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The Head of the CDC Was Behind the Big Gulp Soda Ban In New York

 

“Hey Bloomberg, here’s a big gulp of…..FREEDOM” by Anthony Freda

Bloomberg the Nanny, by William Banzai

Libertarians were outraged by New York City Mayor Bloomberg’s “Big Gulp” ban (which a state court ultimately struck down). They slammed it as a “Nanny State” measure.

But it was current Centers for Disease Control head Tom Frieden who was actually behind the ban.

The New York Times reported in 2004:

Dr. Thomas R. Frieden, the city’s health commissioner,
has turned out to be an active policy advocate among the city’s
department heads, the outspoken architect of some of the Bloomberg
administration’s more controversial policies.

 

Although Mayor Michael R. Bloomberg is more closely associated with a
law that bans smoking citywide, the legislation was actually developed
by Dr. Frieden, who was also given responsibility for helping to push it
through the City Council.

 

***

 

Even Mayor Bloomberg’s partnership with Snapple to sell juice in vending machines in schools has not gone without his notice.

 

"I would have preferred water,” he admitted, although he added that he liked the money that the agreement will raise.

 

He is almost certainly the only city agency head who keeps a bowl of condoms in the reception area of his office.

And the Daily Caller reported in 2010:

  • In 2009, Frieden took to the pages of the New England Journal of
    Medicine to sell the need for a soda tax. “It is difficult to imagine
    producing behavior change of this magnitude through education alone,
    even if government devoted massive resources to the task,” Frieden
    wrote. “Only heftier taxes will significantly reduce consumption.”
  • In 2010, after Obama tapped Frieden to head up the Centers for
    Disease Control, Bloomberg announced his support for a soda tax. “The
    soda tax is a fix that just makes sense,” he said in a March 2010 radio
    address. “It would save lives. It would cut rising health care costs.
    And it would keep thousands of teachers and nurses where they belong: in
    the classrooms and clinics.” Three years earlier, Bloomberg said he was
    opposed to a soda tax.







Initial Jobless Claims Collapse To April 2000 Lows

As we noted last week, when there is no hiring, there is no firing...

and so it is that initial jobless claims collapsed to 264k this week (versus 290k expectations) - the lowest since April 2000 (and 2nd lowest ever on record). That is not what the market wants to hear right now... it is craving bad news to get The Fed re-engaged. Continuing claims inched higher from 2.382 million to 2.389 million but remains near cycle lows.  

 

To sum up: its never been better than this for employment... according to the government-supplied data. Unless you look at this...

 

 

 

Charts: Bloomberg








8 European Countries In Outright Deflation As Inflation Expectations Crash To Record Low

Forward inflation expectations for Europe have collapsed to all-time record lows (based on 5Y forward implied 5Y inflation) as the market grows increasingly impatient at Draghi's dragging his "whatever it takes" feet on pulling the sovereign QE trigger.

 

With 8 European nations now in outright deflation, the growing political pressure on the ECB to actually "do" something is, however, equal and opposite to Germany's (read Buba's) insistence that member states have some fiscal discipline (oh and the fact that OMT may just be exactly what we always said it was - illegal and a mirage).

 

With France shunning Brussels laws directly, and Italy flouting the "hookers-and-blow" GDP adjustment to improve its debt-to-gdp ratios, is it any wonder that Germany sticks to its anti-hyperinflationary, fiscally responsible guns... But then again, as we have seen again and again with the failed European Union, beggars can be choosers as politicians are unwilling to give up their perks in favor of helping the people that voted for them (or didn't in some cases).








Beware of Extremes

The market is a fickle mistress.  At the end of September, and at the start of this month, we pushed against the hawkish read of the Fed’s dot-plots.  We resisted talk of a Fed hike in Q1 15.  We explained that the Fed’s policy signal emanates from the Troika of leaders, Yellen, Fischer and Dudley.    We warned that the US economy had lost some momentum at the end of Q3 and into Q4.  We had wrongly anticipated a softer employment report, but our larger economic suspicions are proving correct. 

 

We now find ourselves pushing back against the uber-pessimistic view that had taken hold.  Looking at the Fed funds futures strip the market has pushed the first rate hike out of 2015 entirely and into the Q1 2016.  There is talk of a new round of QE.  The US economy grew above trend in Q2, as partly a payback for some of the weather-induced weakness in Q1, and it appears to have grown above trend in Q3.  It is not unreasonable to anticipate some modest slowing to a more sustainable pace.  It does not mean a recession.  The slowing from near 5% annualized pace in Q2 to around 3% in Q3, and a bit slower in Q4, does not feel good, it is not the apocalypse either. 

 

The global headwinds can be mitigated by the decline in energy prices and the decline in interest rates.  It is yet to be seen that American households will take advantage of savings at the pump to boost spending elsewhere.  But it is a reasonable expectation. 

 

As a headwind, the dollar’s appreciation was always conditional on its persistence.  In terms of magnitude, we have pointed out that on a real, broad, trade-weighted basis, which is the key metric in this context, the dollar’s rise has been minor this year.  Some bilateral nominal adjustments have been larger, and some companies will likely blame adverse currency moves for disappointing news during earnings season. 

 

However, few companies seem to draw attention to the tailwind that currency adjustments have sometimes given.  Two companies in the same industry with similar international exposure can and do report divergent impact from the developments in the foreign exchange market.  The proper level of analysis for this is the corporate treasurer’s office and its hedging strategies, not macro-economic policy. 

 

The moving parts in the international jigsaw puzzle are not to be found in the euro area or Japan.  There the investors are duly pessimistic, and the recent string of data indicates it is not unwarranted.  Rather, the change has been in perceptions of the UK and US. 

 

For the last few months, we have been highlighting how well sterling was tracking interest rate expectations as reflected in the March 2015 short-sterling futures contract.  As the UK economy lost momentum, and price pressures continued to ease, expectations of the first hike have been pushed from Q4 14 to Q1, then into Q2, and now into late next year, if not 2016. 

 

Similarly, the market, as reflected in the Fed funds futures strip, was never as hawkish as the FOMC dot-plots implied.  Many observers had warned of a rude awakening for investors.   However, rather than move toward the Fed, the market has run, not walked, in the opposite direction. 

 

Inflation expectations are at levels that have proceeded Fed’s QE operations in the past.  These are market-based inflation expectations.   However, they are far from clean.  One distortion stems from differences of liquidity between Treasuries and the inflation-protected securities.  At the risk of over-simplifying, inflation expectations tend to fall when US Treasuries rally strongly. 

 

Before the end of his term, Bernanke announced the Fed’s tapering operation.  Up until now, Yellen has been simply executing it.  This methodology was important.  The Fed announced months ahead of time what it was going to do, and even waited a few months longer than many had expected.  It then implemented what it said it would.   Some foreign countries did not like the unconventional US monetary policy in the first place, and then did not like that it was going to end.  However, they cannot complain of being surprised. 

 

As recently as last week, NY Fed President Dudley opined that it was reasonable to expect the first rate hike around the middle of next year.  A week or so before that Dallas Fed President Fisher, who dissented at the last FOMC meeting, suggested a hike in Q1 may be appropriate.    We suspect, given the price of oil and its impact on the Texas economy, we suspect that Fisher is more likely to change his mind than Dudley. 

 

Assuming that Yellen and Dudley are singing from the same songbook, Yellen’s comments to the Group of 30 in Washington suggest the center is holding.  Neither the hawk nor dove wing has wrestled the reins of monetary policy from the core centrists. 

 

While there can be no mistake that the recent string of data since the September jobs report has been weaker than expected.  The Federal Reserve is likely to recognize this in its statement at conclusion of its month-end meeting.  However, it is also likely to recognize that progress continues to be made toward its mandates.  This is why the three elements of the Fed’s forward guidance will likely continue in the Fed’s statement later this month.

 

First, there is still significant slack in the labor market, even if the unemployment rate looks low or near NAIRU.  Second, It will be a “considerable” period between the end of QE and the first rate hike.  A June of July rate move would still put in 8-9 months out.  Third, even when Fed judges to have achieved its mandates, Fed funds may stay lower than what the central bank believes is the long-term equilibrium rate. 

 

It may be a mistake to conclude that the Fed will not raise rates, or that a new QE operation will be launched.   The Fed’s mandates are being approached.  For policy purposes, the Fed targets the core PCE deflator.  Only the second round impact of falling energy prices would be picked up, for example if the price of airfare fell as companies passed on the lower energy costs to consumers. 

 

More importantly, Fed officials recognize its credibility is on the line.  It has said it will raise rates.  It has led investors to believe a rate hike will be forthcoming.   Barring a significant shock, it will raise rates.    Recall that even a sharp contraction in Q1 14, not all of which can be written off due to the weather, was not sufficient to get the Fed to change the pace of its tapering.  A move back to trend growth, which is a function of labor force growth and productivity, is unlikely to derail the Federal Reserve. 

 

Lastly, while officials would doubtlessly prefer less dramatic market swings, the sell-off of risk assets and the rise in volatility from what many thought to be unsustainable and unhealthy is not completely undesirable.   Many market participants see the size of the Fed’s balance sheet, and some of its composition, and wrongly conclude it is a hedge fund.  It most certainly is not, and such thinking will lead one to exaggerate the impact of the market turmoil on policy.

.  

Medium and long-term investor may also recognize the salutary effect of the market correction.  Value investors were finding little to chose from, and this setback will create new opportunities to buy good securities and companies at better prices.  A less violent path would be desirable, but this is often the case after a period of sustained trends and the compression of volatility. 

 

Global investors have been best served by pushing against the dramatic swings in the pendulum of market sentiment.  First the hawks tried to dislodge the market.  This was successfully rebuffed. Now the doves/pessimists are pushing the market hard in the other direction.  There is still plenty of time before the middle of next year when the market consensus previously expected the first Fed rate hike. 

 

 

Our message to clients can be summarized in three words:  Beware of extremes.  








Average Goldman Employee Comp Drops To $385,821 Despite Top And Bottom-Line Beat

On the surface, Goldman's just reported earnings that were significantly better than expected, with the central-bank controlling hedge fund announcing it had earned $4.57 in the third quarter, over a dollar above the $3.21 expected and also above the highest estimate, on revenues of $8.39 billion, half a billion above the $7.83 billion expected, while also announcing an increase in its dividend from $0.55 to $0.60.

The biggest revenue contributor was the pick up in FICC trading which was $2.17 billion, just below the $2.22 billion in Q2 and well above the $1.83 Bn expected.

Somewhat disappointing is that Goldman's prop group, Investing and Lending, generated just $1.692 billion, far below the $2.072 billion last quarter: so, do you see what happens Larry when the prop guys can no longer trade against Stolper's recos?

Nonetheless, the long-term trend in Goldman revenues is quite clear, and is shown on the chart below

But the main reason why EPS soared is because Goldman did what it should do in a time of contracting revenues: it slashed compensation - the firm set aside "only" $2.8 billion for Compensation benefits, or a 33.4% comp margin, far below the 41% expected, and the 43% margin it had accrued last quarter.

As a result, despite the substantial beat in revenues and EPS, average employee comp actually fell modestly to $385,821 in Q3, although Goldman did boost total headcount from 32,400 to 33,500 in the third quarter, bucking the layoff trend seen at every other bank.








Frontrunning: October 16

  • Dallas County May Declare State of Disaster From Ebola Virus (BBG)
  • Markets on edge after worst turmoil in four years (Reuters)
  • Central bankers may have no quick fix as markets swoon, economy weakens (Reuters)
  • Risk of Deflation Feeds Global Fears  (Hilsenrath)
  • U.S. health official allowed new Ebola patient on plane with slight fever (Reuters)
  • Texas Hospital Fights Allegations About Ebola Protocols (BBG)
  • Treasuries Gain as Oil Drops Below $80 While Stocks Slide (BBG)
  • Greek Bonds Slump on Bailout Concern as Spain Misses Sale Target (BBG)
  • White House shifts into crisis mode on Ebola response (Reuters)
  • Obama Confronts Slippery Slope as Islamic State Advances (BBG)
  • Cocktail of Trouble for Liquor Makers Diageo, Rémy Cointreau and LVMH (WSJ)
  • Dark Pools Said to Rebuff Orders Amid U.S. Volume Surge (BBG)
  • EU Starts Two-Week Austerity Scrutiny as Crisis Reawakens (BBG)
  • U.S. foreclosure activity falls to eight-year low (Reuters)
  • Well that was fun: AbbVie board ditches planned $55 billion Shire acquisition (Reuters)
  • Lockheed says makes breakthrough on fusion energy project (Reuters)
  • Paris’s `Squalor Pit’ Gare du Nord Becomes French Decline Symbol (BBG)

 

Overnight Media Digest

WSJ

* Concerns grew about containing the spread of Ebola in the United States after federal health officials disclosed Wednesday that the second Texas nurse infected with the virus flew from Dallas to Cleveland and back in the days before reporting her symptoms. (http://on.wsj.com/1rdCg5N)

* U.S. officials said they weren't seeking to extend nuclear negotiations with Iran beyond a Nov. 24 deadline, as Secretary of State John Kerry met with his Iranian counterpart on Wednesday. (http://on.wsj.com/1zcfyVu)

* AbbVie Inc said on Wednesday its board is recommending stockholders vote against the drug maker's proposed $54 billion takeover of Shire Plc. (http://on.wsj.com/ZvJBH7)

* Mexico's banking regulator fined Banamex, the local unit of Citigroup Inc a little more than $2 million for failing to prevent an alleged fraud against the bank by a client, oil-services firm Oceanografia. (http://on.wsj.com/1npL4tN)

* Sierra Nevada Corp, the losing bidder in NASA's recent multibillion-dollar "space taxi" competition, has gone to court seeking to block winners Boeing Co and SpaceX from proceeding with work until its pending contract protest is resolved. (http://on.wsj.com/1twUx5q)

* Amazon Inc plans to hire 80,000 seasonal workers for its warehouse network in the United States, representing a 14 percent increase from last year as the company brings its massive distribution facilities closer to urban centers. (http://on.wsj.com/1vfPlBn)

* Google Inc unveiled three Nexus-branded devices on Wednesday, signaling plans to compete with Apple Inc for high-end consumers. Google's new Nexus 6 smartphone, Nexus 9 tablet and Nexus Player set-top box are priced slightly below, or in line with, competing devices from Apple. In the past, Google has priced new models significantly below Apple products. That is a departure for Google, which in the past has priced new models significantly below Apple products. (http://on.wsj.com/1xTlqyl)

* McDonald's Corp has hired back a second former executive as it tries to stabilize its U.S. business. Karen King, retired east division president for McDonald's USA, returned to the company this week as its chief people officer for the U.S. (http://on.wsj.com/1w9OZuk)

 

FT

Russian billionaire Mikhail Fridman's attempt to buy RWE Dea, the oil and gas arm of German utility RWE AG for about 5.1 billion euros was blocked by the UK government, a move that indicates that even private Russian companies will have to bear the impact of U.S. and EU sanctions.

Japan's Toyota Motor Corp said it would recall 1.75 million vehicles globally to address three separate defects, relating to brake master cylinders, fuel delivery pipes and the fuel suction plate.

Statoil ASA's long-serving chief executive Helge Lund unexpectedly quit to take on the top role at smaller rival BG Group PLC where he has been promised a big pay rise if he can turn round the flagging British gas and oil producer.

Tata Steel Ltd said it was in talks with the Klesch Group to sell its long products business in Europe that employs about 6,500 people including those at its distribution facilities.

 

NYT

* The Obama administration may have killed the biggest corporate takeover of the year. AbbVie Inc, the Illinois-based drugmaker that had agreed to pay $54 billion for the Irish pharmaceutical company Shire Plc, now has cold feet. AbbVie's abrupt reconsideration of the deal sent Shire's stock price plummeting on Wednesday and provided the clearest evidence yet that the Treasury Department had succeeded in cracking down on corporate inversions. (http://nyti.ms/1sUEqww)

* The first two drugs that can slow the progression of a fatal lung disease won approval from the Food and Drug Administration on Wednesday, a decision that could open a new era for patients but also a new chapter in the controversy over high drug prices. Roche Holding AG's drugs Esbriet and Boehringer Ingelheim's Ofev, are meant to treat idiopathic pulmonary fibrosis, a scarring of the lungs that affects roughly 100,000 Americans and kills many of them in three to five years. (http://nyti.ms/ZFNaL9)

* Waves of nervous selling buffeted the stock market in the United States on Wednesday, after a steep sell-off in Europe. At one point, the Dow Jones industrial average had plunged 460 points, or 2.8 percent, though it later swung higher to close down 1.1 percent, or 173.45 points. The Standard & Poor's 500-stock index fell 0.8 percent, or 15.21 points. Since their peak a month ago, American stocks have lost over $2 trillion in value, losses that may ripple through the wider economy. (http://nyti.ms/1yG2bvz)

* During an event at its Cupertino, California, headquarters on Thursday, Apple Inc is set to unveil new iPads that are expected to include fingerprint sensors for each model. A major revision of the full-size tablet, the iPad Air, is also expected. (http://nyti.ms/1sW3Yu9)

* JPMorgan & Chase corporate race website, which is managed by an outside vendor, has been conspicuously inaccessible since early August, with visitors to the site seeing only a lonely list of coming races. The link between the breach on that website and the broader attack, which the bank said did not compromise any financial information, has not been previously reported. (http://nyti.ms/1rwp6R8)

* SolarCity Corp, installer of rooftop solar systems, began selling bonds online to ordinary investors on Wednesday, joining a handful of companies that are using crowdfunding to finance solar development. The company will issue up to $200 million in the bonds, whose maturities range from one to seven years and carry interest rates of 2 percent to 4 percent. (http://nyti.ms/1sKZEwr)

 

China

CHINA SECURITIES JOURNAL

- Chinese insurance firms will need to run tests to monitor and measure liquidity risks, according to a circular from the China Insurance Regulatory Commission (CIRC) on Wednesday.

SHANGHAI SECURITIES NEWS

- Chinese brokerages need to ratify a three-year capital replenishment plan before the end of the year and make use of at least one funding channel within three years, according to Zhang Yujun, assistant chairman at the China Securities Regulatory Commission (CSRC).

SECURITIES TIMES

- China's Ministry of Environmental Protection has launched a programme to monitor air pollution discharged by companies through winter, typically a time of high pollutant levels.

CHINA DAILY

- Some Chinese companies operating in Africa are taking measures to protect employees against a deadly outbreak of Ebola in the region, the official paper said. China has thousands of people working in the worst affected regions in West Africa.

SHANGHAI DAILY

- Eight people in southwest China have been killed during a clash between local villagers and construction workers over a land dispute, local officials said on Wednesday.

PEOPLE'S DAILY
- Chinese artists should reflect the country's socialist values in their work, China's president Xi Jinping said on Wednesday. Art works should not be "slaves" to the market or bear the "stench of money", he added.

 

Britain

The Times

29 MLN STG PACKAGE HELPS BG TO LURE NEW BOSS

BG Group PLC has been forced to pay top dollar to recruit one of the oil and gas sector's most well-respected figures, Helge Lund from Statoil ASA to lead the company after seven months without a chief executive, offering Lund a package of up to 29 million pounds. (http://thetim.es/100jg55)

PANIC GRIPS INVESTORS AMID VOLATILE MARKETS

Investors succumbed to the biggest bout of jitters since the nadir of the eurozone crisis two years ago, prompting wild swings in equities and government bonds. Volatility took hold and the Dow Jones swung by almost 450 points over the course of a turbulent day. The S&P 500 VIX index has doubled in the space of a fortnight and hit a peak of 31, higher than in the summer of 2012. (http://thetim.es/1yFr8aq)

The Guardian

BANKS FACE CRACKDOWN OVER EU BONUS CAP

Europe's top banking regulator has warned banks they should not hand their staff top-up payments to avoid the EU bonus cap in a move that could have implications for dozens of banks and thousands of bankers. (http://bit.ly/1w9CqRP)

UK UNEMPLOYMENT FALLS TO 6 PERCENT

UK unemployment has fallen below the 2 million mark for the first time since the global financial system was on the brink of collapse six years ago. (http://bit.ly/1w9CkJO)

The Telegraph

SHIRE TAKEOVER HANGS IN THE BALANCE AS 13 BLN STG WIPED OFF SHARES

The 36 billion pounds takeover of Shire Plc was hanging in the balance on Wednesday night after U.S. drugmaker AbbVie Inc said it was reconsidering the deal in the wake of US tax reforms. (http://bit.ly/11pitem)

TATA STEEL TO SELL OFF LONG PRODUCTS BUSINESS, AFFECTING THOUSANDS OF BRITISH JOBS

Tata Steel Ltd is planning to sell its Long Products division, which employs thousands of workers at several sites in the UK. The steel giant said it had signed a Memorandum of Understanding with the Klesch Group, an industrial company which operates across Europe. (http://bit.ly/1sUdvAT)

Sky News

EX-RSA EXECUTIVE MILES TO JOIN TROUBLED WONGA

The chairman of troubled payday lender Wonga is recruiting another former colleague from the insurer RSA Insurance Group Plc. Paul Miles, the chief financial officer of Capquest, a debt recovery firm, will join Wonga to take on the same role. (http://bit.ly/1sffYUM)

SAINSBURY'S ENDURES BACKLASH ON NECTAR CUTS

J Sainsbury Plc's customers have threatened to shop elsewhere after the supermarket chain confirmed it was planning cuts to its Nectar reward points. (http://bit.ly/1w9ihcF)

The Independent

UBER RIVAL HAILO QUITS NORTH AMERICAN BUSINESS

Taxi hailing app Hailo is to pull out of North America as the London-based company struggles to make a profit amid "astronomical" marketing costs. (http://ind.pn/1vxagkW)

BALFOUR BEATTY NAMES LEO QUINN NEW CHIEF EXECUTIVE

Balfour Beatty has appointed a new chief executive just weeks after fending off a takeover by rival Carillion Plc . Leo Quinn is poised to join in January after five years as group chief executive of defence research firm QinetiQ, following four years as the boss of banknote printer De La Rue. (http://ind.pn/1zbRX7k)

 

Fly On The Wall Pre-market Buzz

ECONOMIC REPORTS

Domestic reports scheduled for today include:
Jobless claims for week of October 11 at 8:30--consensus 290K
Industrial production for September at 9:15--consensus up 0.4%
Philadelphia Fed manufacturing survey for October at 10:00--consensus 20.0
Housing market index for October at 10:00--consensus 59

ANALYST RESEARCH

Upgrades

Air Products (APD) upgraded to Outperform from Neutral at Credit Suisse
American Express (AXP) upgraded to Neutral from Underweight at JPMorgan
Baidu (BIDU) upgraded to Outperform from Perform at Oppenheimer
Bank of America (BAC) upgraded to Outperform from Market Perform at FBR Capital
Bank of the Ozarks (OZRK) upgraded to Buy from Hold at Wunderlich
Bristol-Myers (BMY) upgraded to Outperform from Market Perform at BMO Capital
CSX (CSX) upgraded to Outperform from Neutral at Credit Suisse
Cloud Peak (CLD) upgraded to Buy from Hold at Brean Capital
Cullen/Frost (CFR) upgraded to Market Perform from Underperform at BMO Capital
FireEye (FEYE) upgraded to Overweight from Neutral at JPMorgan
FleetCor (FLT) upgraded to Overweight from Equal Weight at Morgan Stanley
Gulfport Energy (GPOR) upgraded to Outperform from Sector Perform at RBC Capital
Host Hotels (HST) upgraded to Outperform from Market Perform at FBR Capital
Illumina (ILMN) upgraded to Overweight from Neutral at Piper Jaffray
L Brands (LB) upgraded to Outperform from Market Perform at Wells Fargo
LifePoint Hospitals (LPNT) upgraded to Outperform from Neutral at RW Baird
Magellan Midstream (MMP) upgraded to Buy from Neutral at Ladenburg
Netflix (NFLX) upgraded to Hold from Underperform at Jefferies
Sibanye Gold (SBGL) upgraded to Neutral from Sell at UBS
Targa Resources (TRGP) upgraded to Buy from Neutral at UBS
Tiffany (TIF) upgraded to Outperform from Neutral at Macquarie
Time Warner (TWX) upgraded to Buy from Neutral at BofA/Merrill

Downgrades

Akamai (AKAM) downgraded to Market Perform from Outperform at Wells Fargo
Francesca's (FRAN) downgraded to Underperform from Outperform at Macquarie
lululemon (LULU) downgraded to Underperform from Neutral at Macquarie
Netflix (NFLX) downgraded to Fair Value from Buy at CRT Capital
Nordstrom (JWN) downgraded to Neutral from Outperform at Macquarie
Norfolk Southern (NSC) downgraded to Neutral from Outperform at Credit Suisse
Rio Tinto (RIO) downgraded to Market Perform from Outperform at Cowen
Seadrill (SDRL) downgraded to Reduce from Neutral at Nomura
Ternium (TX) downgraded to Neutral from Overweight at JPMorgan
Urban Outfitters (URBN) downgraded to Neutral from Outperform at Macquarie
Viacom (VIAB) downgraded to Underperform from Neutral at BofA/Merrill

Initiations

Aquinox (AQXP) initiated with a Buy at Canaccord
Starwood Waypoint (SWAY) initiated with an Outperform at JMP Securities
Teck Resources (TCK) initiated with an Equal Weight at Barclays
Western Asset Mortgage (WMC) initiated with a Market Perform at Wells Fargo

COMPANY NEWS

Following Shire's (SHPG) waiver of the three-day notice period, AbbVie (ABBV) announced its board withdrew its recommendation made on July 18 regarding the proposed Shire transaction and recommended that stockholders vote against the transaction
Amazon (AMZN) announced it is creating 80,000 seasonal positions across its U.S. network of fulfillment and sortation centers this holiday season
Google (GOOG) unveiled Android 5.0 Lollipop, new Nexus phone, tablet, set-top player
Microsoft (MSFT) said working with YouTube (GOOG) to reinstate content inadvertently removed
Las Vegas Sands (LVS) said its board authorized an additional $2B to the company's stock repurchase program
Meredith (MDP) secured rights to license Martha Stewart Living (MSO) Magazine, website
Insys Therapeutics (INSY) received a Refusal to File Letter from the FDA for its proprietary Dronabinol Oral Solution
Michigan bill blocked Tesla (TSLA) from selling directly to consumers

EARNINGS

Companies that beat consensus earnings expectations last night and today include: eBay (EBAY), Netflix (NFLX), Orbital (ORB), WNS Holdings (WNS), Danaher (DHR), UnitedHealth (UNH), Briggs & Stratton (BGG), HNI Corporation (HNI), HCA Holdings (HCA), Intellipharmaceutics (IPCI), C1 Financial (BNK), Astoria Financial (AF), Umpqua Holdings (UMPQ), United Rentals (URI), BankMutual (BKMU), Boston Private Financial (BPFH), RLI Corp. (RLI), Badger Meter (BMI), American Express (AXP)

Companies that missed consensus earnings expectations include:
Fifth Third Bancorp (FITB), Baker Hughes (BHI), Mattel (MAT), Cohen & Steers (CNS), Universal Forest (UFPI), Central Valley Community (CVCY), Platinum Underwriters (PTP), Las Vegas Sands (LVS)

Companies that matched consensus earnings expectations include:
First Cash Financial (FCFS), BB&T (BBT), Navient (NAVI), Guaranty Bancorp (GBNK)

eBay (EBAY) sees FY14 EPS at low end of $2.95-$3.00, consensus $2.97
Danaher (DHR) sees Q4 EPS $1.00-$1.04, consensus $1.04
WNS Holdings (WNS) raises FY15 adjusted EPS to $1.56-$1.63 from 1.44-$1.56
Orbital (ORB) raises 2014 adjusted EPS view to $1.20-$1.25 from $1.10-$1.20

NEWSPAPERS/WEBSITES

EU antitrust chief criticizes 'irrational' response by politicians to Google (GOOG) probe, WSJ reports
Boeing (BA) mulls potential helicopter deal with Brazilian Army, Reuters reports
American Apparel (APP) to make interest payment on bonds, Bloomberg reports
Mexican regulators fine Citigroup's (C) Banamex unit 30M pesos, Bloomberg reports
Berkshire Hathaway (BRK.A) cuts Tesco (TSCDY) stake to less than 3%, Telegraph reports
AbbVie (ABBV), Shire (SHPG) both look like buys no matter what, Barron's says

SYNDICATE

Esperion (ESPR) 4.25M share Secondary priced at $20.00
NeuroMetrix (NURO) files to sell 3.3M shares for holders
Southern Missouri Bancorp (SMBC) files to sell 345,893 shares for holders
Tetraphase (TTPH) files to sell $75M of common stock








Everything Breaks Again: Futures Tumble; Peripheral Yields Soar, Greek Bonds Crater

Yesterday afternoon's "recovery" has come and gone, because just like that, in a matter of minutes, stuff just broke once again courtsy of a USDJPY which has been a one way liquidation street since hitting 106.30 just before Europe open to 105.6 as of this writing:

  • U.S. 10-YEAR TREASURY YIELD DROPS 15 BASIS POINTS TO 1.99%
  • S&P FUTURES PLUNGE 23PTS, OR 1.2%, AS EU STOCKS DROP 2.54%

This comes after futures actually were briefly green for the session earlier in the morning. The catalyst this time, however, is not some US fund liquidating or repositioning or new Ebola pandemic news, but all Europe:

  • GERMAN 10-YEAR BUND YIELD DROPS TO RECORD LOW 0.715%

Only this time Europe is once again broken with periphery yields exploding, after Spain earlier failed to sell the maximum target of €3.5 billion in bonds, instead unloading only €3.2 billion, and leading to this:

  • PORTUGAL 10-YR BONDS EXTEND DROP; YIELD CLIMBS 30 BPS TO 3.58%
  • IRISH 10-YEAR BONDS EXTEND DECLINE; YIELD RISES 20 BPS TO 1.90%
  • SPANISH 10-YEAR BONDS EXTEND DROP; YIELD JUMPS 29 BPS TO 2.40%

And the punchline, as usual, is Greece, whose 10 Year is now wider by over 1% on the session(!), to just about 9%.

Greece frightening. 10y yield +100 bps today to 8.85%, up more than 200 bps this week: pic.twitter.com/lUm89S1CkM

— Jamie McGeever (@ReutersJamie) October 16, 2014

One-handed golf clap to all those who used other people's money to buy those Greek 5 Year bonds a few months ago.

In short, Europe is a sea of red, only unlike before when the bid for safety was peripheral bonds, this time the puking is also sending the periphery crashing, something we last saw just before Draghi's "whatever it takes" speech, which means that the market has finally called the ECB's bluff and demands that after 2 years of jawboning, that the ECB actually put the printer where its mouth is. Good luck with that.

Let's not forget that oil is also still sliding and we have yet to see some major macro fund liquidate as a result of commodity margin calls. The wait will hardly be too long at this point.

Oh, and we forgot to mention that today Dallas well announce State of Disaster (aka martial law lite) and activate an emergency plan over its third Ebola case. So all those BTFD, best of luck to you too.

Bulletin Headline Summary

  • European equities only see short-lived relief at the open as Greek market rot spreads to the Eurozone core, pushing German 10yr yields to – yet again – record lows.
  • Greek markets continue to sell-off on speculation that Greece’s early bailout exit will be less than smooth. The market turmoil also results in Spain failing to sell their targeted EUR 3.5bln in a longer-dated Bono auction
  • Focus turns to the slew of Fed speakers today, primarily Yellen at 1745BST/1145CDT, and earnings from Goldman Sachs, Google and Philip Morris
  • Treasury rally continues, 10Y trading below 2% while 30Y yield lowest since Dec. 2012 amid concern over global growth and possible economic impact of Ebola.
  • Investors are worried that five years since the world limped out of recession, central banks have virtually exhausted their stimulus arsenals if inflation and activity keep fading
  • A second Texas nurse infected with Ebola alerted U.S. health officials to her elevated temperature before flying from Cleveland to Dallas on a commercial airline
  • Lawmakers and health specialists say reversals and missteps mar the Obama administration’s handling of the outbreak -- and fueled calls for the resignation of CDC chief Thomas Frieden, who testifies today in Congress
  • As airpower has failed to dislodge Islamic State fighters from the Syrian border town of Kobani or halt their offensive in Iraq, Obama’s appeals for strategic patience are being challenged by some U.S. military and intelligence officers and diplomats who say more needs to be done
  • It’s futile for the U.S. and its allies to “blackmail” Russia over the Ukraine crisis, Putin said in a newspaper interview; also accused Obama of adopting a “hostile” approach in naming Russia as a threat to the world
  • The ECB agreed yesterday on two acts that officially establish its covered-bond program and lay out how it will be implemented, according to two euro-area officials, who asked not to be identified because the discussions aren’t public
  • Hong Kong Chief Executive Leung Chun-ying said his government is ready to meet student leaders next week to discuss the city’s first leadership election as he seeks to end three weeks of pro-democracy protests
  • EU peripheral yields surge, with Greek 10Y over 8.00%. Asian stocks fall, Nikkei -2.2%, Shanghai -0.7%. European stocks, U.S. equity-index futures fall. Brent crude falls to four-year low; copper falls, gold little changed

US Econ Calendar

  • 8:30am: Initial Jobless Claims, Oct. 11, est. 290k (prior 287k); Continuing Claims, Oct. 4, est. 2.380m (prior 2.381m)
  • 9:15am: Industrial Production, m/m, Sept., est. 0.4% (prior -0.1%); Capacity Utilization, Sept., est. 79% (prior 78.8%)
  • 9:45am: Bloomberg Consumer Comfort, Oct. 12 (prior 36.8); Economic Expectations, Oct. (prior 41.5)
  • 10:00am: Philadelphia Fed Business Outlook, Oct., est. 19.8 (prior 22.5)
  • 10:00am: NAHB Housing Market Index, Oct., est. 59 (prior 59)
  • 4:00pm: Net Long-term TIC Flows, Aug. (prior -$18.6b); Total Net TIC Flows, Aug. (prior $57.7b)

Central Banks

  • 8:00am: Fed’s Plosser speaks in Allentown, Pa.
  • 9:00am: Fed’s Lockhart speaks in New Brunswick, N.J.
  • 10:00am: Fed’s Kocherlakota speaks in Billings, Mont.
  • 12:45pm: Fed’s Bullard speaks in Washington
  • 12:45pm: Fed’s Yellen attends event in Chelsea, Mass.

POMO

  • 11:00am: Fed to purchase $150m-$250m in 2024-2031 sector

FIXED INCOME

After yesterday's sell-off in US equities abated ahead of the Wall Street close, European equities opened on firmer footing - albeit this was very short-lived. Greek woes swirled further, as the Greek 10yr yield jumped above 8.5% for the first time in 8 months on continued speculation that Greece's early IMF bailout exit will be less-than smooth. The resulting market turmoil in Greece rubbed off on today's Spanish bond auction, as the Spanish Treasury failed to sell their targeted EUR 3.5bln in 2024 and 2028 debt. The SP/GE 10yr government bond yield has widened in response, wider by 22bps today as the Spanish 10yr yield climbs above 2.3%.

The Euribor curve continues to bear-flatten after the ECB confirmed they are yet to make a decision on Greece's collateral requirements at the ECB, despite discussing doing so as earlier reports suggested the ECB could accept poorer quality collateral in order to access liquidity.

EQUITIES

Greek equities have fallen sharply, dragging both Italian and Spanish stocks with it, as a number of Italian banks are stopped out of trade - limit down. Furthermore, lacklustre corporate earnings updates from Nestle and Roche as well as AbbVie turning against Shire dropped blue-chip stocks across the continent.

Corporate earnings updates today include Goldman Sachs, Google, Philip Morris International and Schlumberger all due today.

FX

A resumed decline in industrial metals (Chinese iron ore futures fell 4% overnight) has knocked commodity-based currencies, with CAD, AUD and NZD all underperforming. EUR/USD saw some mild upside after Eurozone Core CPI was revised higher to 0.8% vs. Exp. 0.7%, allowing the pair to reclaim the 1.2800 level ahead of the US crossover. Alongside the downside in European equity futures, the JPY has benefited further, gaining no solace from comments out of BoJ’s Kuroda overnight – who reiterated the Bank of Japan will continue with QQE until their price target is reached.

COMMODITIES

WTI and Brent crude futures again trade softer, with WTI crude briefly breaking below USD 80/bbl. Energy prices failed to find support in positive Chinese data, which overnight showed Foreign Direct Investment rising 1.9% vs. Exp. -14.0%. Furthermore, Yesterday’s API inventories showed a significant build of 10200K vs. Prev. 5100K. The Kuwaiti Oil Co. additionally appeared unphased by the recent slide in oil, as the CEO reaffirmed that the Co. are to raise production further.

* * *

Jim Reid's dramatic summary concludes the overnight recap

Where do we start this morning? Its tempting to get back under the duvet after a 24 hours like the last one, especially as after a year of renovations, my central heating is still not working properly. Anyway I grew up in a house without central heating so I'm made of sterner stuff. As a starter I think its fair to say that after the US opened yesterday it was not wise to be long Greek government bonds and short US Treasuries. In 10 years the former rose 82bps on the day and the latter fell an incredible 34bps at the lows. It was the worst day for Greek Government bonds since July 23rd 2012 (more on this later) and had the US intra-day move stuck, it would have been the biggest yield move on a % basis relative to the starting yield in history.

However it didn't stick and the story of the day for US treasuries was one of a sharp post retail sales rally, then a flash rally, then a flash crash and then a slow but steady sell-off. At 7am NY time 10 years were sitting calmly at around 2.20% before rallying hard to 2.05% by 9am (post weak retail sales) and then 2% at 9.34am. At 9:38am though they hit 1.86%!!! They then reversed back to around 2.04% 15 minutes later before selling off to 2.14% at the close (currently lower this morning at 2.08%). A wild trip that suggests a large liquidation, capitulation or huge technical trading level breached. In markets that have a lower structural liquidity than pre-crisis these things can happen but something big in positioning must have happened yesterday.

With all this going on one wonders what probabilities you'd get that the Fed actually does QE again before it raises rates. I'm sure if you'd have suggested this a month ago many would have thought that there was more chance of Elvis being found living a relaxing retirement on the moon. As a minimum markets have now priced out a 2015 rate hike from the Fed which seems a sensible response. Our US rate strategist Dominic Konstam hosted a call last night and in it he suggested that a minimum pre-condition for stability was for the Fed to validate the re-pricing of the interest rate curve. Or in other words if they stick close to the message of the dots then to paraphrase Dominic it would be a disaster for risk assets. So we perhaps need to hear more dovish comments from the Fed along the lines of Fischer's remarks at the IMF over the weekend and others like Williams back on Tuesday.

The other (and bigger) problem is clearly in Europe. Before we get to Greece the further collapse in 5yr5yr breakevens suggest a market running out of confidence in the ECB's ability to be able to do enough to arrest deflation. In the pdf today we show the history of this. Before mid-August we had only fleetingly traded below 2% in the 10 year history we have. It did manage to go back above 2% again in early September but since September 9th we've been back below 2% with the move accelerating over the last week. We closed at around 1.75% yesterday having hit 1.70% intra-day. This is a key gauge that Draghi looks at although he did downplay it a little in the last ECB meeting. However whichever variable he looks at this morning its fair to say that he will see a market that is not confident the ECB can deliver anywhere near enough to turn things around.

More days like yesterday will surely produce a policy response soon though. If it were to prompt a fiscal break through in Europe then the market would really like that.

Onto Greece and markets struggled yesterday on the back of ongoing political issues in the country. The Athex closed down -6.3%, its worst day since 29th October 2012, although at one point it was down more than 10%, making it the biggest intra-day drop in six years. At the same time Greek 10Y debt closed the day 82bps wider, its biggest one day widening since 23rd July 2012. Greek assets have been struggling recently as its current embattled government has looked ever more likely to collapse before their official mandate expires in 2016, even as the Prime Minister Antonio Samaras has decided Greece will end its IMF bailout programme in December, 15 months early. The anti-bailout Syriza party has seen its polling lead grow ever larger over the current dominant governing party, New Democracy. The latest poll, conducted between October 9-13 by GPO, put Syriza in a 6.5% lead over New Democracy. A general election will take place if the governing parties New Democracy and Pasok fail to secure 180 votes in parliament - the minimum needed to elect a new head of state in February as the incumbent is set to retire. The Greek PM told the Cabinet yesterday that he still expects elections in 2016 as scheduled and remains committed to his current reform programme. Almost irrespective of the final outcome of current political worries it seems they could well remain unresolved well into Q1 next year with the February vote on Greece’s new head of state the most obvious catalyst for change on the horizon.

Moving on to other parts of the European market it was also a historic day to some degree. The 10yr German Bund and French OAT yields fell around 7-8bps to fresh lows of 0.75% and 1.13%, respectively. European equities endured a difficult day with the Stoxx600, DAX, CAC, IBEX, and FTSEMIB down -3.2%, -2.9%, -3.6%, -3.6% and -4.4%, respectively. It was the 7th consecutive down day for the Stoxx600 and it was also the biggest loss for Italian markets since February 2013. On the other side of the Atlantic, the official close of S&P 500 (-0.81%) also failed to tell the whole picture. The index saw a 2.9% peak-totrough intraday move yesterday which at one point actually erased all of its YTD gains. The VIX index closed at a near 29-month high of 26.25 (crossed 31 during intraday). Interestingly Energy (+0.43%) stocks posted modest gains despite the further drift lower in oil prices. Brent fell 1.5% to test the lows of US$83/bbl into the close and there seems to be little good news going on for the commodity right now. US Financials (-2.0%) were the biggest drag to the market in what was the worst day for US bank stocks in nearly 2 years as low rates raised fears of margin concerns.

Indeed there wasn’t much good news anywhere for markets yesterday. Ebola concerns are also gaining more media focus in the US after second nurse Amber Joy Vinson was tested positive for Ebola in Dallas after nursing a Liberian patient. This raised renewed concerns about the protocols for containing the outbreak and has prompted US officials to call for more aggressive monitoring of incidents where the virus could potentially spread. Data flow failed to offer much relief either. The Fed’s Beige Book reported modest-to-moderate growth conditions but the NY Fed survey fell by 21.3pts in October (second biggest monthly fall in recorded history) whilst Retail sales print were also disappointing (-0.3% mom v -0.1% expected). PPI was also softer than expected which is broadly in line with the trend of prices we are seeing globally.

Asian markets are not surprisingly following the weaker lead from US yesterday. Chinese equities are the only major equity markets trading firmer on the day probably helped by data showing that aggregate credit growth rose to a 3 month high in September. Power consumption in China rose 2.7% yoy in September, which although is an improvement from the negative 1.5% print in August, it is still the second worst reading in the last 18 months. Away from China, bourses in Tokyo, Sydney, Seoul and Hong Kong are down -2.2%, -0.4%, -0.3% and -0.5%, respectively as we go to print. The Nikkei is now at around a 6-month low. The Dollar is weaker against key currencies. Asian credit spreads drifted wider given the broader risk off tone. Bank of China’s US$6.5bn AT1 printed overnight and is now quoted higher at 100.40/100.65 after having dipped below par at the open.

Looking at the data docket ahead we have initial jobless claims, industrial production, NAHB housing market index, and the Philly Fed in the US. Data will still be important but with the current disconnect between what’s priced in and the Fed’s dot plot, we will be increasingly sensitive to any Fed communication in the weeks and months to come. The next key event will be the 2 day FOMC meeting concluding on the 29 October (no press conference scheduled) but well ahead of that we have four Fed speakers today. Fed’s Plosser (1pm UKT) will speak on the economic outlook and will take questions from reporters. Fed’s Lockhart (2pm UKT) will speak on workforce development at a university conference co-sponsored by the Atlanta and Kansas Fed. Kocherlakota’s speech today is “Clarifying the Objectives of Monetary Policy” (3pm UKT) and finally Fed’s Bullard (5.45pm UKT) will speak on US demographics (Q&A available). After all this the focus will be on Yellen as she speaks to a Boston Fed conference on “Inequality of Economic Opportunity” tomorrow so stay tuned for that.

Let's see what the next 24 hours brings!!








This Is What Happens, Janet, When You Take The Punchbowl Away

It appears the "Fed is ending QE because the economy is recovering" narrative is failing (as the world wakes up to the fact that The Fed is being forced to exit due to having broken the markets). In the September FOMC meeting, Yellen put the final nail in the QE coffin by confirming the money-printing would end in October. This is what has happened since then...

 

 

But, as we have noted numerous times before; the "taper" is all about economic cover for a forced move the Fed has to make:

1. Deficits are shrinking and the Fed has less and less room for its buying

 

2. Under the surface, various non-mainstream technicalities are breaking in the markets due to the size of the Fed's position (repo markets, bond specialness, and fail-to-delivers among them).

 

3. Sentiment is critical; if the public starts to believe (as Kyle Bass warned) that the central bank is monetizing the government's debt (which it clearly is), then the game accelerates away from them very quickly - and we suspect they fear we are close to that tipping point

 

4. The rest of the world is not happy. As Canada noted early in the year, and US monetary policy was discussed at the G-20

Simply put, they are cornered and need to Taper entirely; no matter how bad the macro data and we are sure 'trends' and longer-term horizons will come to their rescue in defending the prime dealers' clear agreement that it is time...








Ebola! How Worried Should We Be?

Submitted by Chris Martenson via Peak Prosperity,

The current Ebola outbreak, unlike others throughout history, is lasting a very long time; with cases now being reported on a variety of continents well outside of its equatorial African origin.

I'm not especially worried about Ebola striking me or my loved ones, for reasons I'll explain in a moment. But I'm growing increasingly concerned about government response to the outbreak.

So let's spend some time understanding the nature of Ebola, specifically, and viral contagion, more generally. At the very least, Ebola can serve as an instructive reminder about how our society's responses to a viral outbreak could prove to be at least as disruptive and damaging as the virus itself.

Ebola

While very often cited as being 90% fatal once contracted, Ebola is rarely that lethal. In fact it was only that lethal in a single isolated outbreak. A 50% to 70% mortality rate is more common. As of Oct 10 2014, the latest outbreak had afflicted 8,376 and killed 4,024 -- a mortality rate of 48%.

This places the Ebola strain responsible for the latest outbreak on the lower end of the Ebola lethality scale. Don't misunderstand me: this is still a very deadly virus, to be sure. But it's not a guaranteed death sentence, either.

Viruses come in a wide variety of types and shapes. But the general structure they all share is that they have some form of nuclear material, either DNA itself or RNA, housed inside of a protein capsule. Think of a peanut M&M, where the peanut is the genetic payload and the outer coatings serve both a protective purpose (while the virus is seeking a new host) and as the means of docking with a host's cell.

That’s really all a virus is. A few proteins and some genetic material. No membranes, no sexual merging of genetic material, and no ability to replicate themselves all on their own. There are debates still ongoing today as to whether a virus should even be considered a living thing.

The life cycle of a virus is very simple. A virus particle will dock with a target host cell (most viruses are highly specific for the precise sorts of cells they will and won’t bind to), insert its genetic payload which hijacks the host’s replicative machinery, replicate the genetic payload wildly which codes for both new genetic material and protein capsule subunits, and then reassemble lots of intact virus particles which then escape the host cell to go and find other cells to infect.

Within a mammalian host, once a virus attack is recognized, an antibody response is mounted and the fight is on. As the virus particles escape the host cell (which is usually damaged or killed as a consequence of having been hijacked) it is vulnerable to being identified by a host antibody, itself a highly-specialized protein that will 'dock' with a virus particle more or less permanently (they bind together very tightly) and thereby incapacitate the virus’ ability to dock to a new host cell.

With lethal viruses, something goes wrong with this process. Either the virus replicates too quickly for the host to counter effectively, or the virus tricks the immune response into either too little or too much activity -- both conditions which can end poorly for the host.

For example, the Spanish flu epidemic of 1918 preferentially killed those between the ages of 20 and 40. This was unusual because it's exactly opposite the flu mortality patterns we normally expect, where the very young and the very old are the most susceptible.

The best prevailing explanation for this is that it was the very health and vigor of the patients that did them in. The Spanish flu (and other avian flu strains) cause the host body to unleash a 'cytokine storm' which is a very unhealthy, and sometimes lethal, positive feedback loop between immune cells and a class of attractor signaling molecules called cytokines. As more cytokines are released, say into the lung tissue, immune cells are attracted and can then release more cytokines, which attracts more immune cells, and so on. The place to which they are attracted becomes damaged by this overly-aggressive response of the immune cells and for the Spanish flu victims, this happened in the lungs, critically impairing respiration. Hence, the 'healthier' a host was, the more damage the Spanish flu virus caused.

In the case of Ebola, the virus preferentially targets the cells that line the inner walls of blood vessels (a.k.a. endothelial cells) as well as white blood cells, a fact which helps to spread the virus throughout the body fairly rapidly, as white blood cells actively migrate system-wide.

Through a variety of mechanisms, the Ebola virus causes the endothelial cells to detach from the blood vessels and die, which compromises blood vessel integrity. This targeting of the blood vessels is why the Ebola virus is classified as a hemorrhagic fever. The patient's blood vessels literally break down. That leads to the many visible symptoms of an Ebola victim, not the least of which is various burst blood vessels all throughout the body.

(Source)

Currently, it's thought that once exposed, an Ebola victim will incubate the virus for a period of up to 21 days before symptoms express. It's only once the victim is symptomatic that they themselves can transmit the virus and infect others.

This characteristic of Ebola, more than any other, is why I don’t fear it overly much as a pandemic risk. A far more worrisome virus would be one that's infective during asymptomatic stages of its host cycle, as is the case with HIV.

Early symptoms of Ebola include the sudden onset of fever, intense weakness, muscle pain, headache and sore throat. Unfortunately, that pretty much describes any reasonably intense flu, which complicates screening procedures and causes unnecessary worry among those who merely have the flu but worry about the possibility of Ebola.

Nonetheless, authorities have no choice but to take every traveling passenger with these very ordinary flu symptoms as a possible Ebola case. It's a safe bet we’ll hear plenty in the coming days and weeks about Hazmat-suited response teams escorting sickly passengers off of planes.

A tip: if you have a fever, don’t travel. You'll worry a lot of people unnecessarily. And you may end up in quarantine, really throwing your travel plans off the rails.

The Short-Term Risk

While gruesome and heartbreaking, the actual number of deaths by Ebola as well as the total number of people infected is very, very low compared to other hazards out there.

Are you more worried about Ebola than driving to work? If so, you have those risks entirely inverted.

(Source)

In the above chart, there are 27 years worth of data contained in each data point. That means that if the chart reads 2,700 for a given day, then an average of 100 people died on US roads on that day each year out of 27.

For the US, the above chart translates into ~33,000 vehicle deaths per year. Even in Africa where some 4,000 people have died from Ebola so far in 2014, America's vehicle fatalities dwarf that current statistic.

Other communicable diseases such as HIV, tuberculosis, malaria, and diarrheal disease cause some 9 million deaths worldwide each year.

This is why I'm personally not that worried about Ebola striking me or my family here in the eastern US at this time. Nor would I be overly worried in Dallas, where the first two US-soil cases of Ebola command national attention. The odds of getting infected at this point are very low at the individual level.

The Longer-Term Risk

However, I do think that the reaction to Ebola, which could include ex- and inter-US travel bans and other economically and socially disruptive practices could be another matter altogether at this moment in time. While there is a small, but non-zero, chance that this Ebola strain could morph into something more virulent, there is a very good chance of a more Draconian government response developing.

In Part 2: Prudent Precautions To Take Now, we dive into not only what damage to our civil liberties and livelihood these heavy-handed and poorly executed government responses are likely to be, but we also address the actions that individuals can take today on important questions like:

  • Who is at risk of infection in the current ebola outbreak?
  • What's the likelihood the current strain will morph into a more virulent form?
  • What are the best steps to take today to reduce your vulnerability to a pandemic?

What Ebola reminds us of is that when a true pandemic arrives it will travel much faster than those in the past (thanks to air travel being an order of magnitude faster than dawning recognition) and that our complex, highly leveraged, just-in-time global economy is utterly unprepared for even a minor glitch in the flow of goods let alone the virtual lockdown that a true pandemic would require.

A small amount of preparing can make you much less vulnerable should (when?) that comes to pass.

Click here to access Part 2 of this report (free executive summary; enrollment required for full access)

 








Despite "Better Economy" & Tumbling Unemployment, Obama Approval Rating Sinks To Record Low

“Unemployment down, jobs up,” President Obama exclaimed, adding gloatingly that "manufacturing growing. Deficits cut by more than half. High School graduation up. College enrollment up. Energy production up.” As Spectator's Ralph Reiland points out, Obamanomics, allegedly batting a thousand - everything that should be up was up and everything that should be down was down. “By every economic measure, we are better off now than we were when I took office,” declared President Obama... so why, if everything is ponies and unicorns, is President Obama's approval rating at record lows. 61% of Americans disapprove of Obama's foreign policy with only 42% approving of the President overall.

 

 

With just weeks to the mid-terms, it appears the president is not helping matters for his team (as WaPo shows below)

 

Perhaps this is why?

 

Source: Politico








Dallas Commissioners Will Declare State Of Disaster Tomorrow Over Ebola

While the message from the President is 'keep calm and avoid bodily fluids', it appears the commissioners in Dallas are slightly more concerned at the potential for Ebola to escalate:

  • *DALLAS COMMISSIONERS TO DECLARE LOCAL STATE OF DISASTER TOMORROW: NBC-TV
  • *DALLAS COUNTY CONSIDERS DECLARING STATE OF DISASTER FROM EBOLA
  • *DALLAS DISASTER DECLARATION WOULD ACTIVATE EMERGENCY PLAN

While we are not sure where a "state of disaster" ranks relative to a "public health emergency" such as the one in Connecticut, we are certain of one thing - it will mean civil liberties will be reduced as government takes control.

BREAKING>> Emergency Dallas Commissioners Ct. Meeting Set for tomorrow at 2pm to declare Local State of Disaster

— Meredith Land (@MeredithNBC5) October 16, 2014

*  *  *

Welcome to the new normal American police state.

*  *  *

And then there's this... (as NBC Dallas reports)

Officials with Texas Health Presbyterian Hospital Dallas are apologizing for misdiagnosing the country's first Ebola patient.

 

In testimony that will be submitted to the House of Representives on Thursday, Dr. Daniel Varga, chief clinical officer at Texas Health Presbyterian Hospital Dallas, admitted to mistakes that were made during Thomas Eric Duncan's care when he first arrived at the hospital's emergency room.

 

"As the first hospital in the country to both diagnose and treat a patient with Ebola, we are committed to using our experience to help other hospitals and healthcare providers protect public health against this insidious virus, Varga said in the prepared testimony.

 

"It’s hard for me to put into words how we felt when our patient Thomas Eric Duncan lost his struggle with Ebola on October 8. It was devastating to the nurses, doctors, and team who tried so hard to save his life," Varga said in the statement. "We keep his family in our thoughts and prayers. Unfortunately, in our initial treatment of Mr. Duncan, despite our best intentions and a highly skilled medical team, we made mistakes. We did not correctly diagnose his symptoms as those of Ebola. We are deeply sorry."

*  *  *

Perhaps even more concerning is that the CDC appears to have given the second nurse infected with Ebola permission to fly (despite her reporting she had an elevated temperature), as CBS reports:

CBS News Medical Correspondent Dr. John LaPook reports that Vinson called the CDC several times before boarding the plane concerned about her fever.

 

“This nurse, Nurse Vinson,  did in fact call the CDC several times before taking that flight and said she has a temperature, a fever of 99.5, and the person at the CDC looked at a chart and because her temperature wasn’t 100.4 or higher she didn’t officially fall into the category of high risk.”

 

Vinson first reported a fever to the hospital on Tuesday (Oct. 14) and was isolated within 90 minutes, according to officials. She did not exhibit symptoms while on the Monday flight, according to crew members. However, the CDC says passenger notification is needed as an “extra level of safety” due to the proximity in time between the flight and the first reported symptoms.

 

“Those who have exposures to Ebola, she should not have traveled on a commercial airline,” said Dr. Frieden. “The CDC guidance in this setting outlines the need for controlled movement. That can include a charter plane; that can include a car; but it does not include public transport. We will from this moment forward ensure that no other individual who is being monitored for exposure undergoes travel in any way other than controlled movement.”

*  *  *

Do these people really know what they are dealing with?








CDC AUTHORIZED EBOLA AIRLINE FLIGHT

Staggering Negligence

The Centers for Disease Control said that the second nurse to catch Ebola at the Dallas hospital shouldn't have flown commercially.

But as CBS News reports, the CDC itself authorized her flight in advance:

In the case of Amber Vinson, the Dallas nurse who flew commercially as she was becoming ill with Ebola, one health official said "somebody dropped the ball."

 

The Centers for Disease Control and Prevention said that Vinson called the agency several times before flying, saying that she had a fever with a temperature of 99.5 degrees. But because her fever wasn't 100.4 degrees or higher, she didn't officially fall into the group of "high risk" and was allowed to fly.

Update: Confirmed by NBC News.

Top U.S. Military Leaders are Worried About Ebola

The Chairman of the Joint Chiefs of Staff – the American top military leader –  told CNN today:

“If you bring two doctors who happen to have that specialty [i.e. doctors who are experts in Ebola] into a room, one will say, ‘No there is no way it will ever become airborne, but it could mutate so it could be harder to discover,’ ” and another might say something completely different, Dempsey said.

 

He said he is alarmed by the World Health Organization’s warning that Ebola cases could increase and the virus could mutate.

“Then it will be an extraordinarily serious problem,” he said. “I don’t know who is right. I don’t want to take that chance, so I am taking it very seriously.”

The head of the U.S. Southern Command – the branch of the U.S. military responsible for all U.S. military activities in South America and Central America – says:

There is no way we can keep Ebola [contained] in West Africa.

 

If it breaks out [in Central America], it’s literally, ‘Katie bar the door,’ and there will be mass migration into the United States … They will run away from Ebola, or if they suspect they are infected, they will try to get to the United States for treatment.

[I saw how easy it is for illegals to enter the United States. While visiting the border of Costa Rica and Nicaragua with U.S. embassy personnel, I saw a group of men] waiting in line to pass into Nicaragua and then on their way north.

 

The embassy person walked over and asked who they were and they told him they were from Liberia and they had been on the road about a week. They met up with the network in Trinidad and now they were on their way to the United States — illegally, of course.

 

[The men] could have made it to New York City and still be within the incubation period for Ebola.

And he said:

The nightmare scenario, I think, is right around the corner.

 

A U.S. Border Patrol agent – and vice president of the National Border Patrol Council #3307 – agrees that mass migration could spread Ebola to the U.S. , and says that “NOTHING” has been done to secure the border in the event the Ebola virus spreads to Central America.








9 Ominous Signals Coming From The Financial Markets That We Have Not Seen In Years

Submitted by Michael Snyder via The Economic Collapse blog,

Is the stock market about to crash?  Hopefully not, and there definitely have been quite a few "false alarms" over the past few years.  But without a doubt we have been living through one of the greatest financial bubbles in U.S. history, and the markets are absolutely primed for a full-blown crash.  That doesn't mean that one will happen now, but we are starting to see some ominous things happen in the financial world that we have not seen happen in a very long time

So many of the same patterns that we witnessed just prior to the bursting of the dotcom bubble and just prior to the 2008 financial crisis are repeating themselves again.  Hopefully we still have at least a little bit more time before stocks completely crash, because when this market does implode it is going to be a doozy.

The following are 9 ominous signals coming from the financial markets that we have not seen in years...

#1 By the time the markets closed on Monday, we had witnessed the biggest three day decline for U.S. stocks since 2011.

#2 On Monday, the S&P 500 moved below its 200 day moving average for the first time in about two years.  The last time this happened after such an extended streak of success, the S&P 500 ended up declining by a total of 22 percent.

#3 This week the put-call ratio actually moved higher than it was at any point during the collapse of Lehman Brothers in 2008.  This is an indication that there is a tremendous amount of fear on Wall Street right now.

#4 Everybody is watching the VIX at the moment.  According to the Economic Policy Journal, the VIX has now risen to the highest level that it has been since the heart of the European debt crisis.  This is another indicator that there is extraordinary fear on Wall Street...

US stock market volatility has jumped to the highest since the eurozone debt crisis, according to a closely watched index, the the CBOE Vix index of implied US share price volatility.

It jumped to 24.6 late on Monday and is up again this morning. On Thursday, it was as low as 15.

 

That's a very strong move, but things have been much worse. At height of the recent financial crisis – the Vix index peaked at 80.1 in November 2008.

 

Could we get there again? Yeah.

#5 The price of oil is crashing.  This also happened in 2008 just before the financial crisis erupted.  At this point, the price of oil is now the lowest that it has been in more than two years.

#6 As Chris Kimble has pointed out, the chart for the Dow has formed a "Doji Star topping pattern".  We also saw this happen in 2007.  Could this be an indication that we are on the verge of another stock market crash similar to what happened in 2008?

#7 Canadian stocks are actually doing even worse than U.S. stocks.  At this point, Canadian stocks have already dropped more than 10 percent from the peak of the market.

#8 European stocks have also had a very rough month.  For example, German stocks have already dropped about 10 percent since July, and there are growing concerns about the overall health of the German economy.

#9 The wealthy are hoarding cash and precious metals right now.  In fact, one British news report stated that sales of gold bars to wealthy customers are up 243 percent so far this year.

So what comes next?

Some experts are saying that this is the perfect time to buy stocks at value prices.  For example, USA Today published a story with the following headline on Tuesday: "Time to 'buy' the fear? One Wall Street pro says yes".

Other experts, however, believe that this could represent a major turning point for the financial markets.

Just consider what Abigail Doolittle recently told CNBC...

Technical strategist Abigail Doolittle is holding tight to her prediction of market doom ahead, asserting that a recent move in Wall Street's fear gauge is signaling the way.

 

Doolittle, founder of Peak Theories Research, has made headlines lately suggesting a market correction worse than anyone thinks is ahead. The long-term possibility, she has said, is a 60 percent collapse for the S&P 500.

 

In early August, Doolittle was warning both of a looming "super spike" in the CBOE Volatility Index as well as a "death cross" in the 10-year Treasury note. The former referenced a sharp move higher in the "VIX," while the latter used Wall Street lingo for an event that already occurred in which the fixed income benchmark saw its 50-day moving average cross below its 200-day trend line.

 

Both, she said, served as indicators for trouble ahead.

Are we about to witness a stock market crash and another major financial crisis?

Or is this just another "false alarm" that will soon fade?








2nd Ebola Patient's Akron, Ohio Family Home Cordoned Off

Having now identified the 2nd health care worker infected with Ebola as Amber Joy Vinson, and discovered she (against CDC advice) traveled across the nation to her family home in Tallmadge (near Akron, Ohio), we now find out that, as WKYC reports, police have cordoned off the home of her mother and are allowing only limited access to the residential development.

 

 

As Cleveland.com reports,

Dallas nurse Amber Joy Vinson spent last weekend in Tallmadge, an Akron suburb, before testing positive for the Ebola virus.

 

Summit County Public Health officials are still trying to determine who Vinson may have seen and where she went while she was visiting family. A family member has already self-quarantined himself in a Tallmadge home following Vinson's positive test.

 

Interviews to determine Vinson's whereabouts are expected to take time, said Summit County Public Health Medical Director Margo Erme, and people will be interviewed twice to determine whether or not they were in contact with Vinson.

 

"We have been in there all day to see if there are additional contacts and to see where those additional contacts may be, and also the nature of those contacts," Erme said.

 

Quarantine needs will be determined on an individual basis, Erme said.

 

Health officials learned the Vinson had been in the county at around 10 a.m. Wednesday.

And now as WKYC reports,

Police have taped off a home in Tallmadge they believe belongs to the mother of Ebola patient Amber Vinson.

 


 

The home is on Stonegate Trail, in the Stonegate Reserve housing development.

 

At one point, about seven police cars were outside the home and later, that number went down to three.

 

Police are only allowing limited access to the development for residents.

 

Officials say Amber Vinson stayed at a home in Tallmadge #Ebola
http://t.co/WO8L8VjLak pic.twitter.com/l7tXxlo7mf

— fox8news (@fox8news) October 15, 2014

 

 

The development is here...








Market Humor: Articles from the last 3 months

Amazing how much things change in such little time. Remember, "it's different this time."

 

July 21st

 

Investors shrug off EVERYTHING pic.twitter.com/CDXb1ZwalC

— Stalingrad & Poorski (@Stalingrad_Poor) July 21, 2014

 

 

August 27th

pic.twitter.com/KQq18RJ7qF

— Stalingrad & Poorski (@Stalingrad_Poor) August 27, 2014

 

 

 

 

September 15th

 

Front page of today's Money & Investing pic.twitter.com/4BWmFc3FWB

— Stalingrad & Poorski (@Stalingrad_Poor) September 15, 2014

 

 

they changed the title of this article "Why This Market Will Never Go Down" look at the URL http://t.co/JSB4pZk87C pic.twitter.com/z19v5LJu37

— StockCats (@StockCats) October 13, 2014

 

 

headline from 10/13/13 pic.twitter.com/Lr1laB4au7

— StockCats (@StockCats) October 13, 2014

 








Humpday Humor? Blame The Moon

As market prognosticators search for something to pin the recent weakness on (Ebola panic, macro data weakness, global growth scare, M&A boom over, fund liquidations, oil crash.. and so on), there is one much larger driver of hysteria that is missing from this list... The Moon and the madness of crowds.

 

While perhaps a little 'out there' the coincidence of full moon's major gravitational impacts and turning points in stock market volatility is remarkable...

 

Of course, the surge in volatility also coincides with the end of QE (in seasonally-painful October no less) as the gap between reality and market perception finally becomes clear...

 

Charts: Bloomberg and @Not_Jim_Cramer








For Bank Of America, Crime Is Now An Ordinary Course Of Business

Once upon a time banks made money in one of two ways: either by borrowing short and lending long, a/k/a the conventional banking way, or through investment banking, which includes advisory, underwriting and trading with the backstop of billions in deposits, aka the proto-hedge fund way.

Then things changed.

For a profoundly philosophical, if comically metaphysical essay, that uses several thousand excess words and footnotes to come to the miraculous conclusion that bank accounting is, get this, fickle, the following Bloomberg take should be an amusing way to kill a few extra hours. Philosophical ramblings aside, it is, of course, very easy to determine if a bank made or lost money, and that does not even involve looking at the cash flow statement. One looks at the Non-GAAP bottom line and excludes the "excluded", or added back items.

As a reminder, the reason non-GAAP exists in the first place, is to goalseek an already meaningless number to just a cent or two above Wall Street consensus, so as to kickstart the buying of the stock by headline scanning algos. Because EPS may be meaningless but stock-tied compensation/incentive awards are quite meaningful, and lucrative, to executives.

Still, even when it comes to the wizardry of non-GAAP, for a number to be somewhat credible, it has to follow a few basic guidelines, namely that in order for an expense or charge to be "excluded" from the bottom line, it has to fall within the "one-time", "non-recurring" category. Add it back too many times and the magic falls apart as even the mutually-accepted fabulation by circle-jerking ostriches that is non-GAAP. promptly evaporates.

Which is why we ask: why do Wall Street "analysts" continue to add back Bank of America's legal and litigation charges and settlements from its bottom line when calculating its non-GAAP EPS?

As the chart below clearly show, any myth that Bank of America's legal fees are "one-time" or "non-recurring" is by now long dead and buried. In fact, in 2014 they have never been greater!

 

How does this nearly $30 billion in legal "addbacks" over the past three years compared to the so-called Net Income Bank of America generated over the same time period? Here is the answer:

In short: between Q4 2011 and Q3 2014 Bank of America produced "Net Income" of $15.9 billion. However, the amount of added back "one-time, non-recurring" legal expenses is a stunning $28.9 billion: two of every three dollars, non-GAAP as they may be, comes from Bank of America engaging in criminal activity... and that's just the stuff it got caught for.

So perhaps an even more relevant question than how long will the EPS "addback" bullshit continue, is how long will the regulators and enforcers allow Bank of America to exist as an organization for which two-thirds of its "ordinary course business" is, for lack of a better word, crime?








Putin Warns Of "Nuclear Power Consequences" If Attempts To Blackmail Russia Don't Stop

Vladimir Putin slams President Obama for adopting a "hostile" approach in naming Russia as a threat to the world in his recent UN speech. From an interview with Serbia's Politika newspaper, Bloomberg reports,

It’s futile for the U.S. and its allies to “blackmail” Russia over the Ukraine crisis, President Vladimir Putin said in a newspaper interview today.

 

Russia’s partners should remember the risks involved in disputes between nuclear powers, Putin said. He accused Barack Obama of adopting a “hostile” approach in naming Russia as a threat to the world in the U.S. president’s speech to the United Nations General Assembly on Sept. 24.

 

“We hope that our partners will realize the futility of attempts to blackmail Russia and remember what consequences discord between major nuclear powers could bring for strategic stability,” Putin told Serbia’s Politika newspaper on the eve of his visit to the Balkan nation today.

 

Putin said that Obama had identified Russian aggression in Europe as one of the three “major threats facing humanity,” alongside the Ebola virus and Islamic State.

 

“Together with the sanctions against entire sectors of our economy, this approach can be called nothing but hostile,” Putin said.

 

Attempts to pressure Russia with “unilateral and illegitimate restrictive measures” will impede efforts to settle the crisis, he said.

 

“How can we talk about de-escalation in Ukraine while the decisions on new sanctions are introduced almost simultaneously with the agreements on the peace process?” he said. “If the main goal is to isolate our country, it’s an absurd and illusory goal.”

*  *  *

Opportune timing with markets weak for some nuclear sabre rattling...








As US Politicians Consider Travel Bans, Istanbul Quarantines Hospital Of Suspected Ebola Patient

Istanbul's Marmar University Training and Research Hospital is not accepting new patients after, as Daily Sabah reports, a person suspected of being infected with Ebola has been quarantined. The patient, who arrived by plane from Ivory Coast, is suffering high fever and nausea. While Lagos, Nigeria was CDC Director Frieden's worst nightmare with regard Ebola contagion, we suspect Istanbul is a close second with over 14 million people living there. This news comes as US politicians begin to call for visa restrictions and travel bans from infected nations.

 

 

  • *MAN WITH EBOLA HOSPITALIZED IN ISTANBUL: DAILY SABAH
  • *ISTANBUL HOSPITAL TEMPORARILY QUARANTINED ON EBOLA: DAILY SABAH

As Daily Sabah Reports,

A man arriving from Ivory Coast infected with the Ebola virus has been hospitalized in Istanbul on Wednesday.

The patient was brought to the Marmara University Education and Research Hospital. He was diagnosed with Ebola after landing in Istanbul's Sabiha Gökçen Airport. The hospital was briefly quarantined and current patients immediately were transferred to other hospitals.

The patient will be transferred to Süreyyapa?a Breast Diseases Education and Research Hospital on Thursday morning.

?stanbul'da Ebola karantinas? http://t.co/AMP42gcIba pic.twitter.com/ZLkiPJKaPo

— NTV (@ntv) October 15, 2014

Just before this news broke, US politicians started raising the rhetoric on travel bans...

  • *MCCAUL, R-TX, IS CHAIRMAN OF U.S. HOUSE HOMELAND SECURITY CMTE
  • *REP. MCCAUL CALLS FOR U.S. VISA SUSPENSION FOR EBOLA-HIT NATION
  • *MCCAUL PROPOSED VISA BAN FOR LIBERIA, GUINEA, SIERRA LEONE

House Homeland Security Chairman Mike McCaul says a temporary travel ban targeting Liberia, Sierra Leone and Guinea is needed until the outbreak of Ebola “is under control.”

McCaul, R-Texas, called on the Departments of State, Homeland Security to temporarily suspend visas of individuals from those countries

Travel ban would impact 13,500 visas, McCaul says

McCaul’s letter to Secretary of State John Kerry, Homeland Security Secretary Jeh Johnson co-signed by subcmte chairmen Reps. Peter King, Candice Miller, Jeff Duncan, Richard Hudson, Susan Brooks, all Republicans

And then:

  • *BOEHNER: U.S. SHOULD MULL TRAVEL BAN FROM COUNTRIES WITH EBOLA
  • *HOUSE 'READY TO ACT' IF EBOLA LEGISLATION NEEDED: BOEHNER

House Speaker John Boehner (R-OH) today issued the following statement on the growing Ebola crisis:

“Our hearts go out to the health care workers who have contracted the Ebola virus here in the United States, as well as those who have been impacted by it around the globe.  We pray for their speedy recovery, and we pray for those who are helping to treat and care for these individuals, including our medical experts and military personnel who are in West Africa to help stem this deadly disease.  Concerns about the possibility of an outbreak of this sort prompted the House to provide more funding for the CDC than requested, and the tragic developments seen in recent weeks demonstrate that decision was a prudent one.

“In a September 16 speech in Atlanta, President Obama said the ‘chances of an Ebola outbreak here in the United States are extremely low.’  Since that time, several Americans have been diagnosed with the virus and untold more potentially exposed to it.  Today we learned that one individual who has contracted the virus flew to Ohio through the Cleveland airport in the last few days.  A temporary ban on travel to the United States from countries afflicted with the virus is something that the president should absolutely consider along with any other appropriate actions as doubts about the security of our air travel systems grow.

“It is also imperative we ensure that federal, state and local agencies, along with our public health infrastructure, are prepared, remain vigilant, and follow proper protocols to identify the virus and take appropriate measures for those who have been exposed to it.

“Numerous committees – including the House Armed Services Committee and the Committees on Appropriations, Homeland Security, Energy & Commerce, and Transportation & Infrastructure – are actively assessing the administration’s response, and hearings have already begun.  The Homeland Security Committee held a hearing in Dallas to examine the federal, state, and local response thus far.  Tomorrow, the Energy & Commerce Committee will hear from the CDC and NIH to look into their response to the crisis.  These oversight efforts will continue, and the House stands ready to act if it becomes clear legislation is needed to ensure the threat is countered aggressively and effectively.

“The administration must be able to assure Americans that we will stop the spread here at home.  We will continue to press the administration for better information about what steps will be taken to protect the American people, including our troops, from this deadly virus.  And we will work with the administration on appropriate policy options that will help stop the spread of this horrific disease both here in the United States and around the globe.”

*  *  *

And so it begins...








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