Tuesday Assorted Links - 03/31/20

  1. Once in a Lifetime - Ben Hunt, Epsilon Theory

    What do I mean by sociopathy and division?

    I mean the way our political and economic leaders beat the narrative drum about how this virus prefers to kill the old rather than the young, as if that matters for our policy choices, as if older Americans are lesser Americans, as if we should think of them differently – with less empathy – than Americans who are more like “us”.

  2. Why We Sleep — a tale of institutional failure - Andrew Gelman
    That latest tale of research malfeasance in the very popular "pop science" bestseller Why We Sleep. The author Matthew Walker seems to have very egregiously omitted data to support his hypotheses.

  3. The Corona Crisis vs. The Great Depression - Ben Carlson
    Sober-minded compare/contrast between now and the Great Depression. Some dynamics are similar, others are very different (a well-functioning Fed, social programs, Keynesianism).

  4. A Vision of Post-Pandemic New York - Tyler Cowen, Bloomberg

  5. Fiscal Policy during a Pandemic - Miguel Faria e Castro, St Louis Fed

    I find that UI benefits are the most effective tool to stabilize income for borrowers, who are the hardest hit, while savers favor unconditional transfers. Liquidity assistance programs are effective if the policy objective is to stabilize employment in the affected sector.

  6. Lockdowns and GDP Is there a tradeoff? - Andrew G. Atkeson

    If we lock everyone down, we save lives, but we lose economic output. But what if we go back to work now? We will lose lives, but will we gain economic output?

  7. Two COVID-19 initiatives - Alex Danco

#assorted links, markets, economics

Monday Links - 03/30/20

  1. Corporate Socialism: The Government is Bailing Out Investors & Managers Not You - Nassim Taleb
    I have major problems with Taleb's premise of the financial crisis bailouts – specifically that there was some quid pro quo with Geithner and "the financial industry" vis-a-vis Geithner supposedly defending the bankers. But I agree 1000% with Taleb's larger point that if the US Government is bailing out an industry, someone ought to take a haircut.

  2. NY Fed: Fight the Pandemic, Save the Economy: Lessons from the 1918 Flu - Sergio Correia, Stephan Luck, and Emil Verner
    The authors draw two main conclusions using city-level data from the 1918 Flu pandemic. First, higher mortality rates lead to lower economic growth. Second, non-pharmaceutical interventions (social distancing) lead to both lower mortality and better economic outcomes over the medium term (e.g. lower unemployment and higher growth).

    On the contrary, cities that intervened earlier and more aggressively experienced a relative increase in real economic activity after the pandemic subsided. Altogether, our findings suggest that pandemics can have substantial economic costs, and NPIs can lead to both better economic outcomes and lower mortality rates.

  3. The St. Louis Fed’s Financial Stress Index, Version 2.0
    This post provides great detail on how the Fed improved on the Financial Stress Index to improve it's accuracy.

  4. A Short History of Dead Cat Bounces - Ben Carlson

#assorted links, economics, markets

Friday Links

  1. An Explanation for Stock Market Gains from Nikolaos Panigirtzoglou (JPM) - MarketWatch

    Pension funds and so-called balanced mutual funds need to start re-jigging their portfolios in favor of stocks as the selloff in equities and rally in government bonds has driven down the value of their equity relative to their bond positions. Commodity trading advisors and long-short equity hedge funds have also had to cover their short bets on stocks.

#assorted links, markets

Thursday Links

  1. How Bill Ackman Turned $27 Million Into $2.6 Billion During the Coronavirus Crisis
    Shorting historically tight credit spreads, as it turns out. That's how you 100x $27 million.

  2. The Pandemic in My Neighborhood - Michael Lewis, Bloomberg

  3. FRED Restaurant Data

  4. The Changing World Order - Ray Dalio

  5. The Fed Goes All In With Unlimited Bond-Buying Plan - Jeanna Smialek, NYT

    Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate,

    Indeed.

  6. The Fed Asks for BlackRock’s Help in an Echo of 2008 - Matthew Goldstein, NYT

  7. How the Pandemic Will End - Ed Yong, The Atlantic

  8. The Cheesecake Factory Tells Landlords Across the Country It Won’t Be Able to Pay Rent on April 1 - Matthew Kang, Eater
    Cheesecake Factory is the largest dine-in restaurant group in the country, and they're not paying their rent this month. How do you think mom and pops are going to manage? It's gonna be a rough month for commercial landlords and CMBS.

  9. Nobody Wants a Margin Call Right Now - Matt Levine, Bloomberg

#assorted links, markets

Bill Gross: How Technology Can Solve the Climate Crisis

I had the privilege of seeing this presentation in person. It is a masterclass in presentation, critical thinking, framing, and so much more. In 25 minutes Bill successfully defines, educates, contextualizes, and presents (viable) solutions to the climate crisis, and does so in an engaging, entertaining, inspiring way. It's one of the best presentations I've ever seen.

Framing is Everything

Bill frames the climate crisis in terms that are easy to digest and quantify. A couple of choice bits that efficiently and effectively define the nature of the problem:

Each of us is putting our body weight in CO2 up into the atmosphere every single day.
The extra heat that we're adding to the planet, to the ground to the oceans, because of that extra CO2 is equal to three Hiroshima bombs going off every single second of every single day.
A billion animals died in Australia just last month.

When you read these stats, you fucking get it. There's a lot of hard science underneath these high-level qualitative headline stats, but they're not all that helpful for defining the problem. The goal here was to define the problem in order to inspire action. To do that, you have to contextualize the problem in terms your audience understands.

Framing really is everything.

Pick One Thing: Price

Climate change can be intellectually intimidating. This frames the one key metric anyone attempting a solution must solve in the simplest possible terms: price.

If the way to solve the climate crisis is to stop burning fossil fuels, then you can't solve them problem without solving price. You have to make any solution cheaper than oil.

Second & N-Order Thinking

In this slide, he sums up all the ways energy can be stored:

How can we use gravity in a novel way to store energy? I won't summarize the whole talk here. I'll just say that it's inspiring and illuminating to watch him walk through the process of distilling hard engineering problems to consumable chunks, and take you through the process of discovering creative solutions. It's "big E" Engineering before your eyes.

There's too much to praise and fawn over in this presentation. Enjoy.

#climate change, inspiration

Wednesday Links

  1. Southwest Airlines And Alaska Air: Built To Survive Coronavirus - Seeking Alpha
  2. Icahn is shorting the commercial real estate market - CNBC
  3. Now There's a Mortgage Crisis Too - Matt Levine, Bloomberg
  4. The Speed Premium in an exponentially growing pandemic world - Marginal Revolution
    I tweeted about this yesterday (before reading this), the speed narrative must be in the zeitgeist.
  5. Yes, It's Tight Money
  6. Why Time No Longer Has Meaning, According to Science - LifeHacker
    As it turns out, this warping of time has an explanation rooted in how our brains record memories during times of extreme fear and stress.
  7. Why It’s Hard to Invest in Cybersecurity - Differential VC
    Customers, enterprise and SMBs, typically will prefer a one-stop shopping solution to a problem like cybersecurity. They are unlikely to want to piece together a collection of incompatible best-in-class solutions to individual subproblems. They will likely prefer a monolithic solution that offers adequate cybersecurity in one product.
  8. Infinite Games - Graham Duncan
    For me, there is no end to this activity, no prize or summit where I’m done and will feel satiated. To build trust is enjoyable in its own right.
  9. What’s in Congress’s $2 Trillion Coronavirus Stimulus Package - Bloomberg

#assorted links, economics, markets

Tuesday Links

  1. The Fed: Avoiding a Depression
    Helpful context for the Fed's recent actions. It all comes down to making sure the economy has enough liquidity. It starts with the banking system and flows through to essentially all parts of the credit markets: treasury securities, repo markets, money markets, commercial paper, residential and commercial mortgage debt, even investment-grade corporate bonds.
    The Fed’s immediate goal is to keep credit flowing to the real economy.
  2. NBER: The Coronavirus and the Great Influenza Pandemic: Lessons from the "Spanish Flu" for the Coronavirus's Potential Effects on Mortality and Economic Activity
  3. The Forgotten 1957 Pandemic and Recession - Marginal Revolution
  4. Bill Gross: How Technology Can Solve the Climate Crisis
    A mind-blowing, inspiring presentation from Bill Gross that frames the climate change fight in a very digestible way, and presents some incredible technologies he's investing in to create sustainable energy and solve the problem.
  5. Party Zero: How a Soirée in Connecticut Became a ‘Super Spreader’ - NYT
    The Westport soirée — Party Zero in southwestern Connecticut and beyond — is a story of how, in the Gilded Age of money, social connectedness and air travel, a pandemic has spread at lightning speed. The partygoers — more than half of whom are now infected — left that evening for Johannesburg, New York City and other parts of Connecticut and the United States, all seeding infections on the way.
  6. Fed Bombshell - The Grumpy Economist
    A useful explanation as to why the Fed's actions are not inflationary:
    When the Fed buys a Treasury bill, it creates new money with which to buy the bill. It simply increases the amount of reserves, which banks can freely transform to cash, so you can think of it as printing up money to buy the bill. Why doesn't this cause immense inflation? Well, the Fed backs the money with the bill. The overall quantity of government debt has not changed, just the composition.
  7. Buying During a Crisis
  8. How I’m Managing My Own Money Through the Crisis - Ben Carlson
    Stocks could continue to fall further. As a long-term investor, I don’t mind. I have plenty of time to wait and if I regret buying down 50% in 30 years we’ve got bigger problems on our hands than the stock market.

#assorted links, economics, markets

Monday Links

Economists are coalescing around the idea that we need a policy response to an "economic pause". Today's links are (mostly) focused around different policy proposals designed to keep the US out of an economic depression.

  1. U.S. Jobless Rate May Soar to 30%, Fed’s Bullard Says
    It's hard to understate how audacious it is for a Fed governor to warn of 30% unemployment and a 50% reduction in GDP Q2.
  2. The U.S. Shut Down Its Economy. Here’s What Needs to Happen in Order to Restart
  3. Social Distancing Makes Sense Only With Extraordinary Fiscal Stimulus
  4. How to Rescue Main Street From Coronavirus Before It’s Too Late
  5. How to Help American Businesses Endure and Jobs Survive
  6. Saving small and medium-size business: temporary lending facility needed now
  7. Do The Right Thing
    A scathing deep dive into the stock buybacks and executive enrichment at the four largest US airlines, who're now slated to receive loans from the US government.
  8. Fed Unveils Major Expansion of Market Intervention
    The central bank signaled it would do practically anything—extending loans to big and small businesses, backstopping funds to municipalities and purchasing hundreds of billions of dollars of government debt—to help an American economy in a race against time.

#assorted links, economics

Thursday Assorted Links

1. Epsilon Theory: Our Escape Story

A challenge to ignore professional financial pundits preaching moderate consensus views on CNBC. We're in uncharted territory, our escape story out the coronavirus economy won't likely look familiar to most of us.

2. WSJ: How to Treat the Financial Symptoms of Covid-19

John Cochrane (The Grumpy Economist) sounds the warning bell on the ability of Covid-19 to lead to a financial panic, hence the Fed's recent actions to support credit markets, which have shown clear signs of strain. I agree with his diagnosis that the economy is fundamentally strong, we just have this tricky issue of needing to shut down a large part of the economy for a few months, which we just don't have any precedent or policy tools for. Businesses and individuals have a continuing stream of obligations while the income spigot has been abruptly shut off.

Cochrane's prescription is mostly focused on the supply side. I agree with him that it would be a massive mistake to let firms fall into bankruptcy and fail during this economic pause. Cochrane argues for loans as a % of last year's income tax return. Fine, unless you made very little money last year, in which case loans do next to nothing for you. Loans are good, we need loans too, but not in lieu of cash payments to hourly workers and people losing jobs. Cochrane argues cash payments won't get spent in the way that we need right now. Cochrane's probably right that they won't get spent right now, but they will get spent, at one point or another.

3. This Is the Only Way to End the Coronavirus Financial Panic

Andrew Ross Sorkin recommends something similar to the above proposal, but much looser and more flexible: a no-interest bridge loan to businesses, payable over a 5 year payback period. It would likely cost somewhere in the trillions.

It's worth considering a proposal like this in terms of the downside opportunity cost -- lost economic output over the medium term. It seems to become more obvious by the day that this will be the deepest and quickest recession in decades, probably since the great depression, so the downside risk here could be keeping us out of a prolonged deflationary depression.

4. Trump’s $1.2 Trillion Won’t Do It. Try $2.5 Trillion

A strong argument against a payroll tax cut, as it only helps those who have a job, and employed people are less likely to spend the stimulus. Three proposals are thrown out: pay every person under 40 $10,000 (more likely to spend), government bonuses for every person who gets tested, and extending unemployment benefits beyond the normal 26-week period.

5. Michael Bloomberg: The Economic Response We Need to the Coronavirus

An argument for a large infrastructure spending bill to jumpstart the economy once the immediate coronavirus risk passes.

If Congress passes a major infrastructure and clean-energy bill before the April recess, shovels can start hitting the ground when workers, businesses and investors are looking for signs of hope, indications of growth, and reasons to believe that the worst has passed.

6. U.S. Blood Supply Under Stress as Shutdowns Stop Blood Drives

Blood bank supplies have been decimated as a result of the economic shutdown.

About 4,000 blood drives scheduled for March, April and May have been canceled, reducing projected supply by 130,000 donations, according to America’s Blood Centers, an industry group.

Go here to find out where you can donate.

7. The Staggering Rise in Jobless Claims This Week

#assorted links, economics, markets

NYC Public Health Data

Yesterday I posted about Lack of Imagination over at Epsilon Theory. In that piece Rusty references some fantastic public health data published by NYC Health. They have a number of datasets available, the most interesting/useful one currently being influenza-like admissions to NYC emergency rooms.

What's clear in the data is that there's an abnormal spike in March that doesn't exist in any prior year, even in 2018, which appears to have been a particularly bad flu season.

Influenza-like admissions to NYC emergency rooms, 12/31/2017-3/16/2020

We see the same trend if we change the Syndrome filter to Respiratory, which presumably would be the admission reason listed for people with later-stage COVID19 respiratory issues.

Respiratory admissions to NYC emergency rooms, 12/31/2017-3/16/2020

This level of transparency into the health care system is incredibly useful at a time like this. The official coronavirus confirmed case numbers are extremely low, due primarily to the fact that almost no testing has taken place up to this point (though that will likely change this week). These datasets provide a useful proxy for what's actually happening in hospitals, despite what the lagging testing data says.

The NYC syndromic dataset query tool can be accessed here. To get the graph/filter view, click on one of the cells when the page loads.

I'm inspired that the NYC government collects and publishes this data. Other cities should follow their lead and provide this level of transparency. It gives local news organization and individuals a near real-time view of hospital capacity, which is especially important in the midst of a public health crisis, where hospital capacity is one of the key metrics we have to manage to effectively contain and treat the virus.

#covid19, coronavirus, public health, open government