20/5/20: Global COVID19 Counts and Deaths: Update

Global numbers of new cases of COVID19 reported continues to trend on the upward trend line, with no discernible peaking:

Today's new cases counts worldwide mark a new local peak at 95,197, ranking 4th highest rate of new cases reported. Since May 15th, we have recorded four days with above 7th ranked daily new cases counts. Since the start of May, we had 8 days ranked 9th and worse.

Death counts are yet to reflect this two-weeks long acceleration in the new cases arrivals. Since May 15th, worst case of death rates reported was 25th highest in the history of the series.

In simple terms, there is no evidence in amelioration in the global pandemic spread to-date. In fact, new cases arrivals are accelerating on the 7-day moving average trend line.

19/5/20: Hydroxychloroquine of Political Risks

That scary chart...

One, is the President in the middle of a fragile, but long-yarned for recovery. Another is the President amidst a massive economic collapse, mis-managed public health crisis, presiding over a dysfunctional administration and full of outright nastiness to anyone he dislikes, including migrants, Democrats, professionals, media, non-supporters of his agenda, etc. And they are both within 3 percentage points of each other...

19/5/20: German Hawks vs ECB Doves?

My article for The Currency on the German Constitutional Court ruling regarding ECB's PSPP program: https://www.thecurrency.news/articles/17028/german-courts-are-fighting-with-the-ecb-what-does-it-mean-for-ireland.

17/5/20: Sovereign Default Risks and COVID19

Euromoney is covering sovereign default risks in Latin America in the wake of COVID19, with a comment from myself: https://www.euromoney.com/article/b1320n1grh638l/argentinas-crisis-threatens-brazils-faltering-economy.

17/5/20: COVID 19 Updated Charts: Global

Here are the charts summarizing latest data on COVID19 pandemic, globally. Comments in the charts:

17/5/20: COVID19 Updated Charts: U.S. vs EU27

Three charts summarizing U.S. vs EU27 comparatives in COVID19 cases and deaths.

All explanations and comments in the charts:

15/5/20: Generational Effects of Ultra Low Interest Rates

Just because jobs are so plentiful and careers are so rewarding in terms of potential growth in life cycle income. the Millennials are really cheering their future in the Social Mobility Central, the US of A... oh, wait, sorry, theatre of absurd is so 1990s...

Here is the chart showing returns on savings for the already financially-distressed younger generations, updated through March 2020:

Things are ugly. In March 2020, retail nominal deposit rates for 3 months-duration Certificates of Deposit in the U.S. banks have fallen from December 2019 levels of 1.76% (annualized) to 1.35%. This is the lowest level since November 2017.

Think of the longer term comparatives. During the decade of the 1960s, average nominal rate of return on 3mo CDs was 5.51% with real return of 4.76%. In the 1970s, this rose to 7.27% and 5.66%, respectively. Through the 1980s, nominal average was 9.89% and real average was 8.73%. In the 1990s, things crumbled, with the nominal savings returns falling down to 5.32% and real rates down to 4.75%. The first decade of the 2000s saw nominal rates averaging 3.2% and real rates falling to 2.67%. And over 2010-2019, average nominal rate was 0.76% and average real rate was 0.39%.

Yes, avocado and toast are killing Millennial's financial wealth. Not ultra low returns on savings.

15/5/20: U.S. Retail Sales and Employment: Pandemicession

Data through April 2020 on U.S. Retail Sales is in, so here are two charts:

Retail Sales are down 15.08% m/m in April, and down 18.25% on 1Q 2020 average. Year on year, sales are down 17.83%. Losses in retail sales in April amounted to USD 65.97 billion m/m and USD80.635 billion y/y. March-April cumulated losses amounted to USD 93 billion y/y.

Meanwhile, jobs losses in the Retail Sales sector have been dramatic as well:

Employment in Retail Sales sector fell 2,127,000 in the first two months of the COVID19 pandemic compared to year prior, with April employment declining 2,111,000 or 13.5%. Overall sector employment numbers at the end of April stood around the levels last seen in 1994, effectively erasing any employment gains made over 26 years.

Good thing all the workers in the sector are at least seeing recovery in their stocks portfolios. Otherwise, there could have been social unrest, you know...

15/5/20: America's Scariest Charts Updated

Updating my America's Scariest Charts for the latest data on weekly unemployment claims:

New unemployment claims continue to rise (see table below), with data for the week ending May 9th coming in this week printing 2.6 million new claims.

While non-farm payrolls are reported on a monthly basis, we can now integrate the numbers of new unemployment claims (subject to future revisions) for the first week of may, showing the expected impact on the payrolls:

Table below summarizes past recessions experience and current COVID19 'Pandecession':

As shown above, total numbers of jobs losses so far in the pandemic exceed combined jobs losses experienced in all past recessions from 1945 through 2019, based on unemployment claims data.

Finally, here is a chart plotting employment index from the start of the new recession through the end of the recovery cycle:

11/5/20: G7: Fading into Economic Absurdity

G7 is a rather exclusive club of the 7 'largest' and, according to their own aspirations, most important - economically and geopolitically - economies. Except, of course, it isn't.

The latest IMF data (through 2019) and forecasts (for 2020-2021) published last month show just how bizarre the geopolitical influencer game got over the recent years and just how more bizarre it is likely to get over the next two.

Here are the actual ranks of the countries based on their GDP, taking into account exchange rates and price levels differences (the PPP adjustment).

And before you jump at myself, yes, PPP is imperfect. But it is much better than a simplistic U.S. dollar equivalence. 2014-present have taught us this lesson via what has happened in Russia: in dollar terms, the country should have disintegrated by now in another revolution of some color or flower or a cactus variety. Yet, when you look at the Government finances, Russia is doing really well, and when you look at the aggregate society, the pain of the 2014-on crises, devaluations, losses of income and declines in exports revenues has been real, but sustainable to-date. Why? Because Russia does not live on the US dollars when it comes to spending and investing in its economy. And, correspondingly, Russian geopolitical influence did not wane on foot of the economic troubles, dollar-valued economic decline and rounds and rounds of sanctions, including Russia's ejection from the G7+1/G8 grouping. Incidentally, this also explains why China isn't bothered by the G7 'leadership', nor does India miss its place in the group.

So, here we go, that table:

As I noted before, current G7 composition includes 4 member states which are not in the top 7 economies in the world. That means that 57 percent of the group members should not belong to the group. Worse, two of these four members are not even in top 10 economies worldwide, including 16ht ranked, but geopolitically quite loud Canada, which is just a hair-whisker away from being overtaken by globally not-too-noticeable Spain.

Better yet, Australia that loves presenting itself as some anchor of leadership in Asia-Pacific is not making it into top 20 economies in the world, having crashed out of its 19th place back in 2014 to 21st place by 2019. Australia's economic might is a bit lesser than its strategic bark, lagging behind Thailand, not to mention Indonesia.

Meanwhile, of course, the G7 excludes the largest economy in the world, as well as world's 3rd, 6th, and 7th economies. One might argue about Communism in China. One might also argue that Russia should be excluded from G7 because, well, we just don't like the Russkies as long as they are alive. But, excluding India, while including Canada and Italy?! India's economy is larger than the economies of the UK, France, Italy and Canada combined!  Excluding Indonesia? Indonesia's economy is just 3.3% shy of Italian and Canadian economies added together.

Here is a breakdown of official vs size-based groups of G7 and G20 as the share of the global GDP PPP-adjusted in 2014 vas 2019:

The above goes some distance explaining why G20 currently leads in global policy coordination the G7, and why G7 is rapidly falling out of relevance: back in 2014, G7 members states accounted for 32% of the global GDP based on PPP-adjustment; in 2019 they accounted for 30%. Based on the IMF forecasts, by the end of 2021, this number will likely be around 28%. Meanwhile, the share of global GDP accruing to the 7 largest economies in the world has risen from 54% in 2014 to 55% in 2019, and is forecast to rise to 56% in 2021. In other words, the actual G7 will be twice larger than the official G7.

10/5/20: COVID19 Charts Update

As the U.S. and many parts of Europe are moving into the 'second stage' of COVID19 measures, relaxing some of the social distancing restrictions, here are some of the top-level stats on COVID pandemic evolution.

Global view:

• May 10, 2020 data adds 87,461 new cases globally and 4,524 new deaths.
• This was the 7th highest number of new cases additions, and 36th highest day in terms of new deaths in 122 days of record.
• Worryingly, Friday posted the second highest number of new cases increases at 94,158 on record, while Thursday posted 13th highest day in terms of deaths. 

As chart below shows, there is no consistent trend in terms of reduction in global new cases or deaths:

If this situation persists, it is highly unlikely we will see much of the relaxation in international travel, as global pandemic is appearing to be shifting geographically, rather than abating in overall severity.

U.S. vs EU27 cases and deaths:

U.S. continues to post pretty poor numbers, while EU27 is showing some significant slowdown in the pandemic progression:

As chart above shows, U.S. now vastly leads the EU27 in terms of contagion numbers and rates.

• Sunday ranks 28th in data history in terms of new cases reported, and 25th in terms of deaths reported in the U.S.
• Sunday ranks 56th in new cases and 51st in terms of new deaths reported in the EU27.
• The gap in the number of deaths reported over the entire pandemic to-date between the EU27 and the U.S. has now shrunk to 28,144 cases.
• Adjusting for the 7 days differences in the onset of the pandemic, the U.S. death rate per capita now exceeds that of the EU27 (second chart below).

Note: "The death rate from seasonal flu is typically around 0.1% in the U.S., according to news reports", per https://www.livescience.com/new-coronavirus-compare-with-flu.html. Current global running death rate (case fatality rate) for COVID19 is at 6.9% for confirmed cases. In the U.S., case fatality rate current runs at 6.02% and in the EU27 the rate is 11.1%.

Russia update: 

Russia continues to experience high rates of increases in new cases, with Sunday rate of 11,012 being the second highest on record, with the highest rate to-date of 11,231 recorded on May 8, 2020. The death rate recorded Sunday is at 88, ranked 7th in the history of the series.

BRICS update:

Key concerns forward:

Key concerns forward are now shifting toward 'phase two' risks. Shifting from complete shutdown of economic and social activities to restricted levels of activities risks potential re-igniting of the contagion, as underlying pools of disease remain high. Both, Europe and the U.S. are in the situation where daily numbers of new cases and deaths remain well above the levels witnessed at the point of restrictions imposition. If these level were concern back then, why do the higher levels today not warrant continued restrictions? 

Two links of the growing fears of re-emergence of contagion worth checking out:

• Germany: https://www.theguardian.com/world/2020/may/10/fears-rise-in-germany-over-second-wave-of-coronavirus-infections
• Asia: https://www.dw.com/en/coronavirus-latest-world-fears-second-wave-of-infections/a-53383336

9/5/20: Summary of Russian COVID19 Policy Responses

Based on the Finance Ministry estimates, Russian COVID19 measures will cost between 1 and 2 percent on GDP to the Russian Exchequer, as reported by BOFIT.

The impact combines both declines in government revenues and increases in expenditures. Much of the COVID19 measures costs, however, will come from reallocation of spending priorities away from yet-to-be-launched capital expenditures and, potentially, defence budgets.

In response to COVID19, Russian government deployed significant supports for:

• SMEs, targeting primarily employment in the private sector. The government identified over 70 sub-sectors hardest hit by the social distancing measures imposed on the general population and provided funding to cover companies' payrolls as long as the companies retain the levels of employment at 90% or more compared to the start of March levels. 
• Tax deferrals for SMEs and significantly impacted sectors (excluding VAT, excise, natural resources extraction taxes and export tariffs). 
• Per BOFIT, "Federal, regional and municipal government real estate landlords are postponing rental payments for all SMEs and larger firms in hard-hit [sectors]. Private landlords renting commercial real estate (other than residential properties) have been obligated to defer payments of tenants in hard-hit branches. To help participating private landlords, regions are to grant them relief from property taxes."
• The government effectively froze all new bankruptcy proceedings for the duration of the crisis measures.
• Special social insurance payments for families with children, increased levels of benefits for the newly unemployed, and added supports for the pensioners were put in place. Pensioners can avail of a range of enhanced services and additional payments, although these vary by region.
• Frontline healthcare workers have been allocated supplementary pay increases.
• Federal government also suspended debt repayments by regional and local governments.

The Central Bank of Russia moved quickly to alleviate the immediate impact of the crisis:

1. The CBR froze banks' asset valuations at the start of March 2020 levels to delay recognition of banks' losses and prevent a wave of loans defaults.
2. "The general loosening of regulatory rules applicable by banks also covers e.g. loss reserves, credit quality and related collateral for a very large part of corporate and household loans granted, as well as their possible restructurings," per BOFIT.
3. "Authorities have also set up separate deferral programmes for bank debt repayments that are supported by regulatory easing, government interest-rate subsidies and low-interest CBR loans to banks."
4. "Deferral programmes are available for households that have suffered income losses of more than 30 %, as well as SMEs and enterprises in hard-hit sectors."
5. CBR also cut interests rates, most recently on April 24th from 6.0% to 5.5%, bringing 2020 cuts to 75 basis points.

Per BOFIT note, "the state social funds will lose revenues as wage-based social taxes of employers will be halved to 15 % for SMEs. The move will give businesses relief this year in an amount equivalent to slightly less than 0.3 % of GDP."

The latest Russian economy forecasts via CBR come in at -4% to -6% for 2020 and +3 to +5% in 2021, implying slower than V-shaped recovery in real GDP. The forecasts assume oil price averaging USD27 per barrel over 2020, which is consistent with May-December average price of USD20 per barrel, or more conservative than prior assumptions. Notably, the CBR forecast implies that Russian economy will be running a current account deficit in 2020, for the first time since 1999.


As an aside, it is worth noting that the U.S.-Government funded RFEL https://www.rferl.org/a/putin-s-pretext-covid-19-crisis-tapped-to-tax-rich-russians-offshore-wealth/30513483.html has been out in force decrying alleged use of COVID19 as a pretext for, shock-horror, taxing offshore wealth. The proposal has not been approved by the Russian government, yet.