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This is the big news. I am in no way an investment specialist or financial advisor but if I owned stocks I would wait for the relief rally to peak after this bill passes through congress and then get out before bad news predominates again – which it almost certainly will.

US Senate leaders have reached a deal with the Trump administration on a nearly $2tn stimulus package to help rescue the American economy ravaged by the coronavirus pandemic as Donald Trump considers easing restrictions aimed at combating the contagion.

“After days of around-the-clock negotiations amongst senators and administration officials, a bipartisan compromise was struck over what is expected to be the largest US economic stimulus measure ever passed.”

https://www.theguardian.com/world/2020/mar/25/senate-passes-coronavirus-stimulus-package


When everything is done, the Fed could have a balance sheet, consisting mainly of the bonds it has purchased to support markets and the economy, approaching $10 trillion, according to Krishna Guha, head of global policy and central bank strategy for Evercore ISI.”

https://www.cnbc.com/2020/03/23/fed-is-helping-the-markets-more-than-it-did-during-the-financial-crisis.html


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A short national memory married to high-intensity coverage of the pandemic can, and likely will, wipe out the reality of how much people were already under monetary stress.

“A J.D. Power study from February, done for the banking industry, suggested that 75.4% of Americans “are experiencing some level of stress over their current financial situation.” That broke out into 53.6% being “somewhat stressed” and 21.8% reporting as “very stressed.””

https://www.forbes.com/sites/eriksherman/2020/03/24/everyone-was-already-strung-out-over-money-and-debt/#6b1443e33176


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As the shortage of dollars sweeps the globe, cracks are starting to show up in Asia’s emerging markets

“Indonesia, Malaysia, and India are raising red flags for analysts as the coronavirus outbreak shutters large parts of their economies, currencies plunge and governments push to widen their fiscal deficits.”

https://ca.finance.yahoo.com/news/worldwide-dollar-crunch-raises-red-230000474.html


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Chinese companies are looking at $120 billion of debt repayments this year on their U.S. dollar denominated debt.

“Real estate developers and industrial companies make up three-quarters of the outstanding $233 billion of junk-rated bonds. There’s another $563 billion of higher-rated debt.”

https://www.washingtonpost.com/business/the-dollar-squeeze-is-coming-for-chinainc/2020/03/24/4b2cdbc0-6e23-11ea-a156-0048b62cdb51_story.html


Business activity has crashed to record lows in the US and Europe, according to a closely watched survey, as the coronavirus pandemic fuels a global economic crisis.”

https://www.ft.com/content/f5ebabd4-6dad-11ea-89df-41bea055720b


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Government ministers across Africa have called for the suspension of debt interest payments as the Covid-19 crisis deepens.

“The numbers of cases being reported in Africa are still behind Europe and the US but rises are being confirmed in South Africa, Kenya, Egypt, Algeria and Burkina Faso, among others, and there is fear of what economic consequences the pandemic might wreak.”

https://www.theguardian.com/global-development/2020/mar/25/africa-leads-calls-for-debt-relief-in-face-of-coronavirus-crisis


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The near-halving of oil prices since the start of 2020, the sharp fall in global growth, and the effects of the COVID-19 pandemic will put severe strains on both oil and non-oil revenue [in Gulf nations].

“As a result, Gulf Co-operation Council governments’ budget deficits are likely to soar to 10-12% of GDP in 2020, more than double earlier forecasts, while lower oil prices will also result in substantial current-account deficits.”

https://www.project-syndicate.org/commentary/gulf-cooperation-council-perfect-covid19-storm-by-nasser-saidi-2020-03


“”Storage facilities around the world are brimming with cheap oil and could run out of space within months, traders and analysts say, a predicament that could drive down crude prices to unprecedented single-digit dollar amounts.””

https://seekingalpha.com/article/4333826-crude-oil-tsunami-headed-this-way-oil-may-farther-to-fall


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Schlumberger , the world’s largest oilfield services company, on Tuesday said it would cut spending by 30% this year from last year’s levels

“Oil prices have fallen by more than half this year, diving below $24 a barrel on Tuesday, as coronavirus curtails demand and top suppliers Saudi Arabia and Russia began pumping full bore to grab share in a slumping market.”

https://www.reuters.com/article/us-global-oil-schlumberger/schlumberger-cuts-spending-30-eyes-rapid-slowdown-in-oilfield-activity-idUSKBN21B24F


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“The Fed and central banks across the globe have infused huge liquidity in the last few days…

“While governments are taking all possible measures, market players remain unconvinced as the virus outbreak remains out of control, threatening to have a severe impact on global growth and thereby demand for commodities.”

https://www.moneycontrol.com/news/business/markets/commodity-slump-continues-as-demand-concerns-overshadow-supply-risks-5068431.html


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International Air Transport Association (IATA) director general Alexandre de Juniac painted a grim picture of the novel coronavirus pandemic, saying more than half of air carriers globally could “die” without immediate government aid.

““We clearly need massive action very quickly, urgently”, he told reporters on Tuesday. De Juniac repeated his push for governments around the world to provide airlines with more than $200 billion in aid to bridge the crisis.”

https://thepointsguy.co.uk/news/iata-airline-outlook/


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““Volatility and liquidity were the key drivers of Treasuries, with the monetary bazooka and expectations of a large fiscal package doing little to assuage fears. We expect Treasury yields to decline as the Fed and global central banks engage in QE and other extraordinary measures to provide stimulus.”

“Even the U.S. bond market, the most liquid in the world, ceased to function earlier this month, as traders sold off any asset in their possession to make up for losses elsewhere and to stock up on cash, particularly dollars.”

https://www.reuters.com/article/us-markets-bonds-poll/lower-sovereign-yields-to-stay-as-global-economy-in-recession-reuters-poll-idUSKBN21C01Y


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I call it a liquidity doom loop. And it occurs because bond markets have finite liquidity (as bond traders have to hold capital against their trading books), while ETFs do not (there is no capital charge for ETF traders).

“Thus, when bonds are suffering illiquidity, as they are in the current crisis, ETF selling can make the bond market illiquidity worse. This is of systemic importance, and of enormous significance to the real economy, because it means that companies will have to pay higher funding costs than they would otherwise.”

https://www.ft.com/content/b7c15426-6e1b-11ea-89df-41bea055720b


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The shock to the global economy from Covid-19 has been faster and more severe than the 2008 global financial crisis and even the Great Depression. In those two previous episodes, stock markets collapsed by 50% or more, credit markets froze up, massive bankruptcies followed, unemployment rates soared above 10% and GDP contracted at an annualised rate of 10% or more.

“But all of this took around three years to play out. In the current crisis, similarly dire macroeconomic and financial outcomes have materialised in three weeks.”

https://www.theguardian.com/business/2020/mar/25/coronavirus-pandemic-has-delivered-the-fastest-deepest-economic-shock-in-history


Read the previous ‘Economic’ thread here and visit my Patreon page here.