A good night’s sleep and I wake up with interesting things to consider in the day ahead. And so began this morning’s adventures in “Spreadsheet Land.”
In my (crazy, nutcase, Wildman in the Woods) view, we may slow the descent of markets with the Fed move this morning. And it would be a lovely “Rhyme Off ’29” if we came to rest around the same levels as the Great Depression did. Let me show you what I mean:
This is NOT to say the resumption of the decline today (as shown in the 5 AM futures pricing) will be stopping. But, IF it were to, we can take the percentage decline from the September top in 1929 to the first major low – 39.64% and subtract from that the decline from out peak on February 19th. We’re down 33.89% based on early futures pricing.
That would leave a further 5.75% of downside IF (and it’s preposterous to really believe it would roll-out this way…) we were to have a near-perfect mirror of the previous Depression’s track.
But, here’s what it looked like in the early daily data: Before the Fed hit : PRINT. Pay attention to the two red “candles” – the left one being Wave 1 down and the one resuming this morning is Wave 3. At some point, we will turn and the green “candle” will give a playable trade that could last a few weeks.
For this morning, however, we are sitting in the “Blue Zone” which I’ve been saying is where this down leg could run.
But, could the Fed action light off the “green candle move?
In Jumps the Fed
The U.S. (not really) Federal Reserve jumped in today with plans to spend up to $4-trillion of (4% real value compared with 1913) money to bail out the economy: First, here’s the FOMC Announcement just out:
“Effective March 23, 2020, the Federal Open Market Committee directs the Desk to undertake open market operations as necessary to maintain the federal funds rate in a target range of 0 to 1/4 percent. The Committee directs the Desk to increase the System Open Market Account holdings of Treasury securities and agency mortgage-backed securities (MBS) in the amounts needed to support the smooth functioning of markets for Treasury securities and agency MBS. The Committee also directs the Desk to include purchases of agency commercial mortgage-backed securities in its agency mortgage-backed security purchases.
The Committee also directs the Desk to continue conducting term and overnight repurchase agreement operations to ensure that the supply of reserves remains ample and to support the smooth functioning of short-term U.S. dollar funding markets. In addition, the Committee directs the Desk to conduct overnight reverse repurchase operations (and reverse repurchase operations with maturities of more than one day when necessary to accommodate weekend, holiday, or similar trading conventions) at an offering rate of 0.00 percent, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day..”
Neil Kashkari of the Minneapolis Fed admitted today that the Fed has unlimited ability to make up money electronically…which is why we have referred to recent economic actions as MUM – Making Up Money!
Now, an overview from the Fed press release summarizing the moving parts:
- Support for critical market functioning. The Federal Open Market Committee (FOMC) will purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.
- The FOMC had previously announced it would purchase at least $500 billion of Treasury securities and at least $200 billion of mortgage-backed securities.
- In addition, the FOMC will include purchases of agency commercial mortgage-backed securities in its agency mortgage-backed security purchases.
- Supporting the flow of credit to employers, consumers, and businesses by establishing new programs that, taken together, will provide up to $300 billion in new financing. The Department of the Treasury, using the Exchange Stabilization Fund (ESF), will provide $30 billion in equity to these facilities.
- Establishment of two facilities to support credit to large employers – the Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issuance and the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for outstanding corporate bonds.
- Establishment of a third facility, the Term Asset-Backed Securities Loan Facility (TALF), to support the flow of credit to consumers and businesses. The TALF will enable the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.
- Facilitating the flow of credit to municipalities by expanding the Money Market Mutual Fund Liquidity Facility (MMLF) to include a wider range of securities, including municipal variable rate demand notes (VRDNs) and bank certificates of deposit.
- Facilitating the flow of credit to municipalities by expanding the Commercial Paper Funding Facility (CPFF) to include high-quality, tax-exempt commercial paper as eligible securities. In addition, the pricing of the facility has been reduced.
The market likes free money – and the futures turned positive after the Fed announcement. We shall see… a rally high tomorrow which is New Moon Day would sure fit. Could go longer…can’t think of any examples of making up 20% of GDP we could use as a basis for estimation.
The “Passover Rhyme”
Longtime readers of this site will appreciate my holding to a very peculiar – and yet somehow useful – view of history. That is, when I read secular accounts – particularly in religious documents – I try to generalize them to find the middle-ground where “science and religion” can get-along and “play nicely with one-another.”
A couple of examples worth considering. The first – and most obvious – is Halloween. Although wrapped up in much religiosity, there’s a very strong scientific case to be made that some 15-thousand years ago, an exceptional space impact occurred – hitting Earth – and throwing up so much debris that the landing debris formed some of the lakes along the U.S. east coast.
In addition, so violent was the “ringing of Earth” from the impact that freshly buried dead with “thrown up from the grave.” Thus, the “night of the walking dead” – and why Halloween is one of the most wide and extensive underlying memes worldwide.
A curious person might wish to review my write-up of the event back in 2016 over here – should they be interested in the “hidden history” of Halloween…
The second historical example deals with how religions have (in almost corporate take-over fashion – done roll-ups of existing festivals. Christmas is highest on the list here. For it’s widely known that the Druidic/Wiccan midwinter festival (see Yule logs, too) was suspiciously called the birth date of Jesus.
A conscientious research (my hand goes up) on looking for some second-sourcing, finds the birthday was likely in the spring. And that gets to the usurpation of lots of other grassroots festivals. Samhain was rolled into Halloween. Beltane being its mirror; a kind of Gaelic May Day…and perhaps that’s why communist advocates use May Day (halfway between spring solstice and summer equinox, when the crops are in and a fresh crop of child is being raised) as their political loci.
Subsuming holidays is great sport.
“OK Ure, what’s this got to do with Passover and Rhymes?”
Right-o. So I was looking at when the market (could) hit bottom. We have a new moon tomorrow…and – looking for nearby holidays – the next “biggie” is Passover. That comes along at sundown on April 8 and ends of April 16th, this year.
It’s a dandy holiday to apply my odd generalizing of history to. Because – when you read the texts – it’s almost as though Passover could be read as a Social Distancing motivated by public health issues.
By “the Book” then: We turn to Wikipedia first, for some insight into Passover’s history:
“In the Book of Exodus, God helped the Israelites escape from slavery in ancient Egypt by inflicting ten plagues upon the Egyptians before the Pharaoh would release the Israelite slaves. The last of the plagues was the death of the Egyptian first-born. The Israelites were instructed to mark the doorposts of their homes with the blood of a slaughtered spring lamb and, upon seeing this, the spirit of the Lord knew to pass over the first-born in these homes, hence the English name of the holiday.”
Years back, I developed something I call the “substitution method of learning” in order to help recover “lost knowledge.” “What does this template fit?” is the gist of it.
That is, people in ancient times were not widely literate, but oral traditions blossomed. Could this passage be “reconstituted” with some modernist tinkering to template-fit?
In the Book of Exodus, God helped the Israelites escape from slavery in ancient Egypt by inflicting ten plagues upon the Egyptians before the Pharaoh would release the Israelite slaves. The last of the plagues was [a plague that killed children]. The Israelites were instructed to
mark the doorposts of their homes with the blood of a slaughtered spring lamb [quarantine] and, upon seeing this, the spirit of the Lord knew to doing this, the disease would pass over the first-born children in these homes, hence the English name of the holiday.”
In the Book of Numbers (9:13) we pick up another scent of “quarantine” instructions:
“13 But if anyone who is ceremonially clean and not on a journey fails to celebrate the Passover, they must be cut off from their people for not presenting the Lord’s offering at the appointed time. They will bear the consequences of their sin.”
Not just a One-Time-Code…it was important enough (recurring?) to put into Scriptures. As to the nature of the (supposed by me) “ancient public health” issue? Well, in the Book of Leviticus, (23:6) we get a hint that it may have been related to the eating of yeast: Was there a springtime epidemic of spoiling yeast that could kill people?
Thus, if I were “scripting a way to guide the future” back in ancient times, and there was a “spoilt yeast” condition that reoccurred periodically” how would I wrap it up and market it for future generations? Indeed, I offer to you the idea that an “unattached reading of history” can yield huge benefits in understanding.
And did you notice how Passover is a one-week long event? Again, just as modern public health is instituting two-week virus breakpoints, perhaps an earlier, faster-moving bug could be broken in a week’s time. Time enough to restart yeast cultures? Ah, to have a time machine,, right? Not sure if they make one of those portable machine-translators for ancient Aramaic yet, though…
Might shellfish spoil more easily than whitefish in a time before appliances? Or, was the prohibition there in Jewish culture because of occasional to frequent anaphylactic reactions for which no one was running around with EpiPen’s?
And the other food prohibitions (examples in Leviticus 11:3 and 7-8) also make huge sense from a public health perspective when you remember that wild pigs and boar often carry worms as all Texas boar-hunters know (which was why pork must be thoroughly cooked) whereas beef was not so worm-inclined. Again, it’s wrapping up public health in a ceremonial/religious/cultural way that embedded in tradition and belief-sets that makes it endure.
That’s why I wanted to mention: In most religions you study, you will find real gems. The Muslim’s have a similar set of dietary guidelines (Hilal) which Wiki out this way.
“According to the Quran, the only foods explicitly forbidden are meat from animals that die of themselves, blood, the meat of pigs, and any food dedicated to other than God.
However, a person would not be guilty of sin in a situation where the lack of any alternative creates an undesired necessity to consume that which is otherwise unlawful. (Quran 2:173) This is the “law of necessity” in Islamic jurisprudence: “That which is necessary makes the forbidden permissible.”
Speaking of which – were times different and Ure not focused on the greenhouse and the future of food, so much – it would be fascinating to write a Book on Religious Economy.
We know the present “disease outbreak” is suspiciously timed in that the financial system was about to “self implode” anyway. It’s the inevitable effect of compound interest. Which is nothing more, or less, than a highly cerimonialized “making up of money.” Every time a financial engineer does a new structuring, they are creating additional debt.
Originally, there was a logical limit to debt and in the early Christian/Jewish religious texts, the Kondratieff Long Wave was spelled out in Leviticus 25. Every 50-years, there was a Jubilee. All debts forgiven, and ownership of lands returned to the Levites and so forth.
In Islam, there is a strict prohibition on Interest (free-for-all debt creation) and as a result, only buy-sell operations are allowed. As well as sharing of profit and loss.
Still other religions have different attitudes toward money, ownership, and such, making for a marvelous study in human affairs.
Yet another book I wish I had time to study fully and write. There is so much Knowledge wrapped up in Belief Systems, that ferreting it out would be a Life’s Work worth living.
We I read stories like “White supremacists encouraging their members to spread coronavirus to cops, Jews, FBI says” I’m sickened. There is so much knowledge that gets destroyed by errant beliefs held by small minds.
But , it’s time we move on.
The COVID Data
There was some improvement in the data Sunday…small, but any port in a storm, eh?
Our usual caveat: The morning numbers grow with the mid-day reports, so don’t hold your breath. We lean toward that April 8th – 16th Passover week…because the calendaring would be graceful.
On the cases – while Cuomo et all are saying 80% will get the virus:
Obviously, we run out of people so the disease will begin into nonlinear decline from June 11th, but likely way before then – depending on how social distancing digs in.
But the death toll? Going to hurt:
A terrible mess, to be sure.
Which Collapses Next?
Commercial real estate isn’t a bad nag to bet on in the worlds sickest horse race as: “Real Estate Billionaire Barrack Says Commercial Mortgages on Brink of Collapse.”
If you have food and toilet paper – and stay home you may be fine. Good article in Fortune about Which stores are open—and closed—during the coronavirus pandemic in the U.S.?
And the political system continues to implode with even CNN having to report “Senate GOP ramps up pressure on Democrats over coronavirus stimulus package with Monday vote...” Look for a scuffle on this later today. Political pettiness, seems to us, is remarkably resistant to treatment.
Write when you get rich,