Archive for March 2020

With the economic toll of Covid-19 rising sharply, the government must offer a large stimulus package to prevent a precipitous decline in aggregate demand. We must stop firms from layoffs which will deepen the falloff. A new program of 2% of GDP or $400 billion would be a good start. Offer interest-free loans to small…

This past weekend, not only did the Fed cut rates by one full percentage point, but it also began flooding financial markets in general, and Treasury and mortgage-backed securities markets in particular, with cash so they function smoothly. They’re also making sure other central banks have ample access to dollars so that financial strains impact…

The Friday File: The world’s first St. Patrick’s Day parade (sadly postponed this year) occurred on 3/17/1762 in NYC and featured Irish soldiers fighting for Britain! 32.6 million persons or 10.1% of the US population, claim Irish ancestry, down from 38.7 million or 15.6%, as recently as 1990. Six cities in the US are named…

Based on the best data available, Coronavirus death rates are about 0.75% in both China (outside of Hubei Province where China was woefully ill prepared) and South Korea, where testing rates are high. With the number of deaths in the US at 38, I suspect the number of cases is roughly 5,100 or four times…

February’s net job growth was a shockingly strong 273,000, with upward revisions totaling 85,000 for December and January. Add an increase in the workweek and in pay of 0.3% each, and all looks well. But the survey only includes the first half of February, when equities were dazzling, the weather was spectacular, causing a surge…

The chances of a recession have meaningfully risen over the weekend and are now 50%. Driving the rise: an inevitable European recession, soaring Italian fatalities resulting in a rich western democracy locking down all of its population, and a sudden steep decline in oil prices. While the decline helps consumers, it will precipitate a huge…

Oil prices are in freefall; down 50% since 1/1/20. Global demand, which historically annually grows by 1,000,000 bbl/day, is now expected to decline by 100,000 bbl/day in 2020. Making matters worse, because Russia and Saudi Arabia were unable to agree on any sort of production cut, the Saudis are flooding the market to punish the…

The Friday File: There have been a total of 24 James Bond movies, and six actors have been 007. In a recent poll, the most popular James Bond was Sean Connery with 26% of the vote. Daniel Craig was a close second at 21%, with Roger Moore comfortably next at 12%. Pierce Brosnan was favored…

Monetary policy becomes toothless as rates approach 0%, but fiscal policy can shine. The government can cheaply borrow to: increase unemployment benefits to those recently laid-off, offer paid sick-leave to those without it who have Covid-19, give zero-interest loans to small business that may fail and lay off workers, offer free daycare to parents if…

While interest rates on Treasuries have hit all-time lows, mortgage rates have fallen, but not as much. There are at least three reasons. First, if rates keep falling, prepayments will increase, hurting mortgage investors. Second, lower rates suggest the economy is weakening and that can boost defaults, hurting lenders. Third, with re-fi demand already sky-high,…