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Prospect of a Vaccine Signals a New Game is Afoot

Prospect of a Vaccine Signals a New Game is Afoot

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Pfizer's extraordinary results on developing a vaccine for Covid-19 has injected a new factor into the investment climate, even as many countries around the world continue to wrestle with a new and powerful spread of the virus.  In the US equity market, a rotation, which may have been underway previously, gained ground.  It can be illustrated by the fact that the FAANG-driven NASDAQ trailed the other major benchmarks, including the Russell 2000.  European and Japanese equities extended rallies and outperformed the US handily.  

Investors had previously discounted negative interest rates in the UK and New Zealand but no longer does.  The respective currencies were among the best performing major currencies last week.  On the other hand, the safe-haven appeal of the Japanese yen and Swiss franc dimmed, and both underperformed. 

The surging virus renders much of incoming high-frequency data a bit dated now.  The risk of a new contraction after a powerful rebound in Q3 looks more likely in Europe than the US.  Europe's new lockdowns, curfews, and social restrictions seem more severe than in the US, where all 50 states were seeing increased cases at the end of last week, and some areas have not spare hospital capacity.  That said, important data from the US, including the October employment report and the expected bounce back in October industrial output after a 0.6% decline in September, suggests a solid start to Q4.  

Still, there is no way that Q4 US GDP can be anywhere close to the record 33% annualized surge of economic activity in Q3.  Consumption drives around 70% of the US economy, and retail sales account for around 40% of consumption.  It is here that the slowdown will be more evident.  The median forecast in the Bloomberg projects a 0.5% increase in October after averaging 1.1% in Q3.  More Americans are working, and on average, working a little longer and getting paid a little more.  That should underpin consumption.  Retail sales rose by an average of 0.5% in 2019.  Forecasts for Q4 growth are coming around 3-4%.  

Although the world is watching the political drama unfold as President Trump exhausts his legal options resisting what now seems inevitable, the focus is on the virus and vaccine.  New safety data from Pfizer is expected next week, which is need to seek emergency approval.  An update on Moderna's vaccine may be provided in the coming days.   It relies on the same novel technology as Pfizer, which uses messenger RNA to spur one's body to create the proteins that produce the virus's antibodies. 

It is still common to see references to the "Japanification" of the US or Europe, which generally means slow growth and low inflation and low-interest rates.  Yet, the "secular stagnation" that Japan arguably is experiencing is taking place as the population shrinks.  Japan's per capita GDP has fared better than many other high-income countries.  It was also the European Central Bank that was the first to introduce negative interest rates (June 2014 vs. January 2016 for the BOJ). 

The BOJ did innovate and introduced yield curve control, but so far, only Australia has implemented its own version.  Rather than target the 10-year yield as BOJ does, the RBA targets the three-year bond yield.  The BOJ innovated again last week and illustrated how monetary policy can be used despite claims that there is nothing else it can do.  To strengthen banks' intermediary function, especially small and regional banks, the BOJ offered to pay 10 bp on the part of the reserves held at the central bank. The offer was conditional on the bank committing to a major structuring of its overhead or merge with another.  The facility will last through March 2022.  

Japan's new Prime Minister Suga has been candid with his assessment that Japan is over-banked.  The shrinking population, low-interest-rate environment for a quarter of a century, and now the pandemic has squeezed the regional banks.  There will be a couple of legal/regulatory inducements.  First, a law is expected to be approved in the next few weeks that exempts banks from anti-competitive measures.  Second, regional banks that do not use the new facility could be subject to an inquiry by the Financial Services Agency about the bank's viability.  

This initial effort to facilitate consolidation may encourage cost-cutting and the streamlining of existing operations.  However, the inducement for mergers and acquisitions seems too small and temporary to generate much activity.  The BOJ estimates that if all the banks participated, the cost could reach JPY50 bln (~$475 mln).  The implication that monetary instruments can be used more creatively to strengthen intermediation, the transmission mechanism of monetary policy, is a worthy addition to the playbook.    

In the US, the Federal Reserve may lose authorization for some or all emergency facilities launched in March and April rather than take new measures.  The 2008-2009 financial crisis reforms legislated a role for Congress and the US Treasury in establishing emergency facilities.  The facilities initially were to be in place through September. Well ahead of the termination, the Treasury and the Federal Reserve agreed to extend the programs until the end of the year.  Treasury Secretary Mnuchin appears to be balking at authorizing a further extension, even though that is what Fed officials have been advocating. 

Most of the pushback is on the facility that can buy state and local government debt.  It has not been used very much.  In fact, it appears that the Fed has bought two securities for a total of around $1.65 bln.   One issuer was the state of Illinois, and the other was NY's Metropolitan Transportation Authority. Still, the US Treasury notified Congress in mid-October that it does not believe the facility is needed after the end of the year.  Some Senators, noting that the markets were functioning normally, express some concern that the facility could be used as a backdoor way to aid city and state in lieu of fiscal support.  Aid to state and local governments has been a sticking point in stimulus negotiations.  

Some of the same arguments can apply to other facilities the Fed launched with Treasury's support and funded by the Cares Act.  The markets are functioning well, and that the facilities are not needed is supported by reference to their use.  Still, the Federal Reserve has defended them and seeks an extension before a vaccine is available. Its arguments invoke prudence and the signaling impact,  as aptly illustrated by the market reaction to the corporate bond facility's announcement, which also has been barely used.  

That said, the Treasury Department seems more sympathetic to extending the Main Street lending facility.   A legal issue may at stakeThe decision to extend one or more facilities past the end of the year may require congressional approval.  That is the argument put forth by some Senators.  

The ECB has the opposite problem.   Its purchases of bonds, which some estimate to be larger than the net new issuance next year (issuance minus interest payments and maturities), may be so successful that some countries may be reluctant to access EU funds if there are conditions attached.   Indeed, the much-heralded Recovery Fund embedded in the EU's budget faces the risk of veto by Hungary and/or Poland. In Japan, the government and the central bank are pulling in the same direction.  In the US, space has opened between the Federal Reserve, who is advocating more fiscal stimulus and an extension of its facilities, and the legislative branch, which was stalemated ahead of the election. . In Europe, the ECB's bond purchases may offer an alternative to the conditionality.

Since the end of February, the ECB's balance sheet has risen by almost 45% to around 6.80 trillion euros as of November 6.  It is near 62% of GDP, up from 39% at the end of last year.  The Fed's balance sheet has increased by about 72.5% to $7.175 trillion as of November 11.  It was less than 20% of GDP at the end of last year and now is closer to 34%.  In comparison, the BOJ's balance sheet stood at 133% of GDP at the end of October.  It was 103.5% of GDP at the end of last year.  

The most interesting central banks next week, though, will not be the ECB, the Fed, or the BOJ.  The People's Bank of China (PBOC) and the Central Bank of the Republic of Turkey (CBRT) are important even if one does not have direct exposure to either.  The Deputy Governor of the PBOC has warned that it will be exiting some easing measures, and it is just a matter of time.  In addition, a large funding shortage has spurred a surge in money market rates, some of which were at their highest levels since January last week.  Policy loans are maturing this month, and banks face other debt repayments and the need to buy government bonds by the end of the year. 

The  PBOC injected CNY160 bln in the banking system through seven-day repo agreements before the weekend, which is the most in over a month.  The PBOC's medium-term lending facility (MLF) is the focus now.  The PBOC will inject funds through the facility on Monday.   There are roughly CNY600 bln of MLF loans coming due this month and the same amount next month.  Anything less than a CNY400 bln-CNY600 bln injection on Monday may be regarded as stingy by participants, and the pressure on money market rates could increase again.  China is seen as the first to likely exit the emergency programs, and it could impact others.  Foreign portfolio flows into China are increasingly seen to come at the expense of other emerging market economies.  An early move by the PBOC would also likely encourage a stronger yuan.  

Turkey has a new central bank governor and a new treasury minister.  President Erdogan has signaled a monetary regime change.   Recall that CBRT cut rates aggressive from 12% at the end of last year to 8.25% by May.  Despite the currency's depreciation, the loss of reserves,  and higher inflation, officials under pressure from the president did not raise rates repo rate until September.  It did tighten other lending facilities, but like last month, investors' confidence was not won back.   

The CBRT will set the one-week repo rate on November 19. The median estimate in the Bloomberg survey sees a 4.75% hike to 15%.   There is a great dispersion of survey responses.  There is a cluster around 14.00%-14.25% and another cluster of forecasts around 15.00%-15.25%.  There is only one forecast for an unchanged rate.  We suspect that anything less than 300 bp will disappoint the market, which now expects the CBRT Governor Agbal to lead in a more orthodox fashion.   It appears that the new Elvan, the new treasury, and finance minister, who replaced Erdogan's son-in-law, was approved by Agbal.  

The Turkish lira jumped nearly 11% last week, paring this year's loss to about 22.5% year-to-date, leaving Brazil real (-26.3%) and the Argentine peso (-24.9%) at the bottom of the EM currency table. We note that late last week, in the face of a jump in inflation (3.8% month-over-month and 37.2% year-over-year), Argentina's central bank hiked rates, including the Leliq by 200 bp to 38%, and the peso's depreciation accelerated ahead of the weekend.   The takeaway may be that the credibility of policy, broadly understood, maybe as important as the substance.  


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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

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Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The…

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

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