Morning Report: Oil goes negative

Vital Statistics:


Last Change
S&P futures 2751 -50.1
Oil (WTI) 14.23 -7.29
10 year government bond yield 0.55%
30 year fixed rate mortgage 3.38%


Stocks are lower as oil continues to weaken. Bonds and MBS are up.


The front month oil contract went negative yesterday, which was probably a first. I think at one point it traded at -$40 a barrel. Why? Nowhere to put it. Storage is pretty much full, and any incremental capacity out there is expensive. The May contract still trades, but June is really the active one.


Forbearance requests are now up to 6% of all mortgages.  8.26% of Ginnie loans are in forbearance and 4.6% of Fannie / Freddie loans are in forbearance. “With over 22 million Americans filing for unemployment over the past month, homeowners are contacting their mortgage servicers seeking relief, leading to a sharp increase in the share of loans in forbearance across all loan types,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “Mortgage servicers continue to receive a very high level of forbearance requests, but volumes were down somewhat compared to the prior week.”


Most economists think the eventual recovery will be U-shaped, in other words and extended downturn before things get back to normal. The other predictions are a V-shaped recovery or a W-shaped one. Obviously it depends on how long the lockdown lasts, and whether people get back to work wearing gloves and masks. Interestingly this has begun to fall down partisan lines, with red-staters wanting to get back to work, and blue-staters hectoring them about it. Note that Texas supposedly opens this week, and Georgia and Tennessee are looking to re-open May 1.


Retailers are looking for bailout as well. While many small retailers will be able to access the Main Street Program, many larger ones like Macy’s or Needless Markup cannot. The government’s fear is that it would be propping up companies that have larger problems than just the COVID-19 virus and were probably heading for bankruptcy to begin with.


The Senate may be close to a deal for further funding of small business. Apparently one of the issues with the previous deal was that larger companies with existing relationships with the banks got there first, before the the smaller businesses did. This would set aside something like $125 billion for the smaller guys with no relationships. “We insisted that a chunk of the money be separate from the competition with the bigger companies, you know the ones that have two, three, 400 people and a relationship with the banks, and we got $125 billion that will go exclusively to the unbanked,” [Chuck Schumer] said. “To the minorities, to the rural areas and to all of those little mom and pop stores that don’t have a good banking connection and need the help.”

23 Responses

  1. Latest cri de coeur from the left about how the crisis isn’t getting the rubes in line.

    Jed Bartlett would have handled this with aplomb and had everyone marching in the same direction…

    Liked by 1 person

    • All in a tidy, 50 minute’s. Snappy dialogue included!


    • Jed Bartlett would have handled this with aplomb and had everyone marching in the same direction…

      That tends to sum up the media’s (and all celebrities’ and wannabe celebrities’) expectations about politics. It should always be an episode of The West Wing and when it’s not, things are dreadfully off course.


    • Fearing for his reelection, he declared the coronavirus pandemic a war, and himself a wartime president. But the leader he brings to mind is Marshal Philippe Pétain, the French general who, in 1940, signed an armistice with Germany after its rout of French defenses, then formed the pro-Nazi Vichy regime.

      Couldn’t wait to draw a comparison between Trump and Nazis!

      It’s hard to believe these folks get paid to write, but I guess they do.

      And name the actual, real president who wouldn’t be thinking about reelection in a crisis like this?

      Are we still capable of self-government?

      What’s he getting at here?

      The virus should have united Americans against a common threat. With different leadership, it might have.

      Bullshit. The problems we are having are entirely human problems. Local governments have wide latitude and it’s rare that blue or red determines success levels. We have 50 (and more) leaders to look at, and none of them are hitting it out of the park. Because it’s not an obvious problem with a lot of solid data and clear solutions.

      As the contagion has spread, its victims have been likely to be poor, black, and brown people.

      I love the propaganda structure of that sentence. To be read “poor black and brown people” not “poor” then “black” then “brown”. Which makes me guess the number of poor white cases likely outnumber or equal the black and brown cases. My understanding was that the immigrant population is actually doing better than the native caucasian population, but whatever.

      And no conclusion. Presumably he’s saying “vote for Joe Biden and a straight Democrat ticket” but he’s not, you know, coming out and saying it. Because that wouldn’t be journalistic.


    • Let Bartlett be Bartlett!


  2. This is really good:

    7. Oh, the Sweet Irony
    The final take-away from the newly declassified portion of the FISA applications reveals just how tone-deaf and oblivious the FBI agents involved in Crossfire Hurricane were. In the final application, the FBI “notes that Pages continues to be active in meeting with media outlets . . . to refute claims of his involvement with Russian Government efforts to influence the 2016 U.S. Presidential election.”
    “This approach is important,” the FBI posits, “because, from the Russian Government’s point-of-view, it continues to keep the controversy of the election in front of the American and world media, which has the effect of undermining the integrity of the U.S. electoral process and weakening the effectiveness of the current U.S. Administration” (emphasis added).

    What fucking bullshit, your protestations if innocence are further proof of your guilt. This is, if you needed more, proof that it was indeed the Russian Hoax. They need to get Obama under oath. No way Comey dreamed this scam up on his own.

    Liked by 1 person

  3. Hmmmm, I think I’m just going to point out the elephant in the room………….we’re pushing 45,000 deaths here in the good old USA. Some states are jumping the gun with re-opening, but I get it…………we’re all chomping at the bit. Here in my county all the numbers just keep going up but at a reasonable pace. Still waiting for the new hip and no clue when that will happen.

    I think this space (MFP) is not really committed to the science as opposed to the economics and I know it’s a fine line………….but I’m trying to follow the science. I’m not really reading partisan articles.

    We’re dipping into our IRA’s now to keep our business going just in case things work out. We’ve had no help so far from either the PPP, unemployment for a business owner without employees, and still haven’t received the $1200/$2400 stimulus deposit or check. None of our customers who owe us money even from Jan and Feb are paying us but I’m using our savings to pay our suppliers.

    I just signed up to be a contact tracing volunteer which will hopefully improve things here in CA. Still making masks…………..probably over 100 now, and giving blood tomorrow. We’re both ONeg so we’ve been doing that for years.

    I’m still afraid to catch this thing………………

    We’re obviously not destitute here but it’s a challenge

    I’ll be back when things settle down and if I don’t catch the fucking virus!


    • lms:

      I think this space (MFP) is not really committed to the science as opposed to the economics

      Which space? But more importantly, I have no idea what it means to be “committed to science as opposed to economics”. If you are opposed to easing lockdown measures where others aren’t, it isn’t because you are “committed to the science” while those who are not opposed are “committed to economics”. There could be many explanations…you might have more personal fear of getting sick than of getting poor. You might be more aware of the risks presented by corona than you are of the risks presented by economic collapse. You might place more value on immediate, visible consequences than on long term, less easily seen consequences. You might value the lives of those most at risk from corona more than you value the lives of those most at risk from economic collapse.

      As I said, there are many possible explanations, but I don’t see any reason to think that you are any more “committed to the science” than others who might disagree with your preferred policy prescriptions.

      Liked by 1 person

    • There’s nothing about the data at the moment that suggests the only or even best way to mitigate is the kind of shutdown we’ve executed (I think it’s the right general idea, but specifically it’s a crazy overkill, in part because there’s been so little real and thoughtful preparation for the current circumstance).

      Also, if the priority is health, consideration should be given to secondary health consequences of this approach, such as people not seeking healthcare they need because they are afraid of the hospital or believe services won’t be available because of often inaccurate media depictions of overwhelmed hospitals.

      There is also the question of long term health consequences of a major (and unnecessary) recession or depression. If we are committed to the health-outcomes part of science, that should be considered, too.

      Generally, I don’t think much of what we are seeing has anything to do with a commitment to science—it’s about avoiding legal liability and perceived responsibility. Large corporations don’t want to get sued for doing something that lead to the disease spreading. Nor do governments or school systems—because nobody wants to get blamed. Or sued.

      Science would tell us closing everything and cowering at home—and chasing people out of parks and outdoor spaces—is not necessary and a waste of resources, potentially even counter-productive. Rather there are specific categories of people who should be especially wary of contracting it, and specific activities that should be avoided, and types of activities that require enhanced sanitation or restriction of simultaneous participants.

      Actual science would also be clear about data quality and how data was being collected, and what was being assumed rather than verified.


      Also another thing on science: if anything is presented as “it’s science, you cannot review or question it or disagree in any way”, then it’s definitely not actually science. 😀


    • Lulu, are y’all applying for any of the SBA assistance?

      You probably read the LAT story on the results of antibody tests in LA County. Apparently 15 times as many people have carried the virus as folks reported in the sick list. It certainly would be great to know that huge numbers of folks have already carried the virus without themselves being sick. But we won’t know that without widespread testing and now we do not even have enough testing for all the people who have been working. A thought on testing shortages follows.

      NOVA, you know about this, and I hope you can fill in some blanks:

      …regulates all laboratory testing (except research) performed on humans in the U.S. through the Clinical Laboratory Improvement Amendments (CLIA)

      Apparently university and med school labs all over America are running their own testing internally and doing stuff like making swabs on their 3d printers. But they are not CLEA approved labs. If they were, it has been reported that in total they could add capacity to test a million persons a day. I have no idea whether this part is true, but why can’t CLEA APPROVE research labs without otherwise regulating them and how long will that take? Why is that huge capacity lost to us [assuming it really is huge capacity]?

      It seems clear to me that with testing, physical distancing, and masks, much of the economy could open – even while Rosanne and I and millions of other Medicare recipients would still be in semi-isolation. Germany is about to do this, and they have testing in place, as do SK and Taiwan. They aren’t going all out, they are still doing masks and distancing, and Germany canceled OktoberFest, but much of the country will be back to work.

      Liked by 1 person

      • Mark,

        Rational mitigation strategies make a lot more sense to me (in part because they avoid some of the secondary health consequences that are not directly COVID-19 related).

        While I understand that there may be some concern of just willy-nilly approving previously unapproved labs or just snap-changing the approval process, I hope this sort of black swan event is considered and some generally agreed upon mechanism is established for accelerated approval in the future. I figure we have gone a lot faster just recently, but more infrastructure and policy could be put in place to ramp up certain things necessary to coping with an unexpected pandemic in the future.

        Something not addressed in the pandemic models, really, is immunity–or what used to be called immunity, but now we consider being “asymptomatic”. But pretty much every virus we can catch has some portion of the population naturally immune to it. Sometimes quite a lot of it. Until you can figure out what that proportion is likely to be, you can’t make accurate models of infection.

        But, yes–protect the obviously at risk populations and everybody else go out and social distance or wear a mask to the salon. Everybody can practice improved sanitation and hygiene. Shoveling sand into the skate parks seems ludicrously ineffective, IMO.

        And on a global scale, of course, be a little quicker on travel bans and establishing quarantine protocols for repatriations.


      • NOVA, could the $25B in new money for testing help with CLIA approving research labs? I have posed the same questions to a health care attorney in Mich I know and he says the MI manual for obtaining CLIA approval is over 400 pages long and the red tape is tough, but he is diving into it for clients who have testing capability who are not now CLIA approved. He said major university research labs should lobby for a quick exemption if they have state of the art labs, which so many of them do.

        Liked by 1 person

  4. I found this interesting:

    I’m not the only person who thinks McKinsey is undeservedly revered for its supposed business acumen.


    • I never even knew who McK was. Thanks, Kev.


      • I became familiar from In Search of Excellence and a couple of other Tom Peters books and audio programs. He made McKinsey sound awesome! And lots of positives with them, I’m sure.


    • They invoke the word “science” as if it’s an incantation. It’s like listening to a Wiccan ceremony.

      Liked by 1 person

    • It wasn’t just McKinsey pushing just-in-time etc.. That was conventional wisdom which came out of the US copying Japanese production techniques in the 80s. Securitization goes back to the origin of Fannie Mae from the Great Depression.

      Liked by 1 person

      • I wonder if the article meant that McK was pushing tertiary and even more “refined” securitizations than primary FNMAs.

        I know this is an outlier but the first time I ever heard of just-in-time inventory [although it did not yet have that name] was in 1961. The then COO of Texas Eastern Gas Transmission [not the same as the current company of similar name but somehow historically related, and at that time HUGE] explained the concept to my business admin class at Rice. Then when I heard the expression used in the 80s I was surprised that it was the “new” thing, because I remembered that series of guest lectures, which were pretty damned good.

        Addendum: In those lectures there was a detailed two hour sequence about leveraging financing, which was not taught in Fundamental Principles of Accounting. The point of the ten guest lectures was to give us a glimpse about how business was really done, to whet our appetites to take further courses in the sequence.

        Liked by 1 person

  5. Good thread on the newly released Senate intel Committee report. Dispels a lot of MSM spin.


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