Non Sequiturs & Nonsense

I suppose I was wrong to say, on Thursday morning, that “analysts and economists are loath to suggest a double-dip downturn is possible, let alone likely” in the US.

“We’ll have to see what the fourth quarter looks like. It’s possible we could have negative growth if this resurgences gets bad enough and mobility falls off enough,” Robert Kaplan said, in remarks to Bloomberg TV.

“With this resurgence, the risks are all to the downside,” Kaplan added. “The only good news, if there is negative growth and the rebound stalls, our own view is that it’ll be temporary, it’ll last for a quarter or two.”

If we do get “a quarter or two” of negative growth, analysts and forecasters will have some catching down to do (figure below).

On Thursday, New York City Mayor Bill de Blasio called it “just a matter of time” before indoor dining in the city is halted. He predicted the order would come “in the next week or two.” De Blasio closed schools earlier this week and Governor Cuomo has indicated that indoor dining would be cut off if the city’s positivity rate breached 3%.

The Fed’s Kaplan went on to emphasize that another downturn is “a possibility,” during his interview with Bloomberg.

I’d have to agree. Because it seems unlikely that Americans will heed warnings from public health officials, who have cautioned against Thanksgiving travel. The results will be predictable. Infections will surge even higher and the country’s healthcare system will come under further strain.

The pandemic has exposed one of America’s many weaknesses: The term “liberty” is construed so broadly that it often overrides common sense to the detriment of the collective. Hospitalizations for COVID-19 have hit a new record every, single day since November 10.

The country has lost a quarter of a million people to the virus. It now seems likely that America will eventually suffer more casualties from the pandemic than US battle deaths incurred during World War II.

Readers aren’t generally fond of the chart below. They say it lacks sufficient “context.” For example, some claim it should be population-adjusted. I say that’s nonsense. If that were the point I wanted to make, that’s the chart I would have created. I (briefly) taught probability and statistics, after all. I use the visual below because these are not just numbers. They are (or, more poignantly, were) people. Not a single surviving family member or distant relative of the people represented by the bars on the figure below cares about the population-adjusted numbers.

In case I’m not being clear enough, the point isn’t the relative damage vis-à-vis the total populace. That’s a conversation for another time — namely, for a time when the ranks of the dead aren’t still swelling by roughly 1,100 per day.

The point right now is that the country has lost more than 251,000 people to a virus that can be kept in check with simple, common sense measures until there’s a vaccine widely distributed.

And yet, in part because everything in America — right down to a simple request that people wear a small face covering to the grocery store — is couched in terms of “liberty” and “rights.”

It’s not so much that anyone is trying to say that “liberty” and “rights” are irrelevant. Rather, it’s that they are non sequiturs. This isn’t a conversation about “rights.” It’s not a Constitutional debate. It’s a conversation about widespread pestilence.

But, many Americans don’t understand this. And perhaps public officials and lawmakers could do a better job of conveying the difference. Telling someone their rights are irrelevant in the face of a pandemic is conducive to confrontation. Instead, officials should make it clear that commingling the individual liberties debate with a national effort to save lives by preventing the spread of a communicable disease is just nonsensical.

US equities struggled for a good portion of Thursday, but did manage to close near the highs. Tech outperformed, as it tends to do when virus fears are front and center. Small-caps held up well, though. Value’s outperformance has abated amid the proliferation of lockdowns.

As ever, rates give you a good read on the situation. Treasurys gained and yields were notably richer at the long-end, bull flattening the curve. Treasury futures ended on the highs, ignoring the afternoon rally in stocks.

The 10-year at 85bps really hasn’t moved all that much despite the flurry of vaccine news that’s hit the market this month.

Between worries that lockdowns will spell a double-dip downturn for the US and the prospect that those worries will prompt the Fed to move ahead with WAM extension at the December meeting, the long-end stays relatively well bid. “The primary bull flattening impulse remains the building expectations that the Fed will be compelled to deliver an extension of the WAM of QE purchases by year end based solely on the risks presented to the real economy by the rising COVID case count,” BMO’s Ian Lyngen and Ben Jeffery said Thursday afternoon.

Kaplan alluded to that during the same remarks to Bloomberg cited here at the outset.

“I would just continue our bond buying at the same pace that we’re buying,” he said. “If we needed to, if this got bad enough, we could extend maturities but I wouldn’t increase the size.”

It’s already “bad enough.” That much is clear. What’s not clear is whether extending the average maturity of the bonds you’re buying at arm’s length from your friends at Treasury is the proper tool when it comes to eradicating an infectious disease. That’s a non sequitur if ever there was one: Tweak the maturity profile of a massive bond portfolio to fight viral pneumonia. It’s funny — in a macabre kind of way.

Call me crazy, but I imagine mask-wearing would work much better than WAM extension when it comes to flattening the virus curve, even as the latter might be a surer way to tamp down the yield curve.

But the technocrats can only do so much, folks. It’s up to elected officials, and also to you, to help out.


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14 thoughts on “Non Sequiturs & Nonsense

  1. I have been fuming ever since those harridans at MADD managed to impinge upon my liberty to drive home after downing 14 beers and a shot or two.

    In that regard, a story from the AP dated 11/06 noted that 93% of the 376 counties with the highest number of new Covid cases per capita, voted for Trump.

  2. This pandemic management in the USA has all through it’s progression about trading short term gain for long term pain. It is clear that Germany to the opposite route and their data indicates the success of taking short term pain is better than short term gain when trying to minimize pandemic effects. That the American public is loathe to consider even the most modest of measures to help our great society is the root of the problem in my opinion, not freedom. The words freedom and liberty are just convenient shouting points for those that try to show off being as ignorant as possible whilst bullying their fellow countrymen.

  3. Back in the day, I had dinner with the chairman of a bank in a small middle eastern country. He was lamenting the cut throat competition in the local market to pay up for deposits they could not deploy, in order to be able to claim the title of bank with the most deposits. After a lull he asked, “Does your bank send out subject matter experts to do seminars for clients?”
    “Could you arrange one on how stupid we are?”

    H’s essay above is a master class in how stupid we are as a nation.

  4. There is in this country a stated unusually high value placed on “liberty”. But it is nearly always stated without societal context. It is always the case that one person’s exercise of “liberty” will in the broad sense infringe on the rights of another person. A balance always must be struck between the two unless we are to prefer anarchy over society. That balance is a dynamic thing, formed by agreement of the people as reflected in the laws their representatives enact, but also influenced by the words and actions of their leaders and other opinion makers. The balance can and does change over time. In the absence of leaders consistently advocating for and explaining the balance necessary to a particular circumstance the resulting vacuum is a breeding ground for misinformation and bad behavior in the name of “liberty”. All of this has been and still is egregiously apparent as the country has confronted the COVID-19 pandemic. The cost to the nation has been over 258,000 lives and countless lifetime adverse medical conditions. And we are still counting.

    1. Well said.
      One thing I’m missing in this discussion is personal responsibility for personal safety.
      I’m a good driver, but I wear a seatbelt because not everyone else is a good driver.
      I wear a mask because I cannot rely on others being responsible for my safety.
      Apparently either the yahoos don’t care about their safety relative to COVID, or don’t believe in COVID.
      Unfortunately I believe it will take a personal experience of the consequences of this infection to bring most people to their senses.
      And that could take all of 2021, since the summer did little to diminish the virulence, and the flu season is upon us.
      Stay safe. Wear a mask. Especially if you come to Houston.

      1. I was thinking of the car driving analogy. You always have the right to express yourself behind the wheel but anything that approaches public endangerment gets you a seat in a jail cell.

        You won’t have to wait till the end of 2021. I’m from Detroit and it doesn’t take many funerals to get it. The end of 2020 will drive the point home.

    2. Back in the day we were taught how freedom and rights work. You are free to do as you please as long as it’s lawful and doesn’t infringe on someone else’s rights. So, if I live in the country and my nearest neighbor is 2 miles away, then I can blast my stereo to any level. If I live in an apartment building I need to use headphones for loud music. That basic sense of freedom seems to be lost on large numbers of Americans. Not sure how we got to this point but it must be related to a growing sense of entitlement in this country and that is something that’s hideously expressed in our dear leader. What is MAGA but American entitlement writ large. Our allies are praying we will turn down our stereo.

  5. I just checked Google Trends for the search phrase personal responsibility for 2004 to present. Across relevant categories of search intent, interest over time of this search phrase has decreased.

    In the quaint, old days when both of my grandfathers were still alive, personal responsibility used to be a thing. It was passed on down. You know, culturally, like the other iron-hard principles, empathy, and liberty. I didn’t check for search interest over time for empathy, but, if observed, real-world behavior, and other observations of culture are any guide, I would anticipate that interest over time of this search phrase has also decreased.

  6. H, I could sense the anger and frustration in this post. I wish I could still feel that instead of resignation or the jump I get when the phone rings and the caller ID announces a long unheard from name. I said here that the time was up and it is. What we are about to see is nearly unimaginable maybe hospitalizations as high as 120,000 a day and bodies being stacked like cord wood in refrigerated trucks all across the country in the coming weeks. This essentially means that every where one goes, there is a high potential of being in a superspreading environment.

    What amazes me about this is the Wall Street prognosticators with their sophisticated models that don’t see that this environment is not conducive to any sort of commerce and the fools in Washington who will withhold stimulus because they can see that, up the road, this thing will end. The problem being there may be little left up the road.

    Ok, rant over. Back to the whiskey and an ache that won’t go away.

  7. “Pro Life” conservatives (of which I am one) forget about “Pro Life” for all those vulnerable to the virus?


    Wear a mask, socially distance, and think of saving your life AND other lives. What “they” do can kill others and THAT is not “Pro Life”.

    It is a shame “principles” are so flexible.

  8. What we are doing as a nation is throwing off the yoke of self-control, discipline, and any sense of the “Golden Rule.” We claim to be a christian nation but if we really believe that what we are doing by putting our neighbors’ lives at risk is an expression of how we mean to love our neighbors and what we want them to do to us then we have lost our collective minds and entered into a race to become the most individually selfish nation on the planet. So much winning?

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