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It’s So Darn Simple! Wear the Damn Mask!

By Shlomo Maital

Listen carefully. Wear the damn mask! In Asia, countries where people are used to wearing masks, and do so, have fewer cases. Wear the damn mask! Make it a federal requirement. Personal freedom? First amendment rights? Come on, blockheads – you do not have the right to infect others and endanger their lives.

But hey – don’t believe me. Would you believe Goldman Sachs? They are very careful about what they say – the service investment banks offer is mainly trust and credibility. And Goldman Sachs says, 60% (you got it – 60%) of current cases could be prevented if everybody, everywhere, would wear masks in public. If everybody agreed to wear the damn mask, it would not be so necessary to keep shutting and opening restaurants, bars, beaches, small businesses, etc. The benefits would be huge.

   So why don’t people wear them in the US? Why are cases spiking, in 30 or more states?

   Ask your President.

   Unless mask attitudes and behavior change fast, the picture for the US economy is bleak. Here is Goldman Sachs’ take on it:

   “The sharp increase in confirmed coronavirus infections in the US has raised fears that the recovery might soon stall,” Jan Hatzius, Goldman’s chief economist, said in a note. “Although a significant part of the increase reflects higher testing volumes … a broader look at the CDC criteria for reopening shows that not only new cases but also positive test rates, the share of doctor visits for covid-like symptoms, and hospital capacity utilization have deteriorated meaningfully in the last few weeks.”   GDP fell 5% in the first quarter, part of a mostly self-induced recession aimed at stopping the coronavirus spread. It was the biggest one-quarter drop since the fourth quarter of 2008, during the Great Recession. As cases decreased, states slowly began reopening amid hopes that the sharp drawdown would be short-lived. Indeed, even if Goldman’s reduced call is correct, that would mark, by a wide margin, the biggest quarterly rebound since at least 1947. The U.S. has seen 340,000 new virus cases over the past week, a rise of 13.4%. That has come with 3,447 deaths, a 2.9% increase.”

Keep it simple, Stupxxx.   Wear the damn mask!



Crude Oil at $190 in 2025? It’s Not Insane

By Shlomo Maital  

Recently, at the height of the pandemic panic, the price of crude oil was actually negative. That is: “I’ll pay you to take a barrel of crude.” Why? Demand collapsed, all the storage tanks were full – and shutting down production was exceptionally costly.

   Now comes a serious report from investment bankers JP Morgan, “Supercycle on the Horizon.”, published in March. The report states,

“The combination of the supply and demand side dynamics suggests that the global oil market could move into large and sustained deficits past 2022, reaching an extreme 1.7 mbd (million barrels per day) by 2025. Running this scenario through our pricing model suggests these balances would lead to Brent oil prices [the benchmark for crude oil prices] rising steadily from 2022 onwards, averaging around $80/bbl in 2023, $100/bbl in 2024 and $190/bbl in 2025.”

What?? From zero to $190 a barrel? What in the world?

  The reasoning is simple. Low prices are slashing development of new oil fields to zero, and forcing some smaller fracking companies out of business. This means that when demand for oil recovers, as it will, the supply will not be able to meet it. Since the demand for oil is price-insensitive — we need gasoline to run our cars, and have to pay whatever it costs — small shortfalls in supply can lead to huge rises in price. We have seen this repeatedly, in 1973, 1979, and later. Now, 1.7 billion barrels per day is a very small shortfall, out of total daily production of 100 million barrels – only 1.7%!   But it is enough to let prices soar, moving up a near-vertical supply curve.

   Note that JP Morgan is not alone (and even if they were, it is worthwhile to heed what they say – investment bankers’ business is based on a clear-eyed view of the future, because they put their money where their mouths are). Goldman Sachs also thinks the price oil will sore: its “Top Projects 2020” report released in late May said so in writing.

    OK, what does this mean for us ordinary folks?   Maybe – when you consider replacing your current automobile, think about an all-electric. I intend to. With a charging station in your garage, and with batteries improving all the time, your range on one charge is sufficient for most daily driving. Someone I know who has an all-electric says his gas tank needs refilling (you use gasoline when your electric battery is empty) about once a year.

   But, won’t soaring crude oil prices make electricity costly? Probably not. Because overall there is a worldwide glut of natural gas, and it is likely to continue, as more and more countries bring natural gas supplies on line. More and more electricity is being made with natural gas.  

   Food for thought.


Smoking Gun – How the FED Pampered Goldman Sachs

By Shlomo  Maital

Goldman Sachs

  Carmen Sigarra is a veteran lawyer, who worked for the Federal Reserve, overseeing banking operations, specifically Goldman Sachs.  She was fired and is now suing the Fed.

   During her stay at the Fed, she recorded nearly 50 hours of sessions in which Fed examiners checked Goldman Sachs transactions.  She has now released these tapes, and they will be the subject of an upcoming episode of This American Life, on PBS (American public radio).   Don’t miss it!

   What emerges is a picture of lax regulators, overly delicate with how they treat Wall St. Big Money, especially Goldman Sachs.   It demonstrates the culpability of the Fed in the 2008 financial collapse and crisis.  Blame the Fed is the title of an article I published in Barron’s,  and these tapes confirm it.  Blame Goldman Sachs too – they are not blameless.

   Specifically, one transaction that illustrates the whole picture was this:  the embattled Spanish bank Santander was being pressed by European regulators to boost  its capital –  that is, to have more liquid cash on hand, in case its assets declined in value.  To avoid doing this, Santander needed to get some assets off its books.  So it asked Goldman Sachs to babysit them – keep the assets on Goldman’s books.  For a hefty fee, of course.  Goldman agreed… it’s legal, (but shady, said the Fed examiner.  Legal, but shady.  That is the mantra of many people on Wall St.).

   Goldman attached a clause:  The transaction was subject to Fed approval. So the Fed could have killed this ‘shady’ transaction. But of course they didn’t.  And it went ahead. And so did many many many other similar, much worse transactions.

    What do we learn?   Wall St. has immense power.  The alleged independence of the regulators, the Fed,  is a fiction.  This is why another financial collapse, totally different in nature, could well occur. 


Blog entries written by Prof. Shlomo Maital

Shlomo Maital