Bill Owens: Confounding And Confusing Events 7/13/20

A recent article in the New York Times raised an important question about “How deadly is the Corona Virus?”.  We have all had the opportunity to review enumerable statistics which have not necessarily brought clarity to the question.  We know now that cases are rising rapidly, that hospitalizations are increasing (in many places to capacity), and deaths are significantly lower than prior experience would indicate.  The authors of the article did an in-depth analysis and touched on a couple of points that I think are important.  First, who’s currently being infected, and what impact does age and overall health have in either having a mild, if not asymptomatic case, will those who are infected transmit it to others so that the more vulnerable population is again attacked by the virus, and ultimately, the question becomes what, if anything, can we do to stop the spread?  We have all heard the mantra of mask, social distancing, washing hands and avoiding large, particularly indoor groups.  If the public is going to persist in going unmasked, failing to social distance and attending large indoor events, then the likelihood is that the rate of contagion will continue.  Ultimately, the question that the public has to ask itself is, are they prepared to go into the unknown without any protection, it seems like a large number of people are and we are going to have to wait and see how many of the people that they care about become significantly ill, and possibly die.  The authors concluded that statistically the worldwide rate of deaths is less than 1%, but if you multiply that percentage times the people in the world or in the United States, it is a very large number, well into the millions in the United States and the tens of millions in the world.  Are we prepared for that outcome?

Continuing on the COVID discussion.  A group of worldwide experts, according to the New York Times, have asserted in a letter to the WHO that the virus is, in fact, airborne, and is not only transmitted by close contact, but potentially over much greater distances as the particles stay alive and airborne for a considerable period of time.  This only enhances the science which would support wearing a mask.

President Trump’s two performances on the 4^th of July weekend as widely reported were delivered to support racism and enflame culture wars.  The polling seems to indicate the President is out of step with the majority of Americans, but we will see in November whether or not his attempt to rally around his base who must find these concepts acceptable, what then will be the outcome of the election?  The White House did take down a supporter’s video asserting white power, but Ms. Mcenany was very unconvincing, as she insisted that she did not believe there was anything wrong with it. 

Turning to trade, China’s economy is strengthening after applying strict COVID-19 measures as reported in the Wall Street Journal by Jonathan Cheng, which is a mixed blessing for the United States.  A strengthened China during our trade war probably does not help us secure a good negotiating position visa vie the Chinese.  They are in a position if their economy returns to begin the export of products and continue currency manipulation to regain market share throughout the world.  The other side of that equation is, of course, the fact that if the Chinese economy comes back and they begin producing goods, then businesses in Europe and the US will be able to restock and begin the process of reopening (whenever that occurs).  But equally important, they can continue online sales which for many businesses will likely be a long-term sales strategy.

The Russians provide us with yet another interesting trade twist that involves Canada. As you know, the President has threatened to impose tariffs on aluminum and steel coming from Canada, even though it is likely in violation of the USMCA which is of little moment to Mr. Lighthizer, Mr. Navarro and POTUS, since it doesn’t suit their current narrative.  CTV News reports that the Russians happen to have a large supply of aluminum they’d like to export and even though the aluminum industry in the United States and Canada are an integrated supply chain, POTUS appears to be looking for a way that may be just a bit Machiavellian to deliver some of that business to Russia.  How does that work, well, if one imposes tariffs on Canadian aluminum which will drive up its cost, and Russia is selling at either the same price or maybe slightly below the aluminum coming from Canada after application of the tariff, then maybe the Russians get the business.  It seems like a nice payback for paying bounties to kill our troops. 

As we noted last week, the USMCA went into effect on July 1 with largely little fanfare.  Some of that may be the result of the overwhelming presence of COVID in the news, the other may be that USMCA is really not much.  I have pointed out before that the Trump administration has said that the increase to GDP will be approximately ? of 1%, so it is, in fact, an immaterial impactor on GDP from the point of new activity.  The only significant benefit to the USMCA is consistency with NAFTA, so that those trucks and goods arriving at the border are being processed in essentially the same way as they were under NAFTA.  The rest of what happened over the past three years has largely been noise which is the playground of Mr. Trump, his administration and his supporters, including our Congresswoman, Ms. Stefanik.  I have heard her tout the agreement in ways which demonstrate she does not understand the economic impact, nor as a practical matter, how the act actually functions.  It is just noise to her too.

Last week’s job’s numbers need to be evaluated carefully in order to discern actual trends.  As an example, retail clothing gained 202,000 jobs, however, it is still down 40% from last year.  Much of the good news in the job numbers came from leisure and hospitality industries, which are likely to suffer yet another downturn as a result of the ever-increasing number of COVID cases.  The coal industry is another that is suffering dramatically, having lost another 14% of its workers as a result of COVID after suffering a 6-year decline of 27%.  E-commerce jobs continue to grow, but it is unclear at this juncture how much growth is occurring in manufacturing, technology, etc., although it is quite likely, at least in the technology sector, that that remained relatively stable due to the fact that that industry is particularly well situated for remote work. 

Prime Minister Trudeau indicated he would not be attending the USMCA Conference in Washington, DC, celebrating the initiation of the USMCA.  This is not particularly a surprise given the threats of new tariffs made by the Trump administration over steel and aluminum, the threats from Mr. Lighthizer to enforce the agreement vigorously, and the Canadians overall concern with our handling of the Corona virus.  It is also important to note that polling continues in Canada with at least one poll indicating, that 81% (from the NIK of Nanos Research Opinion Poll) of Canadians don’t want the border to open, thus, it is highly unlikely that we will see the border open this summer.  All of us who live along the US/Canadian border and share Lake Champlain, only have the Trump administration to blame for our loss of revenue, as the Director of the Center for Canadian Studies at John Hopkins University stated, “Canadians looking south see chaos.” I also note that one of your local papers, “The Adirondack Daily Enterprise” conducted a poll of its readers which indicated close to 50% of them did not want the border to reopen.  Our Congresswoman continues to support POTUS in his absurd rhetoric about COVID, masks, etc., and offer solutions to open the border which fail to address – ignore – Canadian concerns. The whole story is not appropriate here just your narrative.

In better trade news, US/Canada truck crossings hit pre-COVID levels, which means that the business part of the equation is actually working at very high levels.

We have all seen the headlines, the evening news, indicating that we are hitting a greater number of COVID cases daily, in fact, in many states, records are made each day.  We are now hearing that hospitals in many of these hard-hit localities are at the max, and what happens next will be very important in terms of whether or not this can be contained.

Mr. Trump announced that he was going to order schools to reopen, and if they didn’t, then he would withhold funding.  Unfortunately, this is a political stunt pandering to his base that will not be tied to the utilization of methods that will ensure the safety of children, teachers, parents, grandparents and the society at large.

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