A Cancelled Christmas

Going into this holiday season, I was concerned that COVID infections would rise, especially after Thanksgiving.  Unfortunately, the infection rate is way worse than I expected.  There is some evidence that Omicron is less deadly than other strains.  However the exact figure of less deadly is not known, is it 10%, 50%, 75% less deadly?  While 10% is good news, I am not confident enough to go back to normal.

The infection rate of Omicron is 400% (r0 = 10, 1 infects 10 people) more infectious than the original COVID strain (r0=2.5), so even if less deadly the number of cases at the same time should wipe out the benefit "per day of deaths".  Its hard to appreciate the exponential growth impact.  But graphs can show the effect of exponential growth, for example the graph in NJ below shows the rate of infection occurring:

12/23/2021

Notice the STEEP rise on the right, and how materially higher infection rate is growing RIGHT as we hit a cherished holiday.  Next week will be an epic pandemic infection rate like never seen before in human history.    Lets take an even CLOSER look.

December 13th there was 3,279 new cases reported, 10 days later we are reporting 11,906 cases.  After the holidays what is your estimated number of new cases per day? 24,000? 50,000? If we are to believe r0=10, then we should easily hit 100K new cases a day in NJ alone.

This should be the epic final hurrah of COVID, with the peak hitting in the weeks ahead. Post this event I believe we will finally be rid of COVID as an all consuming concern, it will remain with us forever, but we will finally reach enough resistance to slow the spread in the year ahead.  Further by mid next year we should finally have a drug available to minimize the chance of being hospitalized.

The Challenge - Passing through the Eye of the storm

But right now, the challenge is what will be the effect on personal health if you get COVID when the hospitals are completely over-run?  Will patient care result in better or worse outcomes than we been observing the last few weeks?   In my opinion with hospitals over-run, we will run out of ventilators, drug shortages, and worse yet, tight on nurses/doctors to help the sick.  (Talking to a nurse, she said one hospital in NJ, all their ventilators are taken by vaccinated people.)

This is my primary concern, to get COVID and the wrong time, and not get the care needed to ensure a positive outcome.

But people aren't dying like before....

Lets assume death is a much lower probability (it lags infection rate by 20-30 days), what else is there to fear?  Long term COVID!  There is yet any reliable date about percentage of people who have long term COVID, and Omicron is no exception.

Love takes Action!

If we can make it to the spring, alive, and in good health, I believe we will be FINALLY can move on with COVID being an all consuming topic.  For my family, that means a cancelled Christmas, and I hope to see you for many Christmases to come.  If visiting people not from your immediate household, I recommend everyone wear genuine masks.  (Prefer N95 provides self protection)

Take care and have a happy holiday season with your immediate family.

Update on Federal Reserve post

 I watched another video that rounded out my thinking about what the federal reserve is doing, it took 3 different youtubers to complete the picture.

If you read that post, please scan it again for updates, I marked it in Italic.

https://websurfinmurf.blogspot.com/2021/12/federal-reserve-market-influence.html

Federal Reserve Market Influence

UPDATED: 12/8/2021 - Refined view in italic

Today I have three great videos that summarizes the effect of Quantitative Easing.

First is from the YouTuber Bond King, what is QE, and what they are doing in the marketplace.

Many think QE is 'money printing', in effect like a banana republic just printing money and injecting it into the economy.  The first question I have, how can the Federal Reserve "give" money it creates out of thin air into the monetary system?   There is no method it can do so currently.  (I suspect it will eventually with a crypto dollar issued by the Fed, but that's years off.)

What it is doing is "swapping assets", specifically swapping out US bonds with Federal Reserve Assets.  The reasoning is to try to suppress interest rates and strengthen the dollar.  Lets take a look at bond rates and dollar valuation since 2009 to see if this is indeed the result.  US Bond Rates are down and dollar is up.  This supports it isn't going Banana republic and printing money like Weimar republic.  (If you believe different, please add in comments the rational and data to support!)

The Video that explains the mechanics of QE is below, interestingly this video says the fed gives an impression to suppress bond rates, but he doesn't say it is actually effective. After this video, below is another that shows the fed doesn't actually suppress bond rates, but gives an illusion it does. 

If the fed is able to suppress bond rates, then market signals cannot be trusted.  Historically the financial system uses bond rates to indicate risk on-risk off in investments.  My personal belief is QE helps stabilize rates by reducing the potential volatility of bond selling, but the actual rates are in fact reflective of what the market is willing to support.   It reduces volatility by putting the asset in control of the Federal reserve, out of the hands of institutions that could someday in the future engage in mass selling of federal bonds.  By becoming the 'buyer of last resort' for federal bonds, they can prevent a meltdown of US bonds, and therefore a collapse of USD valuation in the future.

What this does do is help banks with confidence in lending, and this is a market psychology rather than 'free money'.  Banks can at will create millions if not billions of dollars with no reserves, they are the TRUE creators of money/debt/credit out of 'thin air'  And unless banks lend, there is no money growth.

The video that walks through how QE has NOT rigged the bond market rates.

Net result?  Federal Reserve bank, even if it cant suppress rates, or print money, it presents itself like it can.  It supports the market  Psychology that it is somehow 'rigging the market'.    That helps create debt/credit creation by banks which does in fact inject new money into the system.  But it isn't banana republic money creation, people have collateral against this debt, and banks could liquidate customer assets as required.

But there is another angle, WHAT assets does the Federal Reserve buy?  US Treasuries AND distressed assets.  For the moment we will count US treasuries as reliable, but distressed assets?  These are assets no one wants to buy, unless there is a deep discount.  But the fed buys distressed assets without ANY discount.  Further if these assets lose money or implode? It doesn't matter, the fed can print as much money as it wants to stabilize those assets.   THIS is inflationary!  Because if the federal reserve didn't buy these distressed assets there would be a deflationary price to dump them, and a likely cascade of deflation as it helps kick off a chain reaction of deflation. (margin calls, banks raising more capital to cover losses, etc)  THIS is the leaking of money into the economy, through bad loans having no consequences. And when you remove consequences from actions, you are destroying the strength of capitalism.

To learn more, watch this:

Generally speaking majority of new debt is created by those who have collateral.  Those people tend to have assets like houses, stocks, and yes bonds.  They are the ones who don't take a huge hit on the failed assets, and are able to continue to benefit more of wealth growth.  They can then add to their assets more loans to buy houses, stocks, and even bonds.  The vast majority of money creation by the banks therefore is slanted to make the rich richer without the larger consequences of deflationary events.   Its is ponzi like, as the system depends on growth to sustain asset appreciation of those who already have assets.  Now is there any way to prove this is the result of QE? At the bottom is my final chart, you be the judge.  

As long as the world demands dollars (USD is the world reserve, 'gold standard' holding), I don't know when this dance ends.  I suspect US Treasuries hit on average about zero across 1, 5, 7, 10, 20, and 30 year holdings.  For at that point asset investments may seek a new store of value.  As this unfolds, together we will learn more about a breaking point.