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Peak Optimism? S&P Futures Hit After Too Much “Stimulus Optimism” Sends 10Y Yields Surging

Peak Optimism? S&P Futures Hit After Too Much "Stimulus Optimism" Sends 10Y Yields Surging



Peak Optimism? S&P Futures Hit After Too Much "Stimulus Optimism" Sends 10Y Yields Surging Tyler Durden Wed, 10/21/2020 - 08:12

There was a curious twist in the traditional market narrative this morning.

In early overnight trading, futures initially ticked higher on Wednesday as investors pressed bets for a fiscal stimulus deal after Nancy Pelosi said she is hopeful for a stimulus this week, even though negotiations blew past her own self-imposed Tuesday deadline for agreeing on a pre-election deal. Her enthusiasm was echoed by White House Chief of Staff Mark Meadows who said everyone is "working really hard" to get a package agreed by the weekend, adding that there are still outstanding issues, while Mitch McConnell warned the Trump administration not to agree to anything like Pelosi's proposal ahead of the election (McConnell plans to seek a vote on the Republican scaled-down package in the Senate today). In any event, this initial "optimism" was enough to get futures to ramp sharply higher in early overnight trading...

... before reversing sharply after 10Y yield spiked above 0.8% for the first time since early June on too much reflationary stimulus deal optimism!

As a result of the overnight yield spike, we saw the 10Y yield rise to 4 month highs...

... while the 5s30s curve blew out to 4 year high.

In other words, we may have finally hit the natural ceiling to where more fiscal stimulus starts hitting risk assets instead of helping them.

"The rise in yields suggests that the market thinks a stimulus deal will be forthcoming and that the Democrats are set to take both the presidency and the Senate at the Nov. 3 election," said John Hardy, chief foreign-exchange strategist at Saxo Bank.

Elsewhere, Netflix kicked off earnings from the Big Tech club, and was down 5.2% premarket after it missed expectations for subscriber growth as streaming competition increased and live sports returned to television. Tesla fluctuated before financial results later Wednesday, and social-media company Snap soared surged 24.4% after the messaging app owner beat user growth and revenue forecasts, as more people signed up to chat with friends and family during the COVID-19 pandemic. Shares of other social media companies Facebook and Twitter Inc rose 2.6% and 5.7%, while image sharing company Pinterest Inc gained 6.7%.

European stocks slumped for a third day, with the Stoxx 600 Index falling 0.7%, dragged lower by U.K. stocks after the European Union’s chief Brexit negotiator said an agreement was within reach. The construction sector led losses as Assa Abloy AB and Vinci SA declined after third-quarter updates, while telecoms was the only subgroup to gain as Ericsson rallied on better-than-estimated profit. Gold miners Fresnillo and Centamin dropped after cutting their production guidance. Telecom equipment maker Ericsson was a bright spot, climbing after a profit beat.

Earlier in the session, Asia-Pac equities were mixed for most of the session. The ASX 200 (+0.1%) was caged in a tight range with no real standout performers or interesting sector action. Nikkei 225 (+0.3%) was buoyed by its industrial sector, however, Softbank shares erased all gains after sources suggested Huawei and Chinese firms are said to be seeking curbs on Nvidia's acquisition of Softbank’s ARM. KOSPI (+0.5%) swung between gains and losses and traded with no clear direction for most of the session. Hang Seng (+0.8%) initially extended on its opening gains before waning off best levels, with upside led by some of the large-cap names including Alibaba, HSBC and CNOOC.

In FX, the dollar weakened against all of its Group-of-10 peers; the pound led gains, followed by the New Zealand dollar, while the yen headed for its best day versus the dollar since August. The pound jumped after European Union chief Brexit negotiator Michel Barnier said a deal is within reach. Copper rose close to a two-year high on supply disruptions in Chile. The euro rallied a fourth day to touch a 1-month high of 1.1870 per dollar. Australian and New Zealand dollars posted relief rallies as the greenback eased and a wave of dollar sales also benefited the yen.

Meanwhile, the yuan’s ongoing surge has taken it to the highest in more than two years, and further gains are likely. The onshore yuan rose as much as 0.55% to 6.6400 a dollar on Wednesday. The advance takes the currency’s rally from a low in May to 7.7%. The gains are due to China’s economic rebound from the virus pandemic, a wide interest-rate premium over the rest of the world, the prospects of a victory by Joe Biden over Donald Trump in the U.S. presidential election and a weak dollar. "There is still room for the yuan to strengthen further,” said Tommy Xie, an economist at Oversea Chinese Banking Corp. in Singapore. "It’s possible for the yuan to strengthen past 6.60 quite soon, and by end of this year it may even go lower to around 6.55." The yuan’s gains have investors watching to see whether Chinese policy makers will take steps to impede the advance, such as by setting weaker-then-expected daily fixings, relaxing capital controls or having state-backed banks sell the yuan.

In rates, treasuries are off cheapest levels of the session, reached during Asia session amid signs of progress toward a fiscal agreement, and which in turn hammered risk assets. Ten- and 30-year yields rose 5bp-6bp to highest levels since June, with the long facing sustained pressure into $22b 20-year bond reopening at 1pm. Yields remain higher by less than 2bp across the curve with 10- year around 0.805% after touching 0.834%; curve spreads are also in retreat after 5s30s touched 128.5bp, within 2bp of its YTD high. Initial selloff was sparked by House Speaker Pelosi’s comments that she remains hopeful of a pre-election stimulus deal. German, Italian bonds also fell, while hedging costs in the major currencies over two weeks shift higher as the tenor now captures the U.S. presidential election’s immediate aftermath

In commodities, oil dropped toward $41 a barrel in New York after an industry report pointed to a surprise increase in American crude stockpiles. Gold continued to rise above $1900 as the dollar fell, although rising real rates constrained gold upside.

As we progress through earnings season, of the 66 S&P 500 firms that have reported third-quarter results, 86.4% have topped expectations for earnings, according to IBES data. Today, earnings are due from Tesla, Verizon, Abbott Laboratories and Thermo Fisher.

Market Snapshot


  • S&P 500 futures down 0.1% to 3,429.50
  • MXAP up 0.6% to 176.59
  • MXAPJ up 0.3% to 585.94
  • Nikkei up 0.3% to 23,639.46
  • STOXX Europe 600 down 1% to 361.95
  • Topix up 0.7% to 1,637.60
  • Hang Seng Index up 0.8% to 24,754.42
  • Shanghai Composite down 0.09% to 3,325.03
  • Sensex down 0.6% to 40,287.60
  • Australia S&P/ASX 200 up 0.1% to 6,191.80
  • Kospi up 0.5% to 2,370.86
  • Brent Futures down 1.4% to $42.54/bbl
  • Gold spot up 0.6% to $1,919.09
  • U.S. Dollar Index down 0.3% to 92.78
  • German 10Y yield rose 2.2 bps to -0.584%
  • Euro up 0.3% to $1.1853
  • Brent Futures down 1.4% to $42.54/bbl
  • Italian 10Y yield rose 0.7 bps to 0.525%
  • Spanish 10Y yield rose 0.3 bps to 0.186%

Top Overnight News from Bloomberg

  • European Union chief Brexit negotiator Michel Barnier used a speech to lawmakers to emphasize the importance of the U.K.’s sovereignty, a key British demand to return to trade talks
  • U.K. inflation accelerated from the weakest in five years, to 0.5% last month, driven by transport and restaurants following the end of a government subsidy to encourage eating out
  • The ECB’s ultra-cheap lending and unprecedented levels of asset purchases have created a multi-trillion-euro cash glut and a scarcity of top-rated bonds. It’s now cheaper to hedge against an increase in six-month borrowing costs rather than three months, and correlations between long-dated debt and money-market gauges have broken down
  • Traders are testing China’s tolerance for a strong yuan, which keeps rallying no matter what officials do to rein in appreciation. The currency climbed nearly 0.5% to its strongest since July 2018 on Wednesday, even after the People’s Bank of China set its daily reference rate weaker than analysts had expected. Traders have pushed the yuan stronger than the so- called fixing for six days, a sign of confidence that it will continue to rally
  • European Central Bank President Christine Lagarde said the unexpectedly early pickup in coronavirus infections is a “clear risk” to the economic outlook, in a sign that policy makers are gearing up for more monetary stimulus
  • Despite a second call between the Brexit chief negotiators Tuesday ending in a stalemate, EU officials expect formal discussions to resume in coming days before then entering the intense period of legal drafting known as the “tunnel.” They still expect a deal to be struck in mid-November
  • Europe’s coronavirus outbreak continued to spread. Germany, Greece and the Netherlands hit daily case records, and Spain is weighing a curfew in Madrid. The head of Roche Holding AG warned that widespread shots this year are unlikely
  • Oil dropped toward $41 a barrel in New York after an industry report pointed to a surprise increase in American crude stockpiles, countering optimism over a potential U.S. stimulus agreement
  • Copper surged to its highest price in more than two years in London, helped by a rally in the yuan and concerns over risks of widening supply disruptions

Looking at global markets, in Asia, equities were mixed for most of the session before trading mostly higher following a lukewarm handover from Wall Street, which saw the major US indices end the day nearer to session lows, but with modest gains as yesterday’s State-side stimulus talks were seemingly constructive but with a deal yet to be reached. That being said, sources citing Senate Majority Leader McConnell suggested it will logistically be difficult to get a bill done before the elections due to the legislative hurdles that need to be overcome. Nonetheless, House Speaker Pelosi signalled progress and expressed optimism as talks with Treasury Secretary Mnuchin are poised to continue later today. US equity futures also saw mild gains at the electronic reopen, and the three major index contracts modest extended on those gains throughout the night, with ES, NQ and YM higher by between 0.6-0.7% heading into the EU open. Back to APAC, ASX 200 (+0.1%) was caged in a tight range with no real standout performers or interesting sector action. Nikkei 225 (+0.3%) side-lined USD/JPY movement and was buoyed by its industrial sector, however, Softbank shares erased all gains after sources suggested Huawei and Chinese firms are said to be seeking curbs on Nvidia's acquisition of Softbank’s ARM. KOSPI (+0.5%) swung between gains and losses and traded with no clear direction for most of the session. Hang Seng (+0.8%) initially extended on its opening gains before waning off best levels, with upside led by some of the large-cap names including Alibaba, HSBC and CNOOC., whilst COVID-19 related A-shares are bolstered by China ramping up efforts to expand output for the Cos. Conversely, Shanghai Comp (U/C) immediately erased the mild gains seen at the open despite another liquidity injection by the PBoC as US-Sino tensions show no signs of tempering down. Finally, JGB futures remained contained despite the bear steepening seen in USTs, whilst the BoJ Rinban operation showed offerings for 1-3ys, 3-5yrs, and 5-10yrs unchanged.

Top Asian News

  • Political Crisis in Pakistan Deepens After Police, Army Dispute
  • Cathay Pacific Joins Global Jobs Cull, Retires Dragon Brand
  • China Evergrande Group Seeks HK$11.4b Loan for Refinancing

European equities (Eurostoxx 50 -0.8%) have sold off throughout the session despite a mildly firmer cash open. In terms of drivers of the move, European futures overnight appeared to be following some of the gains seen in US futures as markets continue to assess the likelihood of an eventual stimulus bill; however, sentiment deteriorated in quick order as European cash markets opened with little in the way of fresh macro newsflow accompanying the move. Losses across European equities are relatively broad-based with some mild underperformance in the FTSE 100 (-1.3%) as the index contends with a firmer GBP. The construction & materials sector is the region’s laggard amid losses in Vinci (-1.8%) post-earnings, in which the Co. announced a decline in revenues and cautioned that earnings are expected to fall significantly. Also, of note for the sector, Assa Abloy (-2.5%) have endured losses after Q3 results were poorly received by the market. Health care names are also faring poorly this morning with AstraZeneca (-1.6%) shares unable to benefit from source reports suggesting that the Co.’s COVID-19 vaccine trial could resume as early as this week. Additionally, for the sector, Novozymes (-3.5%) are lower on the session following Q3 earnings. To the upside, telecom names are bucking the trend with modest gains in the wake of earnings from Ericsson (+7.3%) after Q3 earnings exceeded expectations and the Co. expressed confidence in its 2020 targets. Other large cap earnings today have included Nestle (-0.3%) who exceeded expectations for 9M organic revenue growth and Iberdrola (-0.7%) who announced that its North American arm is to acquire PNM for around EUR 3.66bln alongside posting 9M results. Looking ahead, today sees a slew of large cap US earnings including the likes of Verizon, Abbott, Tesla & Biogen.

Top European News

  • EU’s Barnier Backs U.K. Sovereignty in Bid to Resume Talks
  • Lane Warns Weak Inflation Is Bad Idea in ECB Listening Session
  • ECB Pandemic Policies Warp Debt Dynamics Into Distant Future
  • GAM Keeps Shrinking as Clients Pull Another $2.7 Billion

In FX, sterling is leading the latest broad G10 assault against the Dollar and perhaps front-running or prematurely factoring in positive news on the eve of EU-UK trade talks amidst comments from Barnier, Sefcovic and Michel ranging from the usual ‘we want a deal, but not at any price’ to the slightly more hopeful ‘an agreement is within reach’. Cable encountered some resistance just above 1.3000 and ahead of the 50 DMA (1.3009) initially, but breezed through at the next attempt before topping out close to near mid-month twin peaks between 1.3064-68. Meanwhile, Eur/Gbp has retreated further from Tuesday’s high just shy of 0.9150 to sub-0.9090 even though the single currency is also appreciating vs an increasingly weak Greenback as the DXY slides to 92.685 and fresh multi-week lows.

  • NZD/AUD/JPY/EUR/CHF/CAD – All up against the Buck, as the Kiwi claws back RBNZ Orr induced losses and reclaims 0.6600 status in the run up to NZ CPI data for Q3 on Thursday and in spite of the recurrence of COVID-19 reaching 25 cases at last count, while the Aussie is hovering below 0.7100 in advance of a speech from RBA’s Debelle tonight and October PMIs tomorrow. Elsewhere, the Yen has rallied beyond the 21 DMA at 105.50 where 1.3 bn option expiries reside and bigger expiry interest between 105.10-00 (1.9 bn) to post a marginal new m-t-d best circa 104.89 and the Euro has absorbed offers around 1.1850 that kept the headline pair capped overnight before breaching a Fib at 1.1861 on the way to 1.1870 and almost matching September 18/21 peaks. The Franc is pivoting 0.9050 and Loonie straddling 1.3100 awaiting Canadian CPI and retail sales for some independent/additional impetus.
  • SCANDI/EM -  Somewhat strangely given a significantly less pessimistic 2020 GDP forecast from Sweden’s Debt Ofiice (-3.5% compared to the prior -6.5% expected contraction) and soft oil prices, the Norwegian Krona is outperforming its Swedish neighbour in Euro cross and Dollar terms as Eur/Nok trades at the lower end of a 10.9960-9000 band in contrast to Eur/Sek nudging the top of 10.3750-3200 parameters. However, it’s one way traffic for the Yuan as Usd/Cnh and Usd/Cny continue their descent to fresh 2 year-plus highs, albeit in keeping with other EM currencies that are taking advantage of the Greenback’s more pronounced pull-back.

In commodities, The crude complex has once again been relatively devoid of specific fundamental updates and as such price action has largely followed broader equity performance this morning; directionally, benchmarks are continuing the downside post-yesterday’s private inventories report. The report displayed a surprise, but relatively modest, build of 0.59mln compared to expectations for a draw of 1mln; attention turns to today’s EIA report for confirmation of this build but similarly to yesterday expectation are for a 1.02mln draw. Note, the build last night did take some desks by surprise given the BSEE were still reporting that some of the offshore Gulf production was shut-in following Hurricane Delta for the survey period. Inventories aside, WTI and Brent have largely been at the whim of downside in the equity space (see above) posting losses of circa USD 0.60/bbl at present; albeit, the benchmarks are off lows by around USD 0.30/bbl. Moving to metals, spot gold hasn’t been able to derive much in the way of further upside post-APAC hours as the DXY continues to drop further below the 93.00 mark. Currently, the precious metal is firmer by ~USD 10/oz. Separately, this morning saw a number of mining updates including Fresnillo cutting their FY20 gold production expectation to 745-775k/oz from the prior forecast of 785-815k/oz but did maintain their guidance around silver. While Antofagasta reiterated their view of copper production for 2020 coming in at the lower end of their original guidance for the year.

US Event Calendar

  • 7am: MBA Mortgage Applications, prior -0.7%
  • 2pm: U.S. Federal Reserve Releases Beige Book

DB's Jim Reid concludes the overnight wrap

After today I’m taking a three day holiday to spend some bad quality time with the children over half term. Tomorrow we’re going to a huge adventure park (Longleat for those who know it) where my wife and I are debating whether to go the whole hog and drive through the monkey enclosure. We’ve got a family car that I’ve no interest in replacing until essential bits start falling off of it. However looking at the video of the experience there’s a good chance that the monkeys will accelerate that day. So we are debating the trade off between seeing the kids faces when monkeys jump on the car to the risk of having permanent damage. All advice welcome.

Speaker Pelosi and Treasury Secretary Mnuchin debated matters of a slightly higher importance last night as they walked back on last night’s deadline for an agreement on stimulus ahead of the election. Overnight Pelosi has said that she’s hopeful for a stimulus agreement this week, which would be “bigger, better and retroactive”. This is pushing S&P 500 futures (+0.66%) higher.

Senate Majority leader McConnell has said that he would put any bill agreed to by the White House and Democrats up for a vote in the Senate, however it is unclear if Republican Senators would be on board. Notably Senators Romney and Shelby, the latter of whom is the chair of the Senate Appropriations Committee, have already said that they would not support a large bill. McConnell reportedly told colleagues that trying to finalise a stimulus agreement ahead of the election could delay the Supreme court vote for Judge Amy Coney Barrett which are set to take place next week. So a lot of politics to get through over the next few days. It’s tough to see what’s genuine progress and what’s just political manoeuvrings.

Earlier US equities advanced in anticipation of potential stimulus as the “oh yes they will, oh no they won’t” saga continued. As a result of a more positive interpretation there was a further bear-steepening in US treasuries, as the 2s10s curve reached a 4-month high of 64.1bps (from the August 4 local lows of 39.6bps), while 10yr yields were up +1.7bps at 0.786%. This morning 10y yields are up a further +3.7bps to 0.823% and the 2s10s curve is up a further +3.2bps to 67.3bps. The recent steepening moves have come as investors increasingly price in a potential stimulus package, either by the election or afterwards in Q1 under a possible Blue Wave election scenario, the chances of which have risen notably in the last 3 weeks.

For equities, the S&P 500 was up +0.47% by the close, with bank stocks (+1.32%) helping lead the way, while the NASDAQ saw a smaller +0.33% increase. UBS (+5.28%) earnings helped bank stocks on both sides of the Atlantic with European banks rising +1.54% as well. In other earnings news, Netflix fell -5.7% in after-market trading as the streaming service added just 2.2 million new subscribers in the quarter compared to the 3.32 million analysts had projected. They are also expecting to bring in fewer subscribers in the upcoming quarter than estimated (6.0m vs 6.54m). Chipmaker Texas Instruments (+1.44% after-market) beat analysts’ estimates, citing strong rebounding demand from automakers and consumer electronics.

Another major story from yesterday was that the US Department of Justice, along with 11 state Attorneys General, filed an antitrust lawsuit against Google, saying that it was “to stop Google from unlawfully maintaining monopolies through anticompetitive and exclusionary practices in the search and search advertising markets and to remedy the competitive harms.” Google’s legal office responded by calling the government’s case “deeply flawed” and at least on the day, investors seemed to agree as the company’s stock rose +1.39% and appeared more sensitive to the fiscal stimulus news. It remains to be seen what specific remedies the government would seek against Google, though any ultimate decision would be set by the federal court judge overseeing.

Asian markets have tracked Wall Street’s move this morning with the Nikkei (+0.40%), Hang Seng (+0.73%), Kospi (+0.26%) and Asx (+0.16%) all up while the Shanghai Comp (-0.35%) is down. In Fx, the onshore Chinese yuan is up +0.33% to 6.6549, the strongest level since July 2018 but this is more on the back of a broader USD move lower this morning. The US dollar index is down -0.17% overnight marking four consecutive day of declines.

In other overnight news, Bloomberg reports that China’s technology companies including Huawei have expressed strong concerns to local regulators about Nvidia’s proposed acquisition of Arm Ltd. The report added that Chinese companies major concern is that Nvidia may force the British firm to cut off Chinese clients as it could become a pawn in the US-China tech supremacy race. Elsewhere, the ECB President Lagarde said that the current virus wave has come a bit earlier as against expectations of a resurgence in “November or December, with the cold” and “from that point of view that has surprised. It’s not a good omen.”

In terms of the coronavirus, yesterday saw the UK report another 21,365 cases as Prime Minister Johnson announced that Greater Manchester would go into tier 3 - the strictest restriction level. Elsewhere in Europe, the Spanish health minister said that they would look at imposing a curfew in Madrid, while in Italy, which had been performing relatively better than the UK or France in recent weeks, a further 10,871 cases were reported. Italian Prime Minister Conte joined the refrain of his fellow European leaders calling for localised restrictions rather than national lockdowns, with the Lombardy region expected to order a curfew starting on Thursday. In the US, cases continue to see the biggest rise in the Midwest and Southern regions as the country saw over 60k new cases over the last day and looks to be seeing a “third” wave as the weather turns. Hospitalisations have started ticking higher as well, in particular Texas is at 8 week highs with particular strain coming to more rural regions with lower capacity. Overall, coronavirus hospitalization in the US stood at 39,230 yesterday, the highest in two months.

On therapeutics, there was bad news as the US FDA inspectors found quality-control problems at an Eli Lilly plant used to help produce its Covid-19 antibody therapy. Elsewhere, Cathay Pacific Airways said that it will cut about 5,300 jobs based in Hong Kong and close its Cathay Dragon unit as part of a sweeping restructuring.

On Brexit, the UK government suffered a defeat in the House of Lords on its controversial Internal Market Bill, which would seek to override parts of the already-reached Brexit Withdrawal Agreement with the EU. Though the bill passed and will move on to further debate, members voted by 395-169 in favour of an amendment to the second reading motion which said that the House regretted that part of the bill “contains provisions which, if enacted, would undermine the rule of law and damage the reputation of the United Kingdom.” Notably, 39 Conservative peers voted in favour of that amendment, including former leader Michael Howard. Otherwise, the negotiations between the UK and the EU remained in stalemate, with the EU’s Michel Barnier tweeting that he spoke again to the UK’s David Frost yesterday, and said “My message: we should be making the most out of the little time left.” The U.K. are currently being cold to the prospect that the EU is moving far enough to restart negotiations although The Telegraph newspaper reported that Barnier was considering a trip to London tomorrow (which wouldn’t happen without some encouragement) so all eyes will be on whether we see a resumption in talks over the coming days. It’s another political dance.

Elsewhere in markets yesterday, the STOXX 600 lost -0.35%, though this masked strong regional divergences, with the DAX (-0.92%) underperforming as Italy’s FTSE MIB (+0.56%) and Spain’s IBEX 35 (+0.98%) made solid gains. Europe saw a similar selloff in rates to the US, with 10yr yields on bunds (+2.2bps), OATs (+1.4bps) and BTPs (+0.8bps) all rising. Finally on the data front, US housing starts in September rose to an annualised rate of 1.415m (vs. 1.465m expected), while building permits rose to an annualised 1.553m (vs. 1.520m expected), their highest rate since 2007.

To the day ahead now, and earnings releases include Tesla, Verizon Communications, Abbott Laboratories, Thermo Fisher Scientific and NextEra Energy. Central Bank speakers include ECB President Lagarde, Vice President de Guindos and chief economist Lane, along with the Fed’s Mester, Kashkari, Kaplan and Bullard and BoE Deputy Governor Ramsden. The Fed will also be releasing their Beige Book and both the UK and Canada will release their September CPI readings.

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Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

In response to the virus pandemic and nationwide…



Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

In response to the virus pandemic and nationwide Black Lives Matter riots in the summer of 2020, some elite colleges and universities shredded testing requirements for admission. Several years later, the test-optional admission has yet to produce the promising results for racial and class-based equity that many woke academic institutions wished.

The failure of test-optional admission policies has forced Dartmouth College to reinstate standardized test scores for admission starting next year. This should never have been eliminated, as merit will always prevail. 

"Nearly four years later, having studied the role of testing in our admissions process as well as its value as a predictor of student success at Dartmouth, we are removing the extended pause and reactivating the standardized testing requirement for undergraduate admission, effective with the Class of 2029," Dartmouth wrote in a press release Monday morning. 

"For Dartmouth, the evidence supporting our reactivation of a required testing policy is clear. Our bottom line is simple: we believe a standardized testing requirement will improve—not detract from—our ability to bring the most promising and diverse students to our campus," the elite college said. 

Who would've thought eliminating standardized tests for admission because a fringe minority said they were instruments of racism and a biased system was ever a good idea? 

Also, it doesn't take a rocket scientist to figure this out. More from Dartmouth, who commissioned the research: 

They also found that test scores represent an especially valuable tool to identify high-achieving applicants from low and middle-income backgrounds; who are first-generation college-bound; as well as students from urban and rural backgrounds.

All the colleges and universities that quickly adopted test-optional admissions in 2020 experienced a surge in applications. Perhaps the push for test-optional was under the guise of woke equality but was nothing more than protecting the bottom line for these institutions. 

A glimpse of sanity returns to woke schools: Admit qualified kids. Next up is corporate America and all tiers of the US government. 

Tyler Durden Mon, 02/05/2024 - 17:20

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Spread & Containment

From Colombia to Laos: protecting crops through nanotechnology

In a recent breakthrough, DNA sequencing technology has uncovered the culprit behind cassava witches’ broom disease: the fungus genus Ceratobasidium….



In a recent breakthrough, DNA sequencing technology has uncovered the culprit behind cassava witches’ broom disease: the fungus genus Ceratobasidium.

Credit: Alliance of Bioversity and CIAT / A. Galeon

In a recent breakthrough, DNA sequencing technology has uncovered the culprit behind cassava witches’ broom disease: the fungus genus Ceratobasidium.

The cutting-edge nanopore technology used for this discovery was first developed to track the COVID-19 virus in Colombia, but is equally suited to identifying and reducing the spread of plant viruses. The findings, published in Scientific Reports, will help plant pathologists in Laos, Cambodia, Vietnam and Thailand protect farmers’ valued cassava harvest.

“In Southeast Asia, most smallholder farmers rely on cassava: its starch-rich roots form the basis of an industry that supports millions of producers. In the past decade, however, Cassava Witches’ Broom disease has stunted plants, reducing harvests to levels that barely permit affected farmers to make a living,” said Wilmer Cuellar, Senior Scientist at the Alliance of Bioversity and CIAT.

Since 2017, researchers at the Alliance of Bioversity International and CIAT have incorporated nanotechnology into their research, specifically through the Oxford Nanopore DNA/RNA sequencing technology. This advanced tool provides insight into the deeper mysteries of plant life, accurately identifying pathogens such as viruses, bacteria and fungi that affect crops.

“When you find out which pathogen is present in a crop, you can implement an appropriate diagnostic method, search for resistant varieties and integrate that diagnosis into variety selection processes,” said Ana Maria Leiva, Senior Researcher at the Alliance.

Nanotechnology, in essence, is the bridge between what we see and what we can barely imagine. This innovation opens a window into the microscopic world of plant life and pathogens, redefining the way we understand and combat diseases that affect crops.

For an in-depth look at the technology being used in Laos and Colombia, please explore this link.

About the Alliance of Bioversity International and CIAT

The Alliance of Bioversity International and the International Center for Tropical Agriculture (CIAT) delivers research-based solutions that harness agricultural biodiversity and sustainably transform food systems to improve people’s lives. Alliance solutions address the global crises of malnutrition, climate change, biodiversity loss, and environmental degradation.

With novel partnerships, the Alliance generates evidence and mainstreams innovations to transform food systems and landscapes so that they sustain the planet, drive prosperity, and nourish people in a climate crisis.

The Alliance is part of CGIAR, a global research partnership for a food-secure future.

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Public Health from the People

There are many ways to privately improve public health. Such responses make use of local knowledge, entrepreneurship, and civil society and pursue standard…



There are many ways to privately improve public health. Such responses make use of local knowledge, entrepreneurship, and civil society and pursue standard goals of public health like controlling the spread of infectious diseases. Moreover, private responses improve overall welfare by lowering the total costs of a disease and limiting externalities. If private responses can produce similar outcomes as standard, governmental public health programs—and more—perhaps we should reconsider when and where we call upon governments to improve public health.

Two Kinds of Private Responses

Following Vernon Smith and his distinction between constructivist and ecological rationality, private actors can engage in two general kinds of public health improvements. They can engage in concerted efforts to improve public health, and they can engage in emergent responses through myriad interactions.1 Three stories below—about William Walsh, Martha Claghorn, and Edwin Gould—indicate concerted efforts to improve public health.

Walsh, a Catholic priest and President of the Father Matthew Society in Memphis, Tennessee, used the society to organize a refugee camp outside of the city and helped hundreds of people avoid yellow fever during the 1878 epidemic—one of the worst yellow fever epidemics in the country.2 Shortly after learning mosquitos carried diseases prior to 1901, Claghorn chaired the Civics committee of the Twentieth Century Club in the Richmond Hill area of Long Island and led a community-wide anti-mosquito campaign, which rid the area of potentially infectious mosquitos.3 After realizing that many of his employees were sick with malaria, Gould—president of the St. Louis Southwestern Railway—used his wealth and business firm to finance and develop an anti-mosquito campaign throughout Texas.4

These stories show how individuals recognize a public health problem given their circumstances and use their knowledge and available resources to resolve the problem. More recently, we might all be familiar with private, constructivist responses to Covid-19. We all made plans to avoid others and produce our desired amount of exposure. Many people made facemasks from old clothes or purchased them from facemask producers. Businesses, retailers, restaurants, and many others adapted in various ways to limit exposure for their workers and customers. My favorite example, albeit not relevant for most, is the so-called bubble that was implemented by the NBA, which housed teams, encouraged play, and limited infection. The NBA finished their season and crowned a 2020 champion only because of the privately designed and implemented bubble solution. The key is that the bubble pursued all of those objectives, not just one of them. All of these responses indicate how private interactions among people can minimize their exposure, through negotiation, discussion, and mutually beneficial means.

In addition to privately designed solutions, emergent public health responses are also important, perhaps even more so. Long-term migration and settlement patterns away from infectious diseases, consumption to improve nutrition, hygiene, sanitation, and the development of social norms to encourage preventative behavior are all different kinds of emergent public health responses. Each of these responses—developed through the actions of no one person—are substantial ways to improve public health.

First, consider how common migration operates as a means of lowering prevalence rates. As soon as people realized that living near stagnant bodies of water increased the probability of acquiring diseases like malaria, they were more likely to leave those areas and subsequently avoid them. Places with such features became known as places to avoid; people also developed myths to dissuade visitors and inhabitants.5 Such myths and associations left places like the Roman Campagna desolate for centuries. These kinds of cultural associations are also widespread; for example, many people in North and South Carolina moved to areas with higher elevation and took summer vacations to avoid diseases like malaria. East End and West End, in London, also developed because of the opportunities people had to migrate away from (and towards) several diseases.6

While these migration patterns might develop over decades, movement and migration also help in more acute public health crises. During the 1878 yellow fever epidemic throughout the southern United States, for example, thousands of people fled their cities to avoid infection. They took any means of transportation they could find. While some fled to other, more northern cities, many acquired temporary housing in suburbs, and many formed campsites and refugee camps outside of their city. The refugee camps outside of Memphis—like the one formed by William Walsh—helped hundreds and thousands of people avoid infection throughout the Fall of 1878.

Second, more mundane public health improvements—like improvements in nutrition, hygiene, and sanitation—are also emergent. These improvements arise from the actions of individuals and entrepreneurs, often closely associated with voluntary consumption and markets. According to renowned medical scientist Thomas McKeown, that is, rising incomes encouraged voluntary changes in consumption, which helped improve nutrition, sanitation, and lowered mortality rates.7 These effects were especially pertinent for women and mothers as they often selected more nutritious food and altered household sanitation practices. With advancing ideas about germs, moreover, historian Nancy Tomes argues that private interests advanced the campaign to improve house-hold sanitation and nutrition—full of advice and advertisements in newspapers, magazines, manuals, and books.8 Following Tomes, economic historians Rebecca Stein and Joel Mokyr substantiate these ideas and show that people changed their hygiene, sanitation, house-hold cleaning habits, and diets as they learned more about germs.9 Such developments helped people to provide their desired exposure to germs according to their values.

Obviously, there were concerted public health improvements during this time that also explain falling mortality rates. For example, waterworks were conscious efforts to improve public health and were provided publicly and privately, with similar, positive effects on health.10 The point is that while we might be quick to connect the health improvements associated with a public water system, we should also recognize emergent responses like gradual changes in voluntary consumption.

Finally, social norms or rules that encourage preventative behavior might also be relevant kinds of emergent public health responses. Such rules identify behavior that should or should not be allowed, they are enforced in a decentralized way, and if they follow from the values of individuals in a community.11 If such rules pertain to public health, they can raise the cost of infectious behavior or the benefits of preventative behavior. Covering one’s mouth when sneezing is not only beneficial from a public health perspective, it also helps avoid earning disapproval.

The condom code during the height of the HIV/AIDS epidemic is another example of an emergent public health rule that reduced infectiousness by encouraging safer behavior.12 People who adopted safer sexual practices were seen to be doing the right thing—akin to taking care of a brother. People who refrained from adopting safer sexual practices were admonished. No single person or entity announced the rule; rather, it emerged from the actions and interactions of individuals within various communities to pursue their goals regarding maintaining sexual activity and limiting the spread of disease. Indeed, such norms were more effective in communities where people used their social capital resources to determine which behaviors should be changed and where they can more easily monitor and enforce infractions. This seems like a relevant factor where many gay men and men who have sex with men live in dense urban areas like New York and Los Angeles that foster LGBTQ communities.

Covid-19 provides additional examples where social norms encouraged the use of seemingly appropriate behavior, e.g., social distancing, the use of facemasks, and vaccination. Regardless of any formal rule in place, many people adapted their behavior because of social norms that encouraged social distancing, the use of facemasks, and vaccination. In communities that valued such behaviors, people that wore face masks and vaccinated were praised and were seen as doing the right thing; people that did not were viewed with scorn. Indeed, states and cities that have higher levels of social capital and higher values for public health tend to have higher Covid-19 vaccine uptakes.13

Improving Public Health and More

“Private approaches tend to lower the total costs of diseases and they limit externalities.”

While these private approaches can improve public health, can they do more than typical public health approaches cannot? Private approaches tend to lower the total costs of diseases and they limit externalities. Each aspect of private responses requires additional explanation.

Responding to infectious diseases and disease prevention is doubly challenging because not only do we have to worry about being sick, we also have to consider the costs imposed by our preventative behaviors and the rules we might impose. Thus, the total costs of an infectious disease include 1) the costs related to the disease—the pain and suffering of a disease and the opportunity costs of being sick—and 2) the costs associated with preventative and avoidance behavior. While disease costs are mostly self-explanatory, the costs of avoiding infection warrant more explanation. Self-isolation when you have a cold, for example, entails the loss of potentially valuable social activities; and wearing condoms to prevent sexually transmitted diseases forfeits the pleasures of unprotected sexual activity. Diseases for which vaccines and other medicines are available are less worrisome, perhaps, because these are diseases with lower prevention costs than diseases where those pharmaceutical interventions are not available. Governmental means of prevention also add relevant costs. Many readers might be familiar with the costs imposed by our private and public responses to Covid—from isolation to learning loss, and from sharp decreases in economic activity to increased rates of depression and spousal abuse.14 Long before Covid, moreover, people bemoaned wearing masks during the Great Flu,15 balked at quarantine against yellow fever,16 and protested bathhouse closings with the onset of HIV.17

Figure 1 shows the overall problem: diseases are harmful but our responses to those diseases might also be harmful.

Figure 1. The Excess Burden of Infectious Diseases

This figure follows Bhattacharya, Hyde, and Tu (2013) and Philipson (2000), who refer to the difference between total costs and disease costs as the excess burden of a disease. That is, excess burden depends on how severely we respond to a disease in private and in public. The excess burden associated with the common cold tends to be negligible as we bear the minor inconvenience of a fever, a sore throat perhaps, or a couple days off work; moreover, most people don’t go out of their way to avoid catching a cold. The excess burden of plague, however, is more complicated; not only are the symptoms much worse—and include death—people have more severe reactions. Note too that disease costs rise with prevalence and with worsening symptoms but eventually decline as more severe diseases tend to be less prevalent. Still, no one wants to be infected with a major disease, and severe precautions are likely. We might shun all social interactions, and we might use government to impose strict quarantine measures. As disease severity rises along the horizontal axis, it might be the case that the cure is worse than the disease.

The private responses indicated above all help to lower the total costs of a disease because people choose their responses and they use their local knowledge and available resources to select cheaper methods of prevention. Claghorn used her neighborhood connections and the social capital of her civics association to encourage homeowners to rid their yards of pools of water; as such she lowered the costs of producing mosquito control. Similarly, Gould used the organizational structure of his firm to hire experts in mosquito control and build a sanitation department. These are cheap methods to limit exposure to mosquitos.

Emergent responses also help to lower the total costs of a disease because such responses indicate the variety of choices people face and their ability to select cheaper options. People facing diseases like malaria might be able to move away and, for some, it is cheaper than alternative means of prevention. Many people now are able to limit their exposure to mosquitos with screens, improved dwellings, and air conditioning.18 Consider the variety of ways people can limit their exposure to sexually transmitted diseases like HIV. If some people would rather use condoms to limit HIV transmission, they are better off doing so than if they were to refrain from sexual activity altogether. Similarly, some people would be better off having relatively risky sexual activity if they were in monogamous relationships or if they knew about their partner’s sexual history. That people can choose their own preventative measures indicates lower total costs compared with blunt, one-rule-for-all, governmental public health responses.

Negative and positive externalities of spreadable diseases indicate too much infectious behavior and too little preventative behavior, respectively. Hosting a party is fun, but it also incurs the internal costs of the drinks and appetizers and, more importantly, perhaps the external costs of raising the probability that people get sick. Attending a local cafe can be relaxing, but you have to pay for a cup of coffee and you might also transmit a disease to other coffee drinkers. The same could be said for many other public and social activities that might spread diseases like attending a class or a basketball game, transporting goods and people, and sexual behaviors. Our preventative behaviors from taking a vaccine to covering your mouth and from isolation to engaging in safer sexual practices emits positive externalities. If left unchecked, negative and positive externalities lead to higher rates of infection.

Overall, we should continue to think more critically about delineating how private and public actors can improve public health and overall welfare. More importantly, we should recognize that private actors are more capable than we often realize, especially in light of conscious efforts to improve public health and those efforts that emerge from people’s actions and interactions. These private efforts might be better at advancing some public health goals than public actors do. Individuals, for example, have more access to local knowledge and can discover novel solutions that serve multiple ends—often ends they value—rather than the ends of distant officials. Such cases and possibilities indicate cheaper ways to improve public health.


[1] Smith (2009), Rationality in Economics: Constructivist and Ecological Forms, Cambridge University Press.

[2] For more on Walsh, see Carson (forthcoming), “Prevention Externalities: Private and Public Responses to the 1878 Yellow Fever Epidemic,” Public Choice.

[3] For more on Claghorn, see Carson (2020), “Privately Preventing Malaria in the United States, 1900-1925,” Essays in Economics and Business History.

[4] For more on Gould, see Carson (2016), “Firm-led Malaria Prevention in the United States, 1910-1920,” American Journal of Law and Medicine.

[5] On the connection between malarial diseases, dragons, and dragon-slaying saints, see Horden (1992), “Disease, Dragons, and Saints: the management of epidemics in the dark ages,” in Epidemics and Ideas by Ranger and Slack.

[6] For more on migration and prevalence rates, see Mesnard and Seabright (2016), “Migration and the equilibrium prevalence of infectious disease,” Journal of Demographic Economics.

[7] The American Journal of Public Health published several commentaries on McKeown in 2002:

[8] Tomes (1990), “The Private Side of Public Health: Sanitary Science, Domestic Hygiene, and the Germ Theory, 1870-1990,” Bulletin of the History of Medicine.

[9] Mokyr and Stein (1996), “Science, Health, and Household Technology: The Effect of the Pasteur Revolution on Consumer Demand,” in The Economics of New Goods, NBER.

[10] See Werner Troesken’s work on public and private waterworks in the U.S. around the turn of the 20th century. See Galiani, Gertler, and Shargrodsky (2005), “Water for Life,” Journal of Political Economy.

[11] Brennan et al., (2013), Explaining Norms, Oxford University Press.

[12] For more on the condom code, see Carson (2017), “The Informal Norms of HIV Prevention: The emergence and erosion of the condom code,” Journal of Law, Medicine and Ethics.

[13] Carilli, Carson, and Isaacs (2022), “Jabbing Together? The complementarity between social capital, formal public health rules, and covid-19 vaccine rates in the U.S.,” Vaccine.

[14] Leslie and Wilson, “Sheltering in Place and Domestic Violence: Evidence from Calls for Service During Covid-19.” Journal of Public Economics 189, 104241. Mulligan, “Deaths of Despair and the Incidence of Excess Mortality in 2020,” NBER, Betthauser, Bach-Mortensen, and Engzell, “A systematic review and meta-analysis of the evidence on learning during the Covid-19 Pandemic,” Nature Human Behavior,

[15] On the great influenza epidemic, see CBS News, “During the 1918 Flu pandemic, masks were controversial for ‘many of the same reasons they are today’.” Oct. 30, 2020.

[16] On yellow fever quarantine in Mississippi, see Deanne Nuwer (2009), Plague Among the Magnolias: The 1878 Yellow Fever Epidemic in Mississippi.

[17] On these closures, see Trout (2021), “The Bathhouse Battle of 1984.”

[18] Tusting et al. (2017), “Housing Improvement and Malaria Risk in Sub-Saharan Africa: a multi-country analysis of survey data.” PLOS Medicine.

*Byron Carson is an Associate Professor of Economics and Business at Hampden-Sydney College in Virginia, where he teaches courses on introductory economics, money and banking, health economics, and urban economics. Byron earned his Ph.D. in Economics from George Mason University in 2017, and his research interests include economic epidemiology, public choice, and Austrian economics.

This article was edited by Features Editor Ed Lopez.


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