we are facing long overdue nemesis. It is true of the overwhelming majority of unimaginative MMT ‘me too’ central banks.

Grant wrote,

It took a viral invasion to unmask the weakness of American finance. Distortion in the cost of credit is the not-so-remote cause of the raging fires at which the Federal Reserve continues to train its gushing liquidity hoses…But the firemen are also the arsonists. It was the Fed’s suppression of borrowing costs, and its predictable willingness to cut short Wall Street’s occasional selling squalls, that compromised the U.S. economy’s financial integrity.

FNF Media keeps on hearing tales about the failure of evil capitalism. When the actions of central banks stifle the free market from achieving price discovery, distorted capitalism will inevitably backfire.

From hereon, sharp pain will be the only effective – and quickest – way to resolve this mess. Governments need to ensure bad companies go bankrupt by rejecting bailout money to zombie companies that will just be a drag on the economy.

Instead of doling out tax dollars, the government should take equity in any business that receives money. Taxpayers deserve a return and by this methodology, it will enforce a mindset that always rejects propping up companies with failed business models. Instead of the government calling the shots, the expertise of commercial lenders should be tapped, a valid point made by Jonathan Rochford.

Unfortunately, this will cause huge short-term disruption and impact large swathes of the community but it will allow markets to clear and provide a platform for risk to be priced appropriately. It is like yanking off a Band-Aid. It stings at first but the recovery becomes far more sound, based on rational economics. Failure to do so will just lead to a protracted Frankenstein economy which will frustrate the majority.

The sad reality will be that Western governments will try to emulate Japan’s lost two decades by crawling on our belly making marginal inches forward. This is somehow seen as superior to hitting the giant “reset” button.

The only major difference being that the Japanese monoculture is experienced and better suited than any other nation to share grief. Western cultures are not remotely close to being able to tolerate such conformity. Japan is not capitalism with warts. It is socialism with beauty spots. It will pay to remember this. In the West, we will demand that others atone for our mistakes. Moral hazard will be the order of the day. This mentality must be stopped dead in its tracks.

Grant reinforced our long-held view on distorting capital markets with this,

The Fed commandeered investment values into the government’s service. It seeded bull markets in the public interest…But investment valuations don’t exist to serve a public-policy agenda. Their purpose is to allocate capital. Distort those values and you waste not only money but also timeLike a shark, credit must keep moving. Loans fall due and must be repaid or rolled over (or, in extremis, defaulted on). When the economy stops, as the world has effectively done, lenders are likely to demand the cash that not every borrower can produce.

We must not forget that post-GFC authorities have been asleep at the wheel even after the introduction of poorly thought out red tape designed to protect us.

Right before the regulators’ eyes, so many blue-chip corporations (e.g. Boeing, GE) binged on ultra-cheap debt to buy back their own shares just to chase short term performance incentives. In recent years, companies like Boeing and GE spent around $45 billion each aggressively buying back their own stock despite being in the midst of severe balance sheet deterioration. Both are trading in a state of negative equity today.

Ford Motor has a junk credit rating. GE & Boeing won’t be far behind them. Over 50% of US corporates are trading one-two notches above junk.

IMG_0523.PNG

The financial community has merely taken advantage of all of this short-termism. Where were the financial analysts doing forensic work on companies? All of this balance sheet deterioration was plain to see.  Why couldn’t they see the obvious long term deterioration in cash conversion cycles? How could they miss that aggregate corporate after-tax profitability has been trending sideways since 2012? Where were the biopsies? We will be witness to plenty of autopsies that were preventable.

Corp Profits After Tax

For Australia’s part, 28 years of unfettered economic growth has bred untold complacency. Only now will we realise the conceited arrogance of government and industry alike. One day we will realise that all of the onerous regulations dripping in ideology (e.g. climate/environment) to confound foreign investment will blow up in our faces. They will not have forgotten that Australia is an unfriendly place to conduct business.

Australia has behaved like a bloated drunk bishop looking down upon his destitute disciples climbing the stairs on hands and knees putting what is left of their pitiful savings into the collection tin. From now, the roles will be reversed at prices that will be highly unfavourable such will be our desperation. Not to mention our currency could well depreciate to a degree which makes us even more vulnerable to foreign predators. Setting our FIRB at $0 will be irrelevant if we fold to the whims of the first suitor that shows interest. The show will be on the other foot.

In press conference after press conference, we continue to be told that hibernating companies will spring back to life and it will all be a case of ‘keep calm and carry on!’We hate to sound negative here.

However, we believe that we are merely being realistic about what is to unfold. The coming depression will force us to become truly appreciative about just how well we have had it while governments have distorted our markets. Had we truly reflected on decades of prosperity instead of wailing about how life has never been worse, things might have turned out differently. We are about to get a true taste of the latter.

On reflection, some positives will come out of this tragedy because we will focus on things that matter rather than getting enmeshed in the theatre of the absurd – identity politics and the cancel culture.

Coronavirus might be a black swan event to the global economy but we have been complicit by allowing our lawmakers and regulators to play slalom with the icebergs. We all knew our overloaded ship was in danger of listing before we left the safe harbour but it was simpler to be suckered into the weather forecasts that predicted endless sunshine and eternal millponds. The engines have now stalled because the tanks are empty. We find ourselves in the middle of a pitch-black, stormy night with howling gale-force winds and a 40-foot swell. Some continue to cling on to the blind hope that the incumbent crew can bail fast enough to avoid the economy capsizing.

It will be all in vain because the ship’s crew left a tape recorder playing on a loop over the tannoy promising passengers to stay in their cabins while they secretly slipped away in the early hours on the only lifeboats available.

Central banks had one mission – create confidence. They have been complicit in the failure. They doubled down on all of the same policies that got them in trouble in the lead up to GFC. They had a simple task of telling governments to embark on structural and tax reform. Instead, they appeased their masters by endlessly cutting rates.

Never again must central banks be allowed to use QE to rescue the economy in a downturn. Central bank balance sheets should be forced to unwind all QE assets. Interest rates must be allowed to set at normalised rates which allow positive returns but avoid reckless borrowing.

While a lot of this piece might sound pessimistic we simply view it as being a realist with experience.