Streetwise Professor

August 5, 2020

Counting the Cost of Covid Hysteria

Filed under: CoronaCrisis,Economics,Politics — cpirrong @ 1:30 pm

The covid hysteria continues. There’s really no other word for it. Responses to it have slipped the bonds of reason, and reasoned debate.

There are many manifestations of the hysteria. I will focus on two–hydroxychloroquine and lockdowns.

Hydroxychloroquine has been a hot button issue ever since Trump gave an equivocal endorsement of it months ago. The most recent demonstration of how radioactive it has become was a rally of sorts by practicing physicians in DC whose endorsement of a therapy regimen including hydroxychloroquine, antibiotics, and zinc unleashed a frenzy of criticism, retribution, and censorship.

The most ebullient endorsement of the therapy regimen came from a Houston physician, Stella Immanuel. Now normally Dr. Immanuel would check important boxes in Progland–she’s an African American (literally, born in Ghana) female. But her praise for hydroxychloroquine unleashed a fury of abuse on her. In addition to being a physician, Dr. Immanuel is a devout Christian who believes in demons, and who focuses on spiritual as well as physical health. These views became the focus of criticism, in the style of ad hominem attacks that have become the staple of what now passes for public discourse. The substance of what she said, and her empirical claims–that her treatment using hydroxychloroquine had impressive clinical results–were ignored altogether.

Well, that’s not quite right. Her views were not ignored, exactly. They were actively censored by the only authorities that currently matter–Facebook, Google/YouTube, and Twitter–who consigned the video of her impassioned presentation (which had received around 14 million views) to the Memory Hole. This blatant censorship was accompanied with the by now familiar paternalistic tut-tutting from our tech overlords that Dr. Immanuel’s views were not consonant with the pronouncements of government authorities (e.g., the CDC) and the WHO. (Bodies, it must be emphasized, which have covered themselves in ignominy in the past months, but why should that matter, right?)

If Facebook, Google/YouTube, Twitter have arrogated for themselves the role as enforcement agents for government ukasis, shouldn’t they be subject to the First Amendment, namely its prohibition of infringement on free speech?

I further note that if conservatives had unleashed such a stream of invective against a leftist African American woman the screams of racism and sexism from the very leftists currently imprecating Dr. Immanuel would shake the heavens. But if the left didn’t have double standards, it would have no standards at all.

But Dr. Immanuel should consider herself lucky. She’s still employed One of her fellow physicians on the Supreme Court steps, Dr. Simone Gold, was fired for her temerity in speaking out by her employer of 25 years.

This further illustrates the double standards issue. For months “front line” medical personnel, doctors and nurses, have been lionized, and cloaked with moral and intellectual authority because of their experience, and the risks they ran. It has not been as maudlin in the US as in the UK, with its clap for the NHS nonsense, but the near beatification of health care professionals has been a thing here. But now we have “front line” medical professionals with experience–by now far more experience than those lionized in March or April–speaking against the Party Line, and they are no longer sanctified–they are demonized. (Maybe Dr. Immanuel was onto something.) Block anti-lockdown protests in your scrubs–Hero! Express views on a treatment that contradicts the authorities while dressed in your white coat–charlatan who must be silenced!

The fact is that the evidence on hydroxychloroquine is on balance favorable, and at worst equivocal. Especially if given in the early stages of symptomatic covid, and crucially if given in conjunction with other medications, notably zinc, it does appear to reduce the risk of death. Further, as a drug that has been dispensed billions of times over decades for a variety of conditions its risks are known, and relatively benign.

So what’s the downside of employing the therapy? It offers some prospect of beneficial clinical results. There is not a readily available alternative that has proven superior. The downsides are modest.

One could get the idea that some people don’t want a treatment.

One of the critics of the studies of hydroxychloroquine is the insufferable, and insufferably arrogant, Dr. Anthony “Where’s the Camera?” Fauci. He caviled a study (described at the above link) at the Henry Ford Hospitals, claiming that it was flawed because it was not a controlled random experiment, but an observational study. Well, a controlled random experiment would be preferable, but observational studies can provide valuable information if done properly, as it appears the Henry Ford study was. Further, most of the anti-hydroxychloroquine studies, including the notorious, fraudulent Lancet study, were observational. Further further, Dr. Fauci’s main claim to fame was a study done in the 1980s that happened to be . . . an observational study.

The Insufferable Fauci provides a segue into the next subject of hysteria–lockdowns. Fauci claimed that the US record in combatting covid is inferior to that of Europe because this country did not lockdown as thoroughly.

Bullshit.

This man who claims to be all about the data and evidence can make such statements only by ignoring the data and evidence. There have been numerous studies of how cross-jurisdiction variations in various metrics (deaths, cases, etc.) of the severity of covid outbreaks vary with the timing and severity of lockdowns. (One example is here, but there are many more.) The basic answer is: likely not at all, but at most, hardly at all.

At best the evidence supports the view expressed early in the outbreak (but curiously discarded) that restrictions on social interactions could affect the timing of the progression of the disease, but not its ultimate toll. That is these policies can affect the shape of the curve, but not the integral under the curve.

Why? Because virus gonna virus. A point that I made early on, and many bona fide experts did as well.

But we are seeing continued calls for a resumption of–indeed, and intensification of–lockdowns. One example is the state of Victoria in Australia (where Melbourne is located). The state has gone into a severe lockdown–with little effect on the spread of the virus. In the United States, Fauci insinuates that more intense lockdowns should be considered, and other figures go beyond insinuation. Minneapolis Fed president Neil Kashkari (like Fauci, a long-time apparatchik who has risen to a position of prominence and power despite little demonstrable record of actual achievement) has called for a “really hard” six-week lockdown. You know, to “save the economy.”

We’ve already seen the economic cost of less than really hard lockdowns. In the US, economic output contracted by 9.5 percent, and unemployment skyrocketed. And we’re the lucky ones. In Europe, the contraction was ~12.5 percent. Please spare us any more rescues.

And again, despite variations in the timing, design, and severity of the lockdowns that wreaked this economic devastation, the progress of the illness was remarkably similar. Sweden did worse than Denmark, but better than France and other European countries–and it suffered only an 8.5 percent hit to GDP.

I could go on and recount other manifestations of hysteria. Masks, for instance. But this post is already long enough.

The ultimate question is why the hysteria? This is a subject deserving of books (plural) not blog posts. In the US, the answer is largely political. As Thomas Sowell noted in Conflict of Visions, views on a wide variety of issues are highly correlated, and this is demonstrated in spades by covid. The left is virulently (pun intended) anti-hydroxychloroquine and pro-lockdown (and mask). The right the reverse. This divide is only aggravated by the pro- and anti-Trump divide.

Related to this is the interest of the governing class. The Faucis and Kashkaris and Democratic governors and mayors and county executives of the US (and their foreign equivalents) quite like the vast powers that they have arrogated in the name of public health. They have achieved unchecked authorities that they could only have dreamed of in January. Why should they want to stop now? And why should they want to tamp down hysteria, when it has worked out oh-so-well for them? Of course they don’t–hell, they have every incentive to stoke it, and by all evidence they are doing so with a hearty assist from the hopeless media.

The cost of this hysteria has been high, economically, and in terms of the collateral damage (including health and mortality) of economic collapse. The benefit is imperceptible. And that is almost certainly why our tech overlords are hell-bent on suppressing those who dissent.

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July 18, 2020

School’s Out Forever?

Filed under: CoronaCrisis,Economics,Politics — cpirrong @ 4:04 pm

As summer marches inexorably towards fall, the latest battle in the Covid Wars is being fought over the reopening of primary and secondary schools. Democratic politicians, and teachers unions, are leading the charge to forestall face-to-face instruction. The battle cry among teachers appears to be “I don’t wanna die.”

Er, you’re not gonna die. Nor are the children.

One of the few pieces of almost uncontested evidence about Covid-19 is that children are at very low risk of contracting the illness, let alone dying from it. Nor do they pose major threats to passing the virus on to adults.

In the back-and-forth over “is Covid-19 worse than a bad flu,” when it comes to school-age children, the answer is that flu is worse than Covid-19, not the other way around. Yet schools have remained open, flu season after flu season.

Recognizing this, many nations have reopened schools, with no reports of resurgences tied to schools.

But in the US, the education establishment, and Democratic politicians, are largely united in opposing reopening. Some school districts (e.g., in Houston) have postponed resumption of normal instruction until November. (Right when the flu season kicks in. Smart!) Others are suggesting that school’s out, if not forever, for 2020-21.

Given the hectoring and lecturing about SCIENCE! from these very same people, the utter disregard for the evidence is striking.

There is only one rational justification for this refusal to run such a slight risk (and again, a risk that is likely less than during normal winters): traditional instruction provides virtually no value! Revealed preference at work, boys and girls.

Are the education establishment and Democratic politicians willing to stipulate to that? If so, we can save a helluva lot of money paying for teachers and brick-and-mortar schools. For the distance learning model is essentially home schooling plus (and not plus very much). Given the histrionics over home schooling emanating from the education establishment, this haste to adopt the home schooling plus model to avoid an immaterial risk is rather amusing.

In fact, although home schooling does work for some (I know several examples, including a home school family that produced a Harvard physics PhD, a Princeton BA and MA, and another Princeton grad who was a world-known ornithologist at age 13), for most Americans it is impractical because parents are employed, and even for families with a stay-at-home parent, less effective than in-person instruction for myriad reasons.

Meaning that the education establishment is willing to sacrifice the educations and futures of millions of American kids, to avoid . . . pretty much nothing.

In other words there is a huge disconnect between the rhetoric regarding the importance of public education that we are usually bombarded with, and the unseemly eagerness of the public education establishment and its political handmaidens to dispense with the core functions of public education. The disconnect is all the more glaring because the justification offered by the supposed followers of the SCIENCE! is flatly contradicted by the actual science.

So what is to explain this disconnect? I have two hypotheses.

  1. This is all about the 2020 election. The Democrats believe that preventing a return to a semblance of normalcy (and you can stick “the new normal” up a warm, moist, orifice) will boost the odds of defeating Trump. Relatedly, they also believe that keeping the panic alive by stoking fears enhances their electoral prospects.
  2. Teachers really like getting paid their full salaries while getting to stay home, assigning some YouTube videos, and calling it teaching.

These hypotheses are of course not mutually exclusive.

Regardless of the explanation, a failure to reopen schools will damage the educations of millions of American children, stunt their social and emotional development, and in some cases inflict serious psychological harm. Moreover, it will inflict substantial stress, distress, and economic harm on adults trying to earn a living now forced to divert time and effort to monitoring their children, and trying to teach them.

It is utterly cynical, and frankly, quite vile. Objectively the case for reopening schools is solid. Certainly far more solid than the cases for various Covid-19 measures, including masks (FFS) or social distancing or lockdowns that have been imposed over the last 4 months. Yet those forcing these latter measures adamantly oppose opening schools.

Like I said. Cynical. And vile.

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June 30, 2020

Hide the Decline! Coronavirus Edition

Filed under: CoronaCrisis,Politics — cpirrong @ 11:03 am

Reported Covid-19 daily deaths (likely exaggerated for reasons I posted on months ago) have been declining inexorably since their peak, and are now about 10 percent of the maximum. Even that is overstated because of backdating in states like Delaware and New Jersey that resulted in large single day death reports that summed deaths that had occurred over periods of weeks or months.

We can’t have that, can we? How are we going to sustain the panic, as politically useful as it is, if we report good news?

No problem–just switch the metric! Whereas for weeks we were told the Grim Death Toll narrative, that has disappeared down the Memory Hole, to be replaced by the Skyrocketing Cases narrative, especially in Red States such as Texas, Florida, and Arizona.

I have been calling bullshit on the case numbers as a meaningful metric since March. It’s even more bullshit now.

A major reason case numbers (i.e., the number of positive tests) are BS is that testing is not a random process, but is endogenous. Moreover–and this is crucial now–the process driving who is tested is changing. Whereas before tests were focused on the symptomatic or the particularly vulnerable, testing is now more widespread. Some companies are requiring employees to be tested in order to return to work, or to remain at work if they have the sniffles.

As a result, more people are testing positive. Moreover, the average age of those testing positive has declined dramatically (because they were censored from the test population before). Most of those people are symptomatic, and those who are experience mild symptoms. Those under 60 exhibit little risk of death, or serious illness (especially if they do not have other serious health conditions). Those who are sick enough to require hospitalization are less likely to require ICU care, and those who do tend to recover at high rates (without ventilation), and have relatively short stays.

As a result, there has been a striking divergence between rising case numbers, and deaths.

But that doesn’t fit certain political needs. So we hear virtually nothing about deaths, but only shrieking about case numbers. This exploits the earlier misconception–misinformation, actually–that the death rate from the virus is high. Indeed, as positive tests accumulate, and serological studies accumulate, it is clear that the infection death rate is in the range of .1-.25 percent, far smaller than the earlier estimates that remain embedded in the memories of most.

The shrieking is particularly intense in–and at–Texas. Yes, Houston has seen a large increase in positive cases. But the deaths in Texas (and Houston) have never been large (up until now 2020 has seen fewer pneumonia-related deaths than in the typical year), and are not trending up . Not that you’d know from reading the media.

So there has been a reprise of the overwhelming the health care system narrative.

The worst sinner at this is my local POS newspaper, the Chronical. This article in particular, which insinuated that Governor Abbott (and no, I’m not a fan) had coerced Houston hospitals into covering up impending doom.

The article starts out with a lie, claiming that Houston ICU utilization had hit 100 percent. Actual data show this did not happen, and that Houston ICU utilization has been fairly constant over since April. Even throwing around scare numbers about 90 plus percent utilization is misleading. Of course hospital facilities are sized so that they do not have persistent unutilized capacity. That is wasteful, and inflates costs. As the data in the link show, moreover, hospitals–rationally–have the ability to expand capacity.

As I said in a very early post, capacity is not a destiny–it is a choice.

Yes, there as an increasing number of Covid patients in ICU. But this is clearly another manifestation of changing testing protocols, and most importantly, of the same problem that makes even the death data meaningless: lumping people in the hospital with Covid together with those who are hospitalized because of Covid. If the increased Covid numbers were there because of Covid, you would see ICU usage go up overall. You don’t. It’s oscillating around normal levels.

It should also be noted that there are reasons to believe that people who should have gone to ICUs, or to hospitals, did not because of Covid. This suppressed numbers and makes it dubious to attribute any increase in utilization to Covid.

As for the supposed coverup, the hospital systems did not stop reporting hospitalization/ICU data, but the projections of future usage.

The outrage! Yeah, because Covid-related predictions have always been spot on, right?

In fact, the only competition between projections is which is the most absurd.

The POS Chronical’s political agenda and utter hypocrisy is on full display:

Then, after reporting numerous charts and graphs almost daily for three months, the organization posted no updates until around 9 p.m. Saturday, sowing confusion about the hospitals’ ability to withstand a massive spike in cases that has followed Gov. Greg Abbott’s May decisions to lift restrictions intended to slow the virus.

Gee. What else happened around the same time. Let me think? Protests ring a bell?

But of course, the protests (and the massive George Floyd funeral) are sacrosanct, and out of respect the virus took a holiday and didn’t exploit the conditions (large crowds) that are supposedly the main source of contagion. (EG., MLB will be restarting–but without fans, because otherwise Minute Maid and other parks would be Covid Central.

The hysteria over case numbers reminds me of a phrase from the Climategate emails: “Hide the decline!” Just as in Climategate, there was a divergence between a number that mattered (actual temperature) and a bogus number (proxy data-based temperatures): actual temps were flat/declining when the proxy number was going up inexorably.

So the battlecry became: Hide the decline!

We are seeing the same thing now. Hide the decline in deaths by hyping irrelevant case numbers, misinterpreting those numbers, and making dire forecasts at odds with the actual data.

If you will recall, the entire justification for lockdowns was to “flatten the curve” to protect the healthcare system. The underlying rationale was that the virus’s spread was inevitable, but we need to control the rate. That is, suppression/elimination was an impossibility until herd immunity was achieved.

Based on that rationale, the surge in cases with low and arguably declining numbers of deaths and no data demonstrating an overwhelmed healthcare system is actually a good thing. It measures progress to herd immunity. Moreover, it’s better to have the spread now, in the summer, rather than when the flu season kicks in, and creates its inevitable increase in demand for healthcare resources–including ICU beds.

But the media and many politicians are completely invested in panic, for malign and dishonest reasons. So it is essential to hide the decline, and hype the spike.

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June 16, 2020

Igor Sechin Is An Idiot. But You Knew That.

Filed under: Commodities,CoronaCrisis,Economics,Energy,Russia — cpirrong @ 1:06 pm

The very informative RBN Energy blog notes “Look What You Made Me Do – Permian Crude Producers Waste No Time In Ramping Up Production“:

Crude oil supply news comes in from all angles these days, bombarding the market daily with fresh information on producers’ efforts to ramp their volumes back up now that the global economic recovery is cautiously under way. Crude demand is rising, storage hasn’t burst at the seams yet, and prices have come a long, long way in just a few weeks. Permian exploration and production companies, having avoided a fleeting, longshot chance that the state of Texas might regulate West Texas oil production, are responding to higher crude oil prices as free-market participants should. The taps are quickly being turned back on, unleashing pent-up crude and associated gas volumes that, you could say, were under a sort of quarantine of their own for a while. Today, we provide an update on the status of curtailments in the Permian Basin.

The story mentions “the taps.” US shale regions, Permian in particular, are as close to something that can be turned on and off like a tap as anything in the history of the oil business.

You will recall that Igor Sechin’s brain flash in responding to the Covid-caused demand crash was to spurn Saudi importuning to extend output cuts, which spurred the steamed Saudis to increase output, thereby turning a hard fall in prices into a bona fide crash. A crash that hurt Russian producers generally, and Rosneft specifically, extremely hard.

The reasoning for Sechin’s strategy was that US shale producers had been the main beneficiary of previous output cuts, and he wanted to drive them out of business. Predatory pricing, in other words.

But as the RBN post indicates, this strategy, like most predatory pricing strategies, doesn’t work if the target can rope-a-dope and recover when you attempt to raise prices. That’s exactly what’s happening.

Yes, some companies have gone bankrupt–but bankruptcy is different than destruction. (Igor might not know this. Seriously.) And yes, the industry is facing more stringent financing conditions–but if prices rise these will ease too, and drilling activity will resume.

In other words, Sechin failed to realize that not only is predatory pricing almost always a futile strategy, it is particularly futile when unconventional US oil production is concerned. The Saudis found this out in 2014-2015, but Igor either wasn’t paying attention, or didn’t learn the lesson.

Predation doesn’t pay. This is hardly a new insight, or one not demonstrated by repeated experiences–including experience involving Igor’s intended prey.

Sechin’s predatory endeavors work when they involve exploiting the Russian legal system. In the marketplace, not so much. But we all knew that Igor is basically a thug, and not all that bright.

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June 3, 2020

Does “Science” Mean Results That Are Too Good to Check?

Filed under: CoronaCrisis,Politics — cpirrong @ 5:45 pm

You’d think that in the face of a feared pandemic that was thought to put the lives of millions at risk, the prospect of a cheap, proven, and widely available treatment would be a godsend. In a sane world, you’d be right. In our twisted, increasingly dystopian one, you are dead wrong.

Hydroxychloroquine is a decades-old anti-malarial drug that has exhibited antiviral properties. It is off-patent, and cheap. It has been used billions of times.

Some anecdotal evidence suggested that hydroxychloroquine could reduce mortality in Covid-19 patients, especially if used in a timely fashion and in conjunction with zinc and/or antibiotics. Some also suggested it might have prophylactic uses.

Great, right? WRONG! The drug has been the subject of unrelenting attack for months now.

Why? The cause is overdetermined.

Probably the biggest reason is that Trump said positive things about it. And if Trump supports something, it must not just be opposed: IT MUST BE DESTROYED.

But that doesn’t explain all the opposition. Being off-patent and cheap, its’ not in the interest of the pharmaceutical industry to promote or even defend it. In fact, it is against the interest of those developing new anti-Covid drugs. Moreover, it is definitely an anathema to the vaccine evangelists (or the vaccine cult, if you prefer), most notably the malign and creepy Bill Gates. The elites have no vested interest in this everyman’s drug, and some have an extremeoy strong interest against it.

Hence the war on hydroxychloroquine.

The anti-hydroxychloroquine forces thought they had scored a decisive victory with a publication in the (don’t ask me why, given some of its past escapades) esteemed medical journal The Lancet which purported to show that not only was the drug inefficacious in treading Covid-19, it was positively dangerous, leading to substantially increased risk of fatal heart conditions.

So hydroxychloroquine quickly became the New Thalidomide. Almost immediately upon the article’s publication, other clinical trials of the drug were stopped. France banned its use in the country.

But the article quickly received scrutiny, and its findings proved unsupported at best, and perhaps utterly fraudulent. The results were certainly not reproducible. The data were assembled by a small firm nobody had ever heard of, which allegedly trawled electronic health records to compile a huge sample. But the results give indications that the data were made up out of the whole cloth:

Other researchers were befuddled by the data themselves. Though 66% of the patients were reportedly treated in North America, the reported doses tended to be higher than the guidelines set by the U.S. Food and Drug Administration, White notes. The authors claim to have included 4402 patients in Africa, 561 of whom died, but it seems unlikely that African hospitals would have detailed electronic health records for so many patients, White says.

The study also reported more deaths in Australian hospitals than the country’s official COVID-19 death statistics, The Guardian reported. On 29 May, The Lancet issued a correction updating a supplemental table and saying that a hospital assigned to the study’s “Australasia” group should have been assigned to Asia. “There have been no changes to the findings of the paper,” the correction notice said.

Similar problems have been identified in other articles on Covid-19 using data produced by the same firm.

There were also serious methodological problems. (See the linked Science article for details.)

The Lancet, for its part, said it had “concerns.” Really? What was your first clue?

The haste with which this article was published, and the greater haste with which our supposed betters acted upon it, is grotesque. It gives all the appearance of rushing out results that advance a certain agenda or agendas, and since they do, being too good to check.

We are constantly lectured and hectored about Science! Don’t question The Science! If you dispute The Science!, you are knuckle-dragging flat earther fundamentalist!

In fact, the first virtue of true science is skepticism: question everything. And it is precisely events like this Lancet study which suggest that the thing we should be most skeptical about is professional science, particularly as related to subjects where strong political or economic interests are involved.

That is indeed a tragedy.

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May 20, 2020

Whoops! WTI Didn’t Do It Again, or, Lightning Strikes Once

The June 2020 WTI contract expired with a whimper rather than a bang yesterday, thereby not repeating the cluster of the May contract expiry. In contrast to the back-to-back 40 standard deviation moves in April, June prices exhibited little volatility Monday or Tuesday. Moreover, calendar spreads were in a modest contango–in contrast to the galactangos experienced in April, and prices never got within miles of negative territory.

Stronger fundamentals certainly played a role in this uneventful expiry. Glimmers of rebounding demand, and sharp supply reductions, both in the US and internationally, caused a substantial rally in flat prices and tightening of spreads in the first weeks of May. This alleviated fears about exhaustion of storage capacity. Indeed, the last EIA storage number for Cushing showed a draw, and today’s API number suggests an even bigger draw this week. (Though I must say I am skeptical about the forecast power of API numbers.). Also, the number of crude carriers chartered for storage has dropped. (H/T my daughter’s market commentary from yesterday). So the dire fundamental conditions that set the stage for that storm of negativity were not nearly so dire this week.

But remember that fundamentals only set the stage. As I pointed out in my posts in the immediate aftermath of the April chaos, technical factors related to the liquidation of the May contract, arguably manipulative in nature, the ultimate cause of the huge price drop on the penultimate trading day, and the almost equally large rebound on the expiry day.

The CFTC read the riot act in a letter to exchanges, clearinghouses, and FCMs last week. No doubt the CME, despite it’s Frank Drebin-like “move on, nothing to see here” response to the May expiry monitored the June expiration closely, and put a lot of pressure on those with open short positions to bid the market aggressively (e.g., bid at reasonable differentials to Brent futures and cash market prices). A combination of that pressure, plus the self-protective measures of market participants who didn’t want to get caught in another catastrophe, clearly led to earlier liquidations: open interest going into the last couple of days was well below the level at a comparable date in the May.

So fundamentals, plus everyone being on their best behavior, prevented a recurrence of the May fiasco.

It should be noted that as bad as April 20 was (and April 21, too), the carnage was not contained to those days, and the May contract alone. The negative price shock, and its potentially disastrous consequences for “fully collateralized” long-only funds, like the USO, led to a substantial early rolls of long positions in the June during the last days of April. Given the already thin liquidity in the market, these rolls caused big movements in calendar spreads–movements that have been completely reversed. On 27 April, the MN0 spread was -$14.45: it went off the board at a 54 cent backwardation. Yes, fundamentals were a major driver of that tightening, but the early roll in the US (and some other funds) triggered by the May expiration clearly exacerbated the contango. Collateral damage, as it were.

What is the takeaway from all this? Well, I think the major takeaway is not to overgeneralize from what happened on 20-21 April. The underlying fundamentals were truly exceptional (unprecedented, really)–and hopefully the likelihood of a repeat of those is vanishingly small. Moreover, the CME should be on alert for any future liquidation-related game playing, and market players will no doubt be more cautious in their approach to expiration. It would definitely be overlearning from the episode to draw expansive conclusions about the overall viability of the WTI contract, or its basic delivery mechanism.

That mechanism is supported by abundant physical supplies and connections to diverse production and consumption regions. Indeed, this was a situation where the problem was extremely abundant supply–which is an extreme rarity in physical commodity futures markets. Other contracts (Brent in particular) have chronic problems with inadequate and declining supply. As for WTI being “landlocked,” er, there are pipelines connecting Cushing to the Gulf, and WTI from Cushing has been exported around the world in recent years. With the marginal barrel going for export, seaborne crude prices drive WTI. With a better-monitored and managed liquidation process, especially in extraordinary circumstances, the WTI delivery mechanism is pretty good. And I say that as someone who has studied delivery mechanisms for around 30 years, and has designed or consulted on the design of these contracts.

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May 14, 2020

Strange New Respect

Filed under: Climate Change,CoronaCrisis,Economics,Energy,Politics,Regulation,Tesla — cpirrong @ 5:50 pm

The past few weeks have brought pleasant surprises from people whom I usually disagree with and/or dislike.

For one, Michael Moore, the executive producer of Planet of the Humans. Moore does not appear on camera: that falls to Jeff Gibbs and (producer) Ozzie Zehner. The main virtue of the film is its evisceration of “green energy,” including wind and solar. It notes repeatedly that the unreliability of these sources of power makes them dependent on fossil fuel generation, and in some cases results in the consumption of more fossil fuels than would be the case if the renewables did not exist at all. Further, it points out-vividly-the dirty processes involved with creating wind and solar, most notably mining. The issues of disposing of derelict wind and solar facilities are touched on too, though that could have been beefed up some.

If you know about wind and solar, these things are hardly news to you. But for environmentalists to acknowledge that reality, and criticize green icons for perpetrating frauds in promoting these wildly inefficient forms of energy, is news.

The most important part of the film is its brutal look at biomass. It makes two points. First, that although green power advocates usually talk about wind and solar, much of the actual “renewable” energy is produced by biomass, e.g., burning woodchips. In other words, it exposes the bait-and-switch huckersterism behind a lot of green energy promotion. You thought you were getting windmills? Sucker: you’re getting plants that burn down forests. You fucked up! You trusted us!

Second, that biomass is hardly renewable (hence the quote marks above), and results in huge environmental damage. Yes, trees can regrow, but not as fast as biomass plants burn them. Moreover, the destruction of forests is truly devastating to wildlife and to irreplaceable habitats, and to the ostensible purpose of renewables–reduction of CO2.

The film also points out the massive corporate involvement in green energy, and this represents its weakest point. Corporations, like bank robbers, go where the money is. But that begs the question: Why is there money in horribly inefficient renewables? Answer: Because of government subsidies.

Alas, the movie only touches briefly on this reality. Perhaps that is a bridge too far for socialists like Moore. But he (and Gibbs and Zehner) really want to stop what they rightly view as the environmental and economic folly of renewables, they have to turn off the money tap. That requires attacking the government-corporate-environmentalist iron triangle on all three sides, not just two.

I am not a believer in the underlying premise of the movie, viz., that there are too many people consuming too much stuff, and if we don’t reduce people and how much they consume, the planet will collapse. That’s a dubious neo-Malthusian mindset. But put that aside. It’s a great thing that even hard core environmentalists call bull on the monstrosity that is green/renewable energy, and point out the hypocrisy and fundamental dishonesty of those who hype it.

My second candidate is long-time target Elon Musk. He has come out as a vocal opponent to lockdowns, and a vocal advocate for liberty.

Now I know that Elon is talking his book. Especially with competitors starting up their plants in the Midwest, the lockdown in California that has idled Musk’s Fremont manufacturing facility is costing Tesla money. But whatever. The point is that he is forcefully pointing out the huge economic costs of lockdowns, and their immense detrimental impact on personal liberty earns him some newfound respect, strange or otherwise.

Lastly, Angela Merkel. She has taken a much more balanced approach to Covid-19 than most other national leaders. Perhaps most importantly, she has clearly been trying to navigate the tradeoff between health, economic well-being, and liberty. Rather than moving the goalposts when previous criteria for evaluating lockdowns had been met, when it became clear that the epidemic was not as severe in Germany as had been feared, and that the economic consequences were huge, and that children were neither potential sufferers or spreaders, she pivoted to reopening quickly and pretty rationally.

The same cannot be said in other major countries, including the UK and France as notable examples. She comes off well in comparison to Trump, although the comparison is not completely fair. Trump only has the bully pulpit to work with, for one thing: actual power is wielded by governors. But Trump’s use of the bully pulpit has been poor. Moreover, he has deferred far too much to execrable “experts,” most notably the slippery Dr. Fauci, who has been on the opposite sides of every policy decision (Masks? Yes! Masks? No! Crisis? Yes! Crisis? No!), is utterly incapable of and in fact disdainful of balancing health vs. economics and liberty, and who brings to the table a record of failure that Neil Ferguson could envy, for its duration if nothing else. The Peter Principle personified: he is clearly at the level of his incompetence, and due to the perversity of government, has remained at that level for decades.

Merkel’s performance is particulary outstanding when compared to those who wield the real power in the current crisis, American governors, especially those like Whittmer, Pritzker, Evers, Walz, Brown, Wolf, Cuomo, Murphy, Northam, and Newsom. These people are goalpost movers par excellence, and quite clearly find the unfettered exercise of power to be orgasmic.

It is embarrassing in the extreme to see the Germans–the Germans–be far more solicitous of freedom and choice than elected American officials, who seem to treat freedom–including the freedom to earn a livelihood–as an outrageous intrusion on their power and amour-propre.

Will this represent the new normal? Will SWP props for Moore, Merkel, and Musk become routine in the post- (hopefully) Covid era? I doubt it, but for today, I’m happy to give credit where credit is due.

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May 11, 2020

Imperial Should Have Called Winston Wolf

Filed under: CoronaCrisis,Economics,Politics,Regulation — cpirrong @ 3:09 pm

In the film Pulp Fiction, moronic hoodlums Jules (Samuel L. Jackson) and Vincent (John Travolta) pick up a guy who had stolen a briefcase from the back of their boss Marcellus Wallace’s car. While driving him away, Vincent accidentally shoots him, leaving the back of the car splattered with blood and brains. In a panic, they drive to friend Jimmy Dimmick’s (Quentin Tarantino’s) house. Dimmick tells them his wife will be home in an hour and they can’t stay. In a panic they call Wallace, who calls in Winston Wolf. Wolf says: “It’s an hour away. I’ll be there in 10 minutes.” In 9 minutes and 37 seconds, Wolf’s car squeals to a halt in front of Jimmy’s house. Wolf rings the doorbell, and when Jimmy answers, Wolf says: “I’m Winston Wolf. I solve problems.” Within 40 minutes, Wolf solves Jules’ and Vincent’s problem. The car is cleaned up with the body is in the trunk, ready to be driven to the wrecking yard to be crushed.

The Imperial team that relied on Microsoft/Github to fix its code should have called Winston Wolf instead, because MS/Github left behind some rather messy evidence. “Sue Denim,” who wrote the code analysis I linked to yesterday, has a follow up describing what Not Winston Wolf left behind:

The hidden history. Someone realised they could unexpectedly recover parts of the deleted history from GitHub, meaning we now have an audit log of changes dating back to April 1st. This is still not exactly the original code Ferguson ran, but it’s significantly closer.

Sadly it shows that Imperial have been making some false statements.

I don’t quite know what to make of this. Originally I thought these claims were a result of the academics not understanding the tools they’re working with, but the Microsoft employees helping them are actually employees of a recently acquired company: GitHub. GitHub is the service they’re using to distribute the source code and files. To defend this I’d have to argue that GitHub employees don’t understand how to use GitHub, which is implausible.

I don’t think anyone involved here has any ill intent, but it seems via a chain of innocent yet compounding errors – likely trying to avoid exactly the kind of peer review they’re now getting – they have ended up making false claims in public about their work.

My favorite one is “a fix for a critical error in the random number generator.” In 2020? WTF? I remember reading in 1987 in the book Numerical Recipes by  William H. Press, Saul A. Teukolsky, William T. Vetterling and Brian P. Flannery a statement to the effect that libraries could be filled with papers based on faulty random number generation. (I’d give you the exact quote, but the first edition that I used is in my office which I cannot access right now. Why is that, I wonder?). And they were using a defective RNG 33 years later? Really?

“Algorithmic errors” is another eye popper. The algorithms weren’t doing what they were supposed to?

Read the rest. And maybe you’ll conclude that this was a mess that even Winston Wolf could have cleaned up in 40 days, let alone 40 minutes.

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May 10, 2020

Code Violation: Other Than That, How Was the Play, Mrs. Lincoln?

Filed under: CoronaCrisis,Economics,Politics,Regulation — cpirrong @ 3:03 pm

By far the most important model in the world has been the Imperial College epidemiological model. Largely on the basis of the predictions of this model, nations have been locked down. The UK had been planning to follow a strategy very similar to Sweden’s until the Imperial model stampeded the media, and then the government, into a panic. Imperial predictions regarding the US also contributed to the panicdemic in the US.

These predictions have proved to be farcically wrong, with deaths tolls exaggerated by one and perhaps two orders of magnitude.

Models only become science when tested against data/experiment. By that standard, the Imperial College model failed spectacularly.

Whoops! What’s a few trillions of dollars, right?

I was suspicious of this model from the first. Not only because of its doomsday predictions and the failures of previous models produced by Imperial and the leader of its team, Neil Ferguson. But because of my general skepticism about big models (as @soncharm used to say, “all large calculations are wrong”), and most importantly, because Imperial failed to disclose its code. That is a HUGE red flag. Why were they hiding?

And how right that was. A version of the code has been released, and it is a hot mess. It has more bugs than east Africa does right now.

This is one code review. Biggest take away: due to bugs in the code, the model results are not reproducible. The code itself introduces random variation in the model. That means that runs with the same inputs generate different outputs.

Are you fucking kidding me?

Reproducibility is the essence of science. A model whose predictions can not be reproduced, let alone empirical results based on that model, is so much crap. It is the antithesis of science.

After tweeting about the code review article linked above, I received feedback from other individuals with domain expertise who had reviewed the code. They concur, and if anything, the article understates the problems.

Here’s one article by an interlocutor:

The Covid-19 function variations aren’t stochastic. They’re a bug caused by poor management of threads in the code. This causes a random variation, so multiple runs give different results. The response from the team at Imperial is that they run it multiple times and take an average. But this is wrong. Because the results should be identical each time. Including the buggy results as well as the correct ones means that the results are an average of the correct and the buggy ones. And so wouldn’t match the expected results if you did the same calculation by hand.

As an aside, we can’t even do the calculations by hand, because there is no specification for the function, so whether the code is even doing what it is supposed to do is impossible to tell. We should be able to take the specification and write our own tests and check the results. Without that, the code is worthless.

I repeat: “the code is worthless.”

Another correspondent confirmed the evaluations of the bugginess of the code, and added an important detail about the underlying model itself:

I spent 3 days reviewing his code last week. It’s an ugly mess of thousands of lines of C (not C++). There are hundreds of input parameters (not counting the fact it models population density to 1km x 1km cells) and 4 different infection mechanisms. It made me feel quite ill.

Hundreds of input parameters–another huge red flag. I replied:

How do you estimate 100s of parameters? Sounds like a climate model . . . .

The response:

Yes. It shares the exact same philosophy as a GCM – model everything, but badly.

I recalled a saying of von Neumann: “With four parameters I can fit an elephant, with five I can make him wiggle his trunk.” Any highly parameterized model is IMMEDIATELY suspect. With so many parameters–hundreds!–overfitting is a massive problem. Moreover, you are highly unlikely to have the data to estimate these parameters, so some are inevitably set a priori. This high dimensionality means that you have no clue whatsoever what is driving your results.

This relates to another comment:

No discussion of comparative statics.

So again, you have no idea what is driving the results, and how changes in the inputs or parameters will change predictions. So how do you use such a model to devise policies, which is inherently an exercise in comparative statics? So as not to leave you in suspense: YOU CAN’T.

This is particularly damning:

And also the time resolution. The infection model time steps are 6 hours. I think these models are designed more for CYA. It’s bottom-up micro-modelling which is easier to explain and justify to politicos than a more physically realistic macro level model with fewer parameters.

To summarize: these models are absolute crap. Bad code. Bad methodology. Farcical results.

Other than that, how was the play, Mrs. Lincoln?

But it gets better!

The code that was reviewed in the first-linked article . . . had been cleaned up! It’s not the actual code used to make the original predictions. Instead, people from Microsoft spent a month trying to fix it–and it was still as buggy as Kenya. (I note in passing that Bill Gates is a major encourager of panic and lockdown, so the participation of a Microsoft team here is quite telling.)

The code was originally in C, and then upgraded to C++. Well, it could be worse. It could have been Cobol or Fortran–though one of those reviewing the code suggested: “Much of the code consists of formulas for which no purpose is given. John Carmack (a legendary video-game programmer) surmised that some of the code might have been automatically translated from FORTRAN some years ago.”

All in all, this appears to be the epitome of bad modeling and coding practice. Code that grew like weeds over years. Code lacking adequate documentation and version control. Code based on overcomplicated and essentially untestable models.

But it gets even better! The leader of the Imperial team, the aforementioned Ferguson, was caught with his pants down–literally–canoodling with his (married) girlfriend in violation of the lockdown rules for which HE was largely responsible. This story gave versimilitude to my tweet of several days before that story broke:

It would be funny, if the cost–in lives and livelihoods irreparably damaged, and in lives lost–weren’t so huge.

And on such completely defective foundations policy castles have been built. Policies that have turned the world upside down.

Of course I blame Ferguson and Imperial. But the UK government also deserves severe criticism. How could they spend vast sums on a model, and base policies on a model, that was fundamentally and irretrievably flawed? How could they permit Imperial to make its Wizard of Oz pronouncements without requiring a release of the code that would allow knowledgeable people to look behind the curtain? They should have had experienced coders and software engineers and modelers go over this with a fine-tooth comb. But they didn’t. They accepted the authority of the Pants-less Wizard.

And how could American policymakers base any decision–even in the slightest–on the basis of a pig in a poke? (And saying that it is as ugly as a pig is a grave insult to pigs.)

If this doesn’t make you angry, you are incapable of anger. Or you are an idiot. There is no third choice.

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May 2, 2020

You Will Respect My Authoritah: Destroying the Healthcare System to Save It

Filed under: CoronaCrisis,Economics,Politics — cpirrong @ 9:55 am

I think it’s fair to say that I was one of the early lockdown (AKA Karentine) skeptics. In one post (19 March) I asked rhetorically whether we were destroying society to save it. Evidence accumulates daily that the lockdowns were indeed wildly costly compared to the benefits, and in the case of the healthcare industry in the US in particular, it is only slightly rhetorically excessive to say that yes, we destroyed it to save it.

Recall that the primary justification for lockdowns was to prevent the healthcare system from being overwhelmed. With a few very localized (and highly publicized) exceptions, it never was, nor was it in any danger of being so. (And for those who claim this was the result of the lockdowns, there is mounting empirical evidence both within the US and internationally that variations in lockdown policy in terms of stringency and timing have trivial impacts on the trajectories of the epidemic.)

But to “save” the healthcare system, the non-coronavirus-targeted system was almost completely shut down. One major effect of this has been financial: hospital systems and individual physicians and nurses have been financially devastated. I can’t put my hands on the citation right now, but I read that something like 40 percent of the large decline in US GDP in March was due to reduced output in the healthcare sector.*

And there will be severe health consequences as well. “Elective” procedures are not unnecessary ones: avoiding or even delaying treatment of many conditions increases the risk of death, and the number of deaths. Such avoidance or delays can also lead to serious declines in quality of life.

These effects are part of the “unseen” that I mentioned in my earlier post. People will die because of the lockdowns, but there are no Lockdown Death Trackers. And those responsible for the lockdowns, or for cheerleading for them (which includes most major media outlets), have absolutely no incentive to create them. Because you can’t handle the truth, apparently.

It is sickly ironic (deliberate word choice) that many of the most strident defenders of lockdowns were, in normal times, almost equally strident in their insistence that the lack of adequate government provided or funded health care caused people to receive too little care, thereby leading to increased mortality and greater incidence of debilitating ailments. And no, don’t bother trying to reconcile these positions: it’s impossible.

I also note that the persistence of the lockdowns, especially in places like California, Michigan, Illinois, Wisconsin, and Minnesota gives the lie to the “flattening the curve to save the healthcare system” justification for them. In California in particular, but also in the other states (outside of perhaps Detroit, which has its own pathologies decades in the making), there has been a yawning gap between ICU capacity and utilization. Yet despite these what should be welcome data, and increasingly restive citizenries in these states, their governors refuse even to countenance relaxation. So it wasn’t really about the healthcare system, was it? Or if it was, it’s now about something else.

And what is that something else? Power.

Gavin Newsom’s tirade against those who dared to go to beaches is a particularly odious example. He basically treats the 40 million people of his state as would a control-freak father incensed at the audacity of his children in defying his authority. This is not a statewide lockdown. This is a statewide grounding–and if you break the rules again, sonnie, the grounding will be extended! Indefinitely! Not because it has any public benefit. But because you dared to challenge Governor Cartman’s–excuse me, Governor Newsom’s–authoritah.

And, of course, Google and Facebook in particular are willing–nay, eager–accessories to these mass deprivations of rights. They have become censors in chief, extirpating (sorry, “deplatforming” and “removing” are too weak) content that crosses the authoritahs’ official line.

The logic behind the lockdowns was always dubious, and they were NEVER based on reliable data. (And don’t get me started on the models.). But whatever logic there was, it is non-existent now. They have become self-perpetuating. Or rather, they are being perpetuated in order to perpetuate the powers seized by governors and local officials.

And if it destroys the healthcare system (not to mention the livelihoods of tens of millions of Americans)? Well, as a man who is apparently the role model for many governors once supposedly said, you can’t make an omelet without breaking some eggs.

*Here are the data. (See p. 9.) GDP fell $234b in the first quarter. Since GDP was rising rapidly–about 3.5 percent annualized–in Q4, and the lockdowns didn’t kick in until March, virtually all of this likely occurred in the last half of March. A pretty staggering decline in a few weeks.

Expenditures on health care fell $110b, almost exactly the 40 percent I mentioned in the original post. This contrasts to a $27b increase over Q4.

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