Markets politics

Deep In The Heart Of Texas

"...driven by certain types of activities, including Texans congregating in bars".

You know it’s serious when the “taverns” close.

Texas governor Greg Abbott on Friday ordered bars shut from noon local time, as the state struggles to “corral” (as Abbott is fond of putting it) one of the nation’s most acute COVID-19 flare-ups.

The same executive order contains a number of additional stipulations, including the following:

  • All bars and similar establishments that receive more than 51% of their gross receipts from the sale of alcoholic beverages are required to close at 12:00 PM today. These businesses may remain open for delivery and take-out, including for alcoholic beverages, as authorized by the Texas Alcoholic Beverage Commission.
  • Restaurants may remain open for dine-in service, but at a capacity not to exceed 50% of total listed indoor occupancy, beginning Monday, June 29, 2020.
  • Rafting and tubing businesses must close.
  • Outdoor gatherings of 100 or more people must be approved by local governments, with certain exceptions.

The order cites the rising caseload, the surge in hospitalizations, and a positivity rate in excess of 10%. Previously, Abbott warned that a double-digit rate would likely prompt “further preventative action”.

Hospitalizations are up 14 days in a row. On Thursday, reports indicated that Houston is out of (or nearly out of) ICU capacity.

“At this time, it is clear that the rise in cases is largely driven by certain types of activities, including Texans congregating in bars”, Abbott said Friday.

Forgive me, but: Imagine that, Greg!

Abbott continued:

The actions in this executive order are essential to our mission to swiftly contain this virus and enhance public health. We want this to be as limited in duration as possible. However, we can only slow the spread if everyone in Texas does their part. Every Texan has a responsibility to themselves and their loved ones to wear a mask, wash their hands, stay six feet apart from others in public, and stay home if they can. I know that our collective action can lead to a reduction in the spread of COVID-19 because we have done it before, and we will do it again.

Let’s not kid ourselves, folks. This is a partial lockdown. It is an incremental step back towards closing down the state.

That doesn’t mean the state will be closed back down, but it does mean that economic activity will be impacted for the duration of these newly reinstated mitigation measures.

If enough states take similar action (and you have to believe Florida will be forced to take additional steps soon), the recovery narrative at the national level will take a hit.

Importantly, it’s worth noting that other states which hadn’t yet relaxed restrictions or moved as far along the road to reopening as Texas and Florida are now beginning their own push to normalize.

Assuming we don’t see flare-ups in the reopening “laggards” (as it were), the effects in terms of the national economy could offset, as activity comes back online in the “old hotspots” even as it’s temporarily offline in the “new” ones.

But that’s a delicate balance. And it’s not one that anyone wants to bet on when it comes to trading, that’s for sure. Equities and risk assets recoiled on Friday morning when the Texas news hit.

Insult was added to injury when Florida reported the biggest daily increase yet, at 8,942. That represents a 7.8% spike, double the 7-day average.

I’ll leave you with one final chart which tells the story.



6 comments on “Deep In The Heart Of Texas

  1. Maybe bank stress testing was spot on yesterday if TX, AZ, FLA all continue towards a second, full or partial, lockdown. Can’t be good for small business lending. More Federal aid to come?

  2. Sounds like Florida is closing down the bars too, but our Governor seems reluctant to say it himself. He had one of the departments tweet it out.

  3. Considering that the accepted norm is that this virus takes 14 days to manifest itself. The steps taken today won’t be felt in terms of impact to daily infection rates until then. It will be really interesting to see the impacts of the policies in two weeks but I doubt very many people will remember them by then.

  4. That is why one needs to be cautious about buying the really dumb narrative that everything is going back to normal in a v or i shaped recovery. It’s dumb, not because it is impossible- although I think both are unlikely. It’s dumb because we still don’t know the course of the pandemic, nor do we fully understand the disease. It has not been around that long. One of my trader friends has it right, expand the range of possible outcomes he said. So all the quant guys with a lot of smarts but not a lot of wisdom are free to make their forecasts, but the right answer is this is really unprecendented in our post WW2 economy. You can model anything if you want, but the models have very low probability of being accurate.

  5. Who could have possibly seen this coming? If only there’d been some kind of warning from what happened to the states that got hit first…

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