Meanwhile on Wall Street

As the nation appears to be collapsing into an economic depression (see previous post) Wall Street has been singing its favorite song. After the initial panic of late February and March, the stock market has been rallying. The S&P 500 has recovered around half of its losses as investors seem determined to ignore the steady stream of bad news. Are they right? How long will this last? Hmm...

The Economy: How bad will it get?

 

The overwhelming consensus is that the best case scenario, is going to dwarf all other post World War II recessions. Many economists expect both the economic contraction and real unemployment figures to rival those of the early 1930s in the dark days of the Great Depression.

So, are we going to have a depression? That would depend on how deep the economic downturn goes, and importantly, how long it lasts. It is almost a running joke that use of the 'D' word is prohibited in academia and among business people, as well as the talking heads on the various financial news networks, except when used in historical reference to the events of the 1930s. And it  doesn't help that there is no hard and fast definition of what constitutes a depression.

Most economists and historians have avoided labeling any of our post-war downturns as depressions, though I would argue that two probably meet the vague definition. The first would be the downturn that began in the last year of the Carter administration and continued through the first couple of years of the Reagan administration. Roughly late 1979 to 1983. The second would be the most recent financial crisis of twelve years ago. A number of countries and regions, notably in southern Europe, never recovered and were still experiencing devastating unemployment aggravated by sovereign debt crisis right up to the arrival of COVID-19.

To my mind the odds of a quick 'V' shaped recovery that Wall Street seems to be hoping for are poor. The economy, especially in our globalized era, cannot be turned on and off like a light switch. When you break the glass and hit the red button labeled "Emergency Stop," the engine is going to seize. In furtherance of the damage to the engine is that we don't have either a cure or a vaccine anywhere on the horizon. This means all of the global distancing rules are going to remain in effect for the foreseeable future. And the mass unemployment is going to send shock-waves out inflicting even more damage. Unemployed people generally can't afford much in the form of goods and services. So what we have is the prospect of an economic contraction functioning like a giant snowball rolling down hill while gaining both size and velocity.

Fortunately we do have a few things going for us. The first is that we have learned a bit since the 30s. So the catastrophic policy mistakes of that era are, we hope, unlikely to be repeated. Raising taxes (both Hoover and FDR), massive increase in government regulation of the economy (FDR), tightening monetary policy (the Fed of the early 30s) and raising protectionist tariffs (Hoover). The last one is a bit alarming since we have a president who is enamored of economic protectionism.

Also unlike in the 30s, we do have something of a social safety net. Granted, it is among the weakest in the developed world. But it is like noon on Miami Beach compared to the long winter of the early 30s where the unemployed and homeless were almost entirely dependent on private charity, which quickly became overwhelmed.

Which brings us to; where are we going? There are just too many variables to give any kind of concrete prediction. But I will make a few general observations. The medical community seems resigned that this thing is going to be with us for years. So until a vaccine is developed we can expect succeeding waves of COVID. Some of those could be worse than what we have experienced thus far and could inflict even more loss of life and economic damage. Unemployment is likely to breach 20% and the contraction in GDP is unlikely to be less than 25%. In that scenario I don't see even the beginning of a meaningful recovery for at least a year, and more likely two to three.

So... depression? Yeah, very likely. Great Depression Part II? I doubt it. It was the government that put the "Great" into the depression of the 1930s. And while I always encourage taking a deep breath before putting any upward limit on the stupidity of politicians and bureaucrats, if... we can avoid the mistakes of the Hoover/Roosevelt years, I am cautiously hopeful that the worst will be over within four to five years.

But for now, I think we are just going to have fasten our seat belts and hang on. Because even the rosiest predictions suggest we are in for one hell of a bumpy ride.

(To those who are fortunate enough to be doing OK, please remember the many who are not.)

US Supreme Court passes on closely watched gun rights case

The Supreme Court said on Monday that it will not issue a ruling in a closely watched case over a New York gun regulation that barred transport of handguns outside the city, including to second homes and firing ranges.

In an unsigned opinion, the court said that the roll-back of the rule by city and state officials after the court agreed to hear the case effectively ended the dispute without the justices needing to intervene.

The case was the first Second Amendment case to reach the top court in nearly a decade. The justices have not waded into the highly charged debate over gun rights since expanding the reach of the Second Amendment in a pair of cases in 2008 and 2010.

Conservatives were hoping the court, which has a new 5-4 conservative majority, would use the New York case to limit regulations on firearms further. But the outcome of the case was telegraphed in December during oral arguments, when the court spent little time addressing the underlying constitutional questions raised by the New York regulation.

Three of the court’s Republican-appointees, Justices Samuel Alito, Neil Gorsuch and Clarence Thomas, said they would not have dismissed the case. Alito, in an opinion joined by Gorsuch and in part by Thomas, wrote that by declining to rule in the case the court allowed itself to be “manipulated.”

Read the rest here.

Reports of N Korean Dictator's Death Gaining Traction

It's not looking good for Trump's buddy.

Latest.

Still waiting for official confirmation.

Trump's behavior is alarming Republicans

WASHINGTON — President Trump’s erratic handling of the coronavirus outbreak, the worsening economy and a cascade of ominous public and private polling have Republicans increasingly nervous that they are at risk of losing the presidency and the Senate if Mr. Trump does not put the nation on a radically improved course.

The scale of the G.O.P.’s challenge has crystallized in the last week. With 26 million Americans now having filed for unemployment benefits, Mr. Trump’s standing in states that he carried in 2016 looks increasingly wobbly: New surveys show him trailing significantly in battleground states like Michigan and Pennsylvania, and he is even narrowly behind in must-win Florida.

Democrats raised substantially more money than Republicans did in the first quarter in the most pivotal congressional races, according to recent campaign finance reports. And while Mr. Trump is well ahead in money compared with the presumptive Democratic nominee, Joseph R. Biden Jr., Democratic donors are only beginning to focus on the general election, and several super PACs plan to spend heavily on behalf of him and the party.

Perhaps most significantly, Mr. Trump’s single best advantage as an incumbent — his access to the bully pulpit — has effectively become a platform for self-sabotage.

His daily news briefings on the coronavirus outbreak are inflicting grave damage on his political standing, Republicans believe, and his recent remarks about combating the virus with sunlight and disinfectant were a breaking point for a number of senior party officials.

Read the rest here.

This is disturbing

The walls of Russia’s new Orthodox cathedral dedicated to the Armed Forces will be decorated with the faces of President Vladimir Putin, Defense Minister Sergei Shoigu and Soviet leader Josef Stalin, the MBKh News website reported Friday.

The 95-meter Armed Forces cathedral, a symbol of close defense-church ties in Russia, is expected to open on May 9 — the 75th anniversary of the Soviet victory over Nazi Germany in World War II — at a sprawling military-themed park near Moscow. Once completed, the building will become one of the tallest Orthodox churches in the world.

Read the rest here.

In Defense of Closed Communion

Fr. Lawrence (Farley) has an excellent piece up. Read it here. Please leave any comments there.

Rescue bills hide huge tax breaks for the wealthy

...One provision tucked into the federal economic-rescue law increases the amount of deductions companies are permitted to take on the interest they pay on large quantities of debt. Only companies with at least $25 million in annual receipts can qualify for that break.

Another change lets people deduct even more of their businesses’ losses from any winnings they reaped in the stock market, sharply reducing what they owe in capital gains taxes. Only households earning at least $500,000 a year — the top 1 percent of American taxpayers — are eligible.

And yet another provision in last month’s rescue package allows companies to deduct losses in one year against profits that they earned years earlier. The tax break most likely won’t put any extra cash directly into the hands of companies hit by the current crisis for at least a year.

The bottom line is that, barely two years after congressional Republicans and President Trump lavished America’s wealthiest families and companies with a series of lucrative tax cuts, those same beneficiaries are now receiving a second helping.

Many of the tax benefits in the stimulus are “just shoveling money to rich people,” said Victor Fleischer, a tax law professor at the University of California, Irvine. While the 2017 tax-cut package was a bonanza for big companies and wealthy individuals, in order to keep the law’s overall costs down it  imposed a number of restrictions on who could take advantage of certain tax breaks and how much those taxpayers could reap.

Read the rest here.

Pakistan: Court legitimizes abduction and forced marriage/conversion of 14 yo girl

A high court ruling in Pakistan validating the marriage and forced conversion to Islam of a 14-year-old Christian girl has heightened fears that it will encourage others to commit such crimes, sources said.
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The High Court in Sindh Province on February 3 dismissed a petition to have the marriage and forced conversion of a Catholic girl overturned. The court ruled that both were valid since a girl under sharia (Islamic law) can marry after her first menstrual cycle.

Huma Younus was taken from her home in Karachi’s Zia Colony on October 10 while her parents were away. She was forced to marry the man who abducted her, identified as Abdul Jabbar of Dera Ghazi Khan, Punjab Province, her attorney said.

“The hearing on February 3 lasted only five minutes,” the family’s attorney, Tabassum Yousaf, told Morning Star News. “The court, in just a few words citing the sharia, has justified the violation of the girl’s body since she has already had her first period.”

Yousaf added that the family was prohibited from seeing Huma because police said her life would be at risk if she was brought to the courtroom.

Read the rest here.

Roman Catholic Traditional Mass Under Threat?

Francis has sent out a questionnaire on Benedict XVI's Summorum Pontificum. Under normal circumstances one might simply treat this as a routine inquiry into one aspect of the liturgical life of the Latin Church. But given Francis' known hostility to all aspects of Roman Catholic tradition, this is understandably causing people to nervously sit up and take notice.

Details.

UK: Forced contraception and abortion

UNITED KINGDOM, April 23, 2020 (LifeSiteNews) – A judge in England has ruled that a woman reported to have learning disabilities will be fitted with a contraceptive device against her will.

Representatives of Oxford University Hospitals NHS Foundation Trust told Justice Gwynneth Knowles that the woman – who is in her late twenties and is currently pregnant – has already given birth multiple times and has had those children removed from her custody.  

They also explained that she suffers from medical conditions and suggested that future pregnancies could put her health at risk...

...Forced abortion is on the rise in the U.K. In October 2019, a judge ordered a disabled woman be forced to have an abortion and doctors could restrain her while committing it.

“This is an outrage which should shock every right-thinking person,” John Deighan, Deputy Chief Executive of the Society for the Protection of Unborn Children, said at the time. “It is a level of cruelty and barbarity reminiscent of how people with mental health issues were treated in the 1930s of Nazi Germany. To force abortion on any person is abhorrent and to do so in the name of medicine calls into question the structures of law and justice in our society.”

In February 2020, a judge ordered another forced abortion on a vulnerable woman who had been raped by her carer.

Also in 2019, another disabled woman narrowly escaped a forced abortion after massive public outcry.

Read the rest here.
HT: Dr. Tighe

The Death of the Department Store: ‘Very Few Are Likely to Survive’

American department stores, once all-powerful shopping meccas that anchored malls and Main Streets across the country, have been dealt blow after blow in the past decade. J.C. Penney and Sears were upended by hedge funds. Macy’s has been closing stores and cutting corporate staff. Barneys New York filed for bankruptcy last year.

But nothing compares to the shock the weakened industry has taken from the coronavirus pandemic. The sales of clothing and accessories fell by more than half in March, a trend that is expected to only get worse in April. The entire executive team at Lord & Taylor was let go this month. Nordstrom has canceled orders and put off paying its vendors. The Neiman Marcus Group, the most glittering of the American department store chains, is expected to declare bankruptcy in the coming days, the first major retailer felled during the current crisis.

It is not likely to be the last.

“The department stores, which have been failing slowly for a very long time, really don’t get over this,” said Mark A. Cohen, the director of retail studies at Columbia University’s Business School. “The genre is toast and looking at the other side of this, there are very few who are likely to survive.”

At a time when retailers should be putting in orders for the all-important holiday shopping season, stores are furloughing tens of thousands of corporate and store employees, hoarding cash and desperately planning how to survive this crisis. The specter of mass default is being discussed not just behind closed doors but in analysts’ future models. Whether that happens, no one doubts that the upheaval caused by the pandemic will permanently alter both the retail landscape and the relationships of brands with the stores that sell them.

Read the rest here.

Rumors: North Korean dictator may be seriously ill

South Korea is trying to throw cold water on the rumors, but at least some of them are coming from US intelligence. Hmm...

Happy Birthday

Pope Clement XIV, remembered today chiefly for a single act, was born on this day in AD 1705. Here's hoping the next Pope is Clement XV.

Oil Crashes -300%

The price of oil collapsed deep into negative territory for the first time in history today with persons holding oil contracts paying around $35 a barrel for someone to take it off their hands.Traders however were cautioning that this is likely at least in part a technical event and that, as battered as the oil market is, the true value of oil remains positive.

Christ is risen!

Wishing all a blessed feast in these sad and trying times.

Matins w/12 Passion Gospels for Great and Holy Friday

A note on blog posts and updates

It is normally my custom to abstain from blogging during the three days preceding Pascha as it is a distraction and I am extremely busy with services. Sadly, services will not be as demanding on my time this year. That said, I expect blogging to be greatly reduced while I try to focus on the Great and Holy Days preceding the Resurrection to the best of my ability.

Wishing you all a blessed finale to your fast and a joyous Pascha.

The Fed Is Killing the Two Main Functions of Wall Street: Price Discovery and Prudent Capital Allocation

On Thursday, knowing that a three-day Easter weekend was coming and the attention of the public would be elsewhere, the Federal Reserve announced that it would allow two of its emergency lending programs to begin buying junk bonds. Those are bonds with less than an investment-grade credit rating, meaning they have a greater likelihood of defaulting. The Fed is not simply accepting junk bonds as collateral for loans, it will actually be buying junk bonds — potentially hundreds of billions of dollars of them. 

Two of the popular junk bond ETFs, iShares iBoxx High Yield Corporate Bond ETF (symbol HYG) and SPDR Bloomberg Barclays High Yield Bond ETF (symbol JNK) closed the trading day on Thursday up 6.55 and 6.71 percent, respectively, on the announcement. Those ETFs had been plunging in price for most of the month of March. 

For years now, prudent investors have been forgoing risky investments like junk bond ETFs and accepting a much tinier yield on U.S. Treasury securities. Now, high rollers like hedge funds that bought junk bonds and junk bond ETFs and received the higher yields, are getting bailed out of these risky bets. The markets will now, going forward, price junk bonds on a closer plane with Treasury securities, assuming the Fed will not let them fail. 

This is effectively killing the pricing mechanism of Wall Street. A U.S. Treasury note has the unconditional guarantee of the U.S. government to make the timely payment of interest every six months and pay the principal at maturity. Junk bonds are backed by nothing more than deeply-indebted corporations, which can, and do, frequently file for bankruptcy protection, making their bonds sometimes sell for pennies on the dollar. But going forward, junk bond ETFs will be priced on the premise that the Fed may ride to the rescue.

Read the rest here.

A blessed feast

Wishing a blessed feast to those celebrating Easter today.

Percy Faith: Delicado

Get ready for the recovery of the 1%

There were two important economic events on Thursday. The government reported that 6.6 million Americans filed for unemployment, an all-time record. And the Federal Reserve announced a new program to flood the economy and financial markets with $2.3 trillion in liquidity — including buying up junk bonds from debt-laden companies.

Which one moved the market? The Fed move, driving the Dow Jones Industrial Average up 500 points by midday.

The market jump, unemployment surge and Fed rescue efforts all converged to form a new split in the economy, between the asset-rich and the rest of America.

Much like the early days of the financial crisis recovery, the wealthy (or the top 10% who own more than 85% of the stocks and financial assets) were quickly saved by the Federal Reserve and Congress.

In 2009, the stock market jumped more than 50% from its low, thanks to the TARP program and other Fed and government support. It took the rest of American almost a decade to recover lost wages and their home values.

The diverging fortunes of the haves and have-nots led to a massive, post-crisis backlash against the wealthy. It gave rise to the Occupy Wall Street Movement, the Tea Party, anti-establishment politicians and a roaring debate over inequality.

Now, while the root cause of the crisis is vastly different, and no one is talking about greedy sub-prime bankers who brought the trouble on themselves, the coronavirus and response is likely to lead the country down a similar anti-elite path...

Read the rest here.

Episcopal Church Reports No Change In Attendance In Recent Weeks

NEW YORK, NY—Most churches have been severely impacted by recent bans on large gatherings, but not the Episcopal Church. Local parishes across the country reported no change in attendance once the ban went into effect...

Read the rest here.

‘The greatest miscarriage of justice’: Andrew Bolt responds to George Pell verdict

Outspoken columnist Andrew Bolt has labelled the case against Cardinal George Pell as “the greatest miscarriage of justice in Australian history”.

The Sky News host said the “witch hunt” against Pell had destroyed his career, reputation and locked him in jail for 404 days “for a crime he could not possibly have committed”.

Pell will immediately be released from prison after the High Court ordered his child sexual abuse convictions be quashed “and judgments of acquittal be entered in their place”.

The most senior Catholic in the world to be convicted of child sexual abuse today learned his final appeal bid had been successful. He released a statement saying he felt as though the “serious injustice” he suffered while maintaining his innocence had been “remedied”.

The full bench of seven judges were unanimous in their decision, finding the jury, acting rationally on the whole of the evidence, ought to have entertained a reasonable doubt as to Pell’s guilt.

Bolt, an outspoken supporter of Carindal Pell, was quick to respond to the judgement.

“This was one of the greatest miscarriages of justice in Australian history,” he said.

“A lot of people today should be ashamed of their role in the persecution, the witch hunting and the jailing - for 404 days - of an innocent man.

“The charges were inherently implausible and yet they were believed.

“And voices that spoke against this conviction were hounded down.”

Read the rest here.

Breaking News: Cardinal Pell's Conviction is Overturned by High Court

This is just breaking. Details likely to be added here.

Boris Johnson Hospitalized in ICU

Highly disconcerting news. Although the UK government is being extremely tight lipped, this must be said. People are not put into intensive care on a precautionary basis, especially in the middle of a pandemic with resources under severe strain. It must be assumed the Prime Minister is seriously ill and his condition is probably life threatening to at least some degree.

Vicar of Christ no more?

Pope Francis appears to have abandoned most of the formal titles of his office.