What Sequoia Capital’s “Black Swan” Memo Means for Unicorn-Hotspots Like San Francisco, Silicon Valley & Others

“False optimism can easily lead you astray and prevent you from making contingency plans or taking bold action.”

By Wolf Richter for WOLF STREET.

Sequoia Capital — one of the most prominent and most experienced venture capital firms that has seen its share of blowups — sent a “Black Swan” memo to the founders and CEOs of the startups it is funding. Back in 2008, as the Financial Crisis was starting to take stuff down, it had put the founders and CEOs of its portfolio companies through a presentation, titled “R.I.P. Good Times,” with the purpose of preparing the leaders of these startup companies for what was to come so that their companies could survive. This time, the memo, published on Medium, is titled: “Coronavirus: The Black Swan of 2020.”

This may not be a “Black Swan” for the economy overall, but it’s likely a Black Swan for the current startup universe that is populated by prodigious cash-burn machines.

The memo provides “guidance” on how to run a startup so it can survive the business and economic challenges posed by “the spreading effects of the coronavirus.”

The guidance is the opposite of what many unicorns and non-unicorns that grew up on the notion of endless cash want to hear. And it shows that there are big changes afoot that will impact unicorn-breeding grounds such as San Francisco, Silicon Valley, San Diego, Boston, Seattle, Austin, and many others.

So I’ll start with the section further down in the memo, because it tells you that they mean business, and that things need to happen quickly, and that other things are already happening quickly, whether anyone wants them to or not, and that startups need to adjust to them or die:

Having weathered every business downturn for nearly fifty years, we’ve learned an important lesson — nobody ever regrets making fast and decisive adjustments to changing circumstances.

In downturns, revenue and cash levels always fall faster than expenses. In some ways, business mirrors biology. As Darwin surmised, those who survive “are not the strongest or the most intelligent, but the most adaptable to change.”

And you already know what’s coming: Six points on how to survive by a mix of cutting expenses, cutting headcount, cutting advertising, and cutting capital expenditures to preserve cash – and by getting ready for the end of easy-endless-funding and preparing for a tough slog going forward.

Get ready, cut expenses, preserve cash.

1. Cash Runway. Do you really have as much runway as you think? Could you withstand a few poor quarters if the economy sputters? Have you made contingency plans? Where could you trim expenses without fundamentally hurting the business? Ask these questions now to avoid potentially painful future consequences.

The money is going to dry up. Deal with it.

2. Fundraising. Private financings could soften significantly, as happened in 2001 and 2009. What would you do if fundraising on attractive terms proves difficult in 2020 and 2021? Could you turn a challenging situation into an opportunity to set yourself up for enduring success?

Many of the most iconic companies were forged and shaped during difficult times. We partnered with Cisco shortly after Black Monday in 1987. Google and PayPal soldiered through the aftermath of the dot-com bust. More recently, Airbnb, Square, and Stripe were founded in the midst of the Global Financial Crisis. Constraints focus the mind and provide fertile ground for creativity.

Prepare to survive tough sales.

3. Sales forecasts. Even if you don’t see any direct or immediate exposure for your company, anticipate that your customers may revise their spending habits. Deals that seemed certain may not close. The key is to not be caught flat-footed.

Cut advertising and marketing expenses.

4. Marketing. With softening sales, you might find that your customer lifetime values have declined, in turn suggesting the need to rein in customer acquisition spending to maintain consistent returns on marketing spending. With greater economic and fundraising uncertainty, you might even want to consider raising the bar on ROI for marketing spend.

Layoffs now before you run out of cash.

5. Headcount. Given all of the above stress points on your finances, this might be a time to evaluate critically whether you can do more with less and raise productivity.

Be prudent with capital spending.

6. Capital spending. Until you have charted a course to financial independence, examine whether your capital spending plans are sensible in a more uncertain environment. Perhaps there is no reason to change plans and, for all you know, changing circumstances may even present opportunities to accelerate. But these are decisions that should be deliberate.

In other words, discipline.

The fake halo of the unicorn with its fake “valuation” that was used to generate hype and create and even bigger “valuation” no longer matters. Cash is going to be tight, and startups will run out, in which case they will collapse, no matter what their “valuation” is.

To survive, they need to bring costs down, cut expenses, trim headcount, reduce capital expenditures, slash marketing expenses (much of which is wasted anyway), and prepare for tough times:

A distinctive feature of enduring companies is the way their leaders react to moments like these. Your employees are all aware of COVID-19 and are wondering how you will react and what it means for them.

False optimism can easily lead you astray and prevent you from making contingency plans or taking bold action. Avoid this trap by being clinically realistic and acting decisively as circumstances change. Demonstrate the leadership your team needs during this stressful time.

A shakeout is already underway.

Numerous startups, approaching the out-of-money moment without new funding in sight, have shut down or laid off a bunch of their people. This started last year, well before the coronavirus was even on the horizon. And now the coronavirus issues are thrown on top of it. For startups, this confluence is a Black Swan event.

And it’s going to get rough for unicorn-breeding grounds so uniquely focused on startups, like San Francisco and Silicon Valley, that they derive a significant part of their economic activity from the startups, the billions in investor cash they throw around locally, the billions in cash their employees throw around locally, the taxes they all pay, the homes they buy or rent, and the offices they lease. It’s all going to change.

There will be fewer companies, and the survivors aren’t going to throw around cash like they did before, and there will be fewer employees to throw around cash and buy or rent homes, and there will be fewer billions to go around. And suddenly, there will be all kinds of vacant office space, and folks looking for jobs, and homes on the market, and landlords trying to find tenants. The unicorn bubble has burst – that’s what this means. There will be startups that survive this, some of them will thrive, and there will be many others that will disappear.

The estimated hit to global air passenger revenues quadruples to $113 billion. Stocks of top-seven US airlines plunged 30% in 15 trading days, after getting massacred today. Read... US Airline Stocks Crushed. Southwest Warns on US Domestic Demand. UK Airline Collapses, Abandoned by Its Coronavirus-Spooked Owners

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  183 comments for “What Sequoia Capital’s “Black Swan” Memo Means for Unicorn-Hotspots Like San Francisco, Silicon Valley & Others

  1. 2banana says:

    Of course, they could always make a profit…

    “And you already know what’s coming: Six points on how to survive by a mix of cutting expenses, cutting headcount, cutting advertising, and cutting capital expenditures to preserve cash – and by getting ready for the end of easy-endless-funding and preparing for a tough slog going forward.”

  2. Sigmund Fraud says:

    “Tis a consummation devoutly to be wished.”

  3. andy says:

    Oh..that’s a shame. What will happen to all the Lamborghinis.

    • NoEasyDay says:


    • Mike G says:

      In my area it’s mostly mainland Chinese college students driving these. If coronavirus keeps them at home in China you’re going to see a glut of them for sale.

    • Cas127 says:

      Or the $3500 per month one bedroom apts…

  4. WES says:

    Unicorns, with their horn now suddenly stuck in a tree, now need to figure out how to eat and drink, without the magical feeding hand of central bankers!

    R.I.P. Adam Smith!

    • Thomas Roberts says:

      I know, I almost feel bad for a bunch of almost entirely arrogant startups, who, don’t actually invent anything other than an app or some “””””smart device””””” or some kind of pointless expensive convenience. Who think they are genius inventors, that will change the way people do things “but, still think they can price gouge you and sometimes force you into subscription fees or costly planned obsolescence”, and are temporally rich. But, then I don’t feel bad.


      • Anon1970 says:

        Since the Great Recession, here are some of the new products that I have purchased and that I am very satisfied with:

        1. A laser printer (replaced an HP cartridge printer that required all three cartridges to work even if I only wanted to print in B&W).
        2. An Amazon Fire Stick which delivers a lot of free programing with no monthly fees. It also has pay channels which I don’t use.
        3. An Instant Pot (far fewer burned meals).
        4. A 4K TV. The motherboard did fail between the first and second year but mine came with a second year warranty at no extra charge. The TV is now in its 5th year with no further problems. But next time I will buy an extended warranty for the peace of mind.
        5. A new dishwasher which replaced a very noisy old one.
        6. A smart phone which I mostly use for emergencies on my pre-paid phone plan or where free WiFi is available. I guess my pre-paid plan was too good a deal for customers as it is no longer offered to new customers.
        7. A new computer when Microsoft stopped supporting Windows 98.

        • Have the old HP printer, with scanner. Use free online fax services. Bought a ROKU, don’t use that either. METV. Bought a programmable pressure cooker for $5 at a garage sale, love it. Smart TV, good stereo sound. Bought a high end dishwasher at Sears outlet, for < 200 installed myself. Big scratch, still haven't fixed that. Replaced my landline with $80 smartphone which sits on my desk just like the old one. Buy minutes when needed. Writing this on a Dell refurb desktop windows seven. Not sure what to do, cheaper to buy another refurb with 10 already on it? My favorite thing is probably my Riyobi battery powered blower, never use a broom again. Great for disciplining the cat too.

        • DawnsEarlyLight says:

          Ambrose, just by a Windows 10 license key off of E*ay. 10 bucks should do it!

        • Thomas Roberts says:


          Those aren’t from unicorns though, I was referring to the distinct silicon valley type of starts-ups. Also most of those things aren’t new. The ones that pi** me off are the start-ups that produce almost useless gadgets and services that end up being much more expensive or complicated than what they were replacing. With alot of these start-ups if the company goes OB or discontinues support, your product is now worthless “they are often designed in this way, even if they don’t need to be”.

          And there is also services like LYFT, which are just copies of existing ideas, but they have the arrogance to act they like are geniuses, even though they just burn investor cash and harm legitimate non-techy businesses like cab companies “who may be actual start-ups”. Actual cab companies provide services like open 24 hours and may even have contracts with the city or state to give people with disabilities rides or deliver people to their doctors appointments. Uber and LFYT cannot do this, but can take enough money from the best service hours of the day to put real cab companies, especially those in non-large cities, OB “out of business”. This is one example, but these so called app “disruptors” do more harm than good.

        • California Bob says:

          re: “The ones that pi** me off are the start-ups that produce almost useless gadgets and services that end up being much more expensive or complicated than what they were replacing. ”

          My SO just ‘had to have’ a fancy, battery-powered trash can with motion detection. It’s slow to open, and closes when you don’t want it to (it does have a ‘stay open’ sensor, but you have to remember to use it). Our old foot-operated one did whatever your foot told it to do, plus, no batteries!

        • Good list …. Mine included a USED TOYOTA CAMRY & THE “fees” to adopt a mixed Yorkie that someone didn’t want be because it got to big ….

          A few months ago a tornado came right through our town … The only thing I cared about and grabbed as I went to the lowest floor was my dog

      • Lisa_Hooker says:

        Reminds me of Apple’s spinoff. “Hello, we’re from Taligent. Give us the money.”

    • FluffyGato says:

      R.I.P. Adam Smith???
      Shaking out the weak hands is exactly what Smith said should, and would, happen.

      More like R.I.P. to the companies that only existed due to Fed largesse.

  5. travis lewis says:

    Re Corona Virus,
    ZH reports South Korea ,which has huge virus testing capacity, marks death rate at 0.6%.
    ie 1 in 180.
    Older population,in South Korea than average, as well.
    With younger population, Africa’s virus death rate might be 1 in 400.
    Irrelevant in the big picture.
    America has high diabetes levels, might be different.

    • roddy6667 says:

      Africa has a large percentage of their population undernourished and already ill with other diseases. In comparison, South Korea has one of the healthiest populations in the world.

      • Frederick says:

        However I’ve read that this virus hits Asian people much worse than Caucasian’s or Blacks Not sure how true that is but there are a lot of people on the net saying it’s so

        • Boomer says:

          Not true. Chinese men hit harder because somewhere between 50-80% are smokers. Much smaller proportion of women smoke.

        • Longtime Listener First Time Caller says:

          If you don’t know its whether its true, don’t repeat it!

        • Shiloh1 says:

          Yes, The posting by “George Washington” blogger which was a zerohedge article on 2/13/2020 mentioned that and had links to the sources.

        • Wolf Richter says:


          People, don’t believe all this stuff that is floating around out there about the CV. Believe is what you do in church. This thing is new, and it takes time to get a scientific understanding, and to scientifically proof or disproof theories. But it only takes a few hours to dash off an article that then takes on a life of its own no matter how many times it gets debunked.

        • roddy6667 says:

          Yes, the virus has hit Asians the hardest because it is mostly in Asia now. Duh! Westerners just have to wait a month, then it will be hitting Caucasians the hardest.

      • jj says:

        roddy6667 you are right & Also, S. Korea has support sysytem like the elders are supported by their young which is strong Asian culture.

    • Thomas Roberts says:

      travis lewis,

      Those people in south Korea just got infected, it takes time for it to kill you or for you to survive. Right now they are merely infected, they are not casualties or survivors yet.

      This applies everywhere and is the current model
      1. Up to 2 weeks, but sometimes possibly more incubation period, where you show no symptoms, but at some point may be able to infect others
      2. Followed by 1 or 2 weeks estimated of mild to no symptoms
      3A. Possibility 1 estimated 80% of population- several more weeks of little to no symptoms, you can infect others, but will be fine yourself.
      3B. Possibility 2 estimated 20% of population- You experience complications that could kill you, your chance of survival depends on your age, health, and level of hospital care. Even if you survive, you may have health damage.
      4. Recovery, you feel fine, but may still infect others for some unknown amount of time.

    • Rowen says:

      Have you seen how aggressively the South Koreans have been testing potential carriers? Over 140K already. So, of course, its rate will be negligible; they’re picking up relatively healthy people who’s bodies are able to combat the virus, especially before they interact with really vulnerable people. meanwhile, we’ve got a carrier from the WA nursing homes traveling cross country to NC.

      • Wolfbay says:

        Capitalist first world countries like South Korea and Singapore are doing a lot of testing and people are not charged for the test.
        In our budding third world banana republic we don’t test much which helps with denial and we charge thousands for the test if people have no insurance.

        • Anon1970 says:

          We (the US) are too busy trying to be the policeman of the world. I wonder if the homeless on the streets of our big cities, such as LA and SF, will eventually contribute to a rapid spreading of the virus in our urban areas.

        • Michael Fiorillo says:

          Never let a good crisis go to waste. It’s rule number one in Disaster Capitalism.

      • So you’re complaining that their rates are artificially low because too many people are testing healthy? Nice logic. By definition we test almost exclusively the obviously sick, especially the elderly and infirm. Maybe if we stop pussy-footing around and focus on testing ONLY infected elderly smokers we can juice that mortality rate to 110%! YEAH BABY!

        Wolf, I hate to sound paranoid, but do you see an uptick in new subscribers who ONLY talk about CV19? Because this level of hysteria and misinformation is disturbing. Economic impact, okay, but the zombie plague talk is ridiculous.

        • Wolf Richter says:

          COVID 19 is a huge topic at the moment, particularly in the most impacted states on the West Coast. Everyone is talking about it. State and local governments have called out states of emergency to work through the funding issues. Mayors and governors issue announcements on a daily basis. You cannot get away from it. But eventually, we’ll get used to dealing with it, and the discussion will settle down. Give it a few weeks.

          That said I’m not a fan of slinging around wild numbers and rates and hypotheses and fake news and hunches and loosey-goosey estimates and whatnot. In that respect, I think it’s good to keep your cool. Take it seriously, take precautions, but don’t freak out.

          But the economic and business consequences are very real. And COVID 19 is relevant here because there are real economic consequences in how we’re dealing with it.

        • California Bob says:

          re: “Everyone is talking about it.”

          I just attended a large gathering here in the CA CV (local irrigation systems provider had an open house with free tri-tip lunch and other swag). There were, by my estimate, 400-500 farmer types, young and old, and not a single mask. Most of the conversations I overheard were about the quality–or lack thereof–of the food. Just sayin’

        • Wolf Richter says:

          California Bob,

          Ha, I knew this would happen as soon as I’d posted my comment — that there would be someone who went somewhere, and for an entire hour the coronavirus didn’t get mentioned ;-]

        • California Bob says:

          Didn’t want to disappoint you, Wolf ;)

          I really had no point, except maybe that the Central Valley might as well be 900 miles from SF instead of 90, and farmers are generally conservative and get their ‘news’–at least their talking points–from Fox (which has pretty consistently called the COVID scare a hoax).

    • farmer john says:

      On average every SE-Asian country ( malyasia, vietnam, thailand, myanamar,cambodia, vietnam, philipines ) have 10’s of 1,000’s of ex-pat’s who work illegally in Korea/Japan/Taiwan/HK, and in the past two weeks they’re all flooding home.

      Because they’re illegal, most just return the same means, by way of the underground railroad, which is a nice way of saying they just show up back at the family farm, after sending money home for 10-20+ years. Already I’m seeing everywhere, mostly by word of mouth from police and friends of police is that these people are showing everywhere at day-care centers, schools, … to “see the kids”, the trouble is because they came in the underground-railroad, illegal to go work abroad ( skating taxes ), and then returning with no record, means they skip quarantine and testing.

      I just found out today from a policeman in our village that a guy just showed up today from Korea, no quarantine, and the first thing he did is go to a day care that has 100’s of kids ( < 5 years of age ). I have known about this for weeks, but all reports I heard were still no effecting my village. There is already in effect in all SE-ASIAN country's law that say if you return, and don't report, you face "Serious Jail-time", I guess they just take their chances. These return people are actually more dangerous than the casual 'korean' because most often their jobs are cleaning the homes of the dead, which is why they're exiting ASAP. These country's like Japan/Korea are forcing all the 'death-jobs' on to the illegals, which because their undocumented, their deaths go unnoticed. ( yep, I would leave too )

      It's only by word of mouth that shit is hitting the fan. I'm most worried about Laos as they have 100's of 1,000's of ex-pats, as Laos has discouraged foreigners from settling in Laos forever, they actually want you to take their citizens abroad, now with the virus, they want to come home, be near the family.

      I think this kind of blow-back will effect USA too, as since the great-depression for 3+ generations people left the family-farm and went to the city for work, now the city is a death trap, millions of American's can easily return to the family town, and/or family farm, but even a bigger problem as there is no mechanism in USA to test people going from city to rural. Of course in time the rural folk will come to hate and despise the city slickers for bringing plague upon them.

      • VintageVNvet says:

        Good summary, with exception that in my direct experience, most in USA who grew up on farm/ranch and went to city sold farm ASAP after death of parents or grandparents, for cash to be able to buy home in city.
        Siblings and I, if we had had the consciousness of youngins today, would have ”divorced” our parents before allowing them to have sold ”our” farm in the 1950s. They sold for a good profit, but because it is in an area that has had vastly increased population, the land would be worth approximately 1,000 times what they sold it for.

    • Ron says:

      Korea has very high levels of testing which reduces the death rate as they account for the large number of cases that have few symptoms.

    • Wisdom Seeker says:

      Travis you are totally wrong. South Korea has 42 dead and 135 recovered. The remaining cases are “fate to be determined”. And that fate hinges critically on the extent to which the caseload of severe pneumonias overwhelms the hospital system. It’s far too soon to tell, but the Precautionary Principle applies. Fate will not be kind to those who underestimate this new enemy of humanity.

      P.S. Even 0.6% means this thing would be 6 times as bad as influenza. If only it was that kind.

    • Greg Hamilton says:

      China also has high diabetes levels.

    • Lols says:

      South Korea is lying, in my opinion, after talking to various individuals who have family in South Korea.

  6. roddy6667 says:

    I have always believed that an ability to be scalable is a sign of a good business model. If a company can cut back on personnel, rents, and other costs, they can survive a downturn in sales brought on by a recession.

  7. Roger says:

    Imagine what the WeWork numbers must look like with office rents plummeting globally.

  8. Kessler says:

    It feels like Unicorns should be immune to the economic downturns, since they are not real economy. They don’t generate profit anyway, so they shouldn’t be affected by sales downturn. And unlike physical goods, money can be created in any amount by the goverment to finance them.

    • Unamused says:

      And unlike physical goods, money can be created in any amount by the goverment to finance them.

      “The government” does not create money. That’s the banks’ job. The government’s job is to be the scapegoat for corporate excesses.

      Unicorns provide a disposal service for people who have too much money.

      • Jeff Relf says:

        Every loan increases the money supply,
        and no one borrows like the government.

        Capitalism has little to do with
        the flood of money that’s drowning out
        the less fortunate ( who can’t compete );
        no, it’s the government that’s doing it.

        In Seattle, my hometown,
        rents went up 68% from 2010 to 2017,
        displacing the less fortunate.

        It’d help a lot if the government
        could be honest about the inflation rate.

        What did Moses say when the plague hit ?!
        ” Let my people free “.

    • rhodium says:

      The government does not directly finance them. The fed lowers the rate of return on safer investments encouraging people to seek out returns elsewhere like speculating in unicorns. Unicorns then create jobs accomplishing their goal of eliminating economic “slack.” What they don’t acknowledge is the unstable house of cards style economy that results. It is less founded on teneble demand than it is on throwing supply at consumers hoping that some things stick. Maybe it would if they did stick, but the lack of profitability proves it isn’t working.

    • Prairies says:

      Read point #2. I am pretty sure you skipped it. These unicorns don’t operate on a profit model, they operate on fundraising – corporate welfare from wealthy donors. Give us all your money, we give you nothing in return, thanks see ya in 6 months.

      Once Venture Capitalists leave the building the unicorns will simply look like donkeys.

  9. ooe says:

    the problem is that if you layoff people , you will lay off your customers. People who are not employed by the unicorns are going to be scared and not spend so they will cause the on going recession

    • Unamused says:

      the problem is that if you layoff people , you will lay off your customers.

      If they really cared about their customers they’d send them somewhere else.

  10. Michael Engel says:

    1) US10 is down to 0.773%.
    2) Supposed Fed will be cut to 0.25%, the 3Y will be NR @ (-) 0.1% and the US 10 will be 0.1%. The Fed will cut to zero, but never below.
    3) Suppose corona virus will hit IS in round #2 and Fed Rate will be 0%, the 3Y will be underwater, but the US 10Y will be even more negative.
    4) Suppose coronavirus infect the whole world and US yield curve will become a steep anti parabola of negative rates : NR US 3Y > NR us10.
    5) If US 10Y will keep sinking and become bottomless, what kind of world it will be.
    6) And what the Fed was really thinking while we are sinking.
    7) Will gold beat SDR, or barter trading will takeover and rule the global trade.

    • backwardsevolution says:

      China Boy – the people in some northern Italian towns have been under quarantine the past few weeks. Last I heard they have been cooperating nicely with this quarantine.

      I also read today that northern Italy is home to thousands of “Chinese” workers who work in the Italian fashion-industry sweatshops.

      Perhaps some of these workers went home for the Chinese New Year, and then returned to Italy infected?

  11. Michael Engel says:

    1) When WTI plunged in 2014 ICE US high yield CCC popup to a lower high
    @ 21% in 2016.
    2) CCC max was over 38% in Dec 2008, when oil plunged from 149 to 32,
    within few months.
    3) CCC in a trading range since 2019. Its osc in a higher narrow box
    since Oct 2018.
    4) HYG : TLT plunged since Oct 2018 to a new low.
    5) The diving US10Y @ 0.77% might ignite a wild fire on CCC that is hard to contain.
    6) Diversion : UST plunge while the ICE CCC are popping up..

  12. unit472 says:

    California state government can also expect a collapse in their revenue. I would guess there will be a major outbreak of corona virus among the homeless and immigrant populations that will strain state finances further. Nothing has been done to fix the power grid and with rainfall in the 2020 season half of the 2019 season fire risk will be high too. Newsom has his work cut out for him

    • Wisdom Seeker says:

      Cal revenue statewide will actually surge for a bit longer as people who sold their stocks pay capital gains, and property taxes remain high on inflated valuations. But yeah, sales taxes will start to fall and next year the capital gains turbo-boost will be gone.

  13. Iamafan says:

    Guys and gals, it is not about profits now, it is about survival. Store shelves are getting close to empty. One meal a day works great if you want weight loss. Stay liquid.

    • MC01 says:

      I live in Italy about 60 miles from the major Covid-19 outbreak. Yesterday I went to shop for groceries and I was met with the usual well-stocked shelves. Even hardtack and rusks are back on the shelves. This is the second week of lockdown we are having here and it’s predicted to last to March 15.

      But the FTSE-MIB has been literally savaged. Or to be more precise it’s going back where it should be, negative interest rates or not: as I am typing this we are down 830 points for the day. Things must be really bad because the iPhone tells me that charts for 6 months and one year are unavailable and I should “try later”.
      This stuff was long overdue

    • Wolf Richter says:


      Our Trader Joe’s and Safeway are well stocked, nothing in short supply, not even beer. Just went there yesterday.

      • Iamafan says:

        Go to Costco and then make a comment.

        • Wolf Richter says:

          Well, don’t buy at Costco. Buy where the food is.

          You’re talking about “one meal a day” and “empty shelves” and “survival,” and you don’t want to go to Safeway or Trader Joe’s where the food is and rather starve? Think, dude!

        • Ripp says:

          Went to Costco the other night about a half hour before they closed. No toilet paper, paper towels, OJ, hand sanitizer, rice, wipes. Most people I’ve ever seen on a weeknight before closing.

          Stopped at the Fry’s (Kroger) on my way home to get a few other things. Fully stocked toilet paper, paper towels, OJ, rice, wipes. Didn’t see hand sanitizer, but I didn’t go past that department. Oh, and almost nobody there, didn’t even have to wait in line to check out…

          Why the panic at Costco but the regular grocery is business as usual?

        • Bobber says:

          My Costco was out of water, toilet paper and towels last weekend, but everything was double-stocked yesterday. This was not too far from Kirkland WA.

          Supply chains for those goods are going strong.

        • Wolf Richter says:


          THEN DON’T GO TO COSTGO!!!! If you want to buy toilet paper, go where the toilet paper is. Costco is NOT the only friggin place to buy stuff

        • Jon says:

          Just in time inventory practices have made shortages a problem when more than the statistically normal number of people decide to buy a product. JIT is how Cosco keeps prices down.

        • Seen it all before, Bob says:

          I had the same experience at Costco as Iamafan.

          So I bought Costco stock. :-)

      • Anon1970 says:

        I guess you didn’t look for hand sanitizer.

        • Wolf Richter says:

          Correct. I’m pretty sure Trader Joe’s doesn’t carry hand sanitizer anyway, but Safeway does, and I didn’t check. No need to. There was lots of soap of all kinds, and we have plenty of water coming out of the tap, so why would I look for hand sanitizer?

        • Lisa_Hooker says:

          1 pint 70% isopropyl is $1 US or less. Plenty around.

        • drg1234 says:

          Yikes! Do not use isopropyl alcohol to disinfect your hands. You will dry out the skin in short order. Wolf is right – soap and water are all you need.

        • Lisa_Hooker says:

          First, Wolf is correct, soap and water is cheapest and effective. Second, if isopropyl (rubbing alcohol) dries you skin use a bit of lotion when necessary. Or you can make your own sanitizer with some aloe vera gel. Commercial sanitizers typically contain many additives and preservatives such as benzalkonium chloride that are not in your best interests. Notwithstanding, I now carry a few sealed foil packets of commercial sanitizer in my pocket. Very convenient and disposable.

        • Hand sanitizer!? That’s for changing diapers! This is COVID 19! You need to use friggin gasoline! I say we take of into orbit and nuke it from space! It’s the only way to be sure!

      • timbers says:

        There is one that is in short supply:

        Trader Joe’s that sell beer and wine. At least in Massachusetts. It’s determined by local law I think.

      • A Citizen says:

        Our Publix has been and continues to be well stocked despite what the employees describe as being extremely busy. No hint of panic, but folks are definitely getting ready for possible work-related quarantines.

        We stopped messing with Costco years ago…

      • DawnsEarlyLight says:

        Well, if anything, this ‘preparedness purchasing’ will boost the economy!

    • Lisa_Hooker says:

      I absolutely hate those liquid weight loss drinks! Eat a balanced meal – a smaller one.

      • wkevinw says:

        Lisa_Hooker- correct about the “diy” hand sanitizer. If you have water and a sink, soap and water are excellent. Hand sanitizer is best used when you don’t have that.

        I can’t recall the exact recipe but ~20-50% alcohol and some gel (lotion?) are also needed. Just alcohol doesn’t work (unless you did something like submerse your hands in a bowl of it). Aloe is excellent. A “sticking agent” + skin moisturizer are needed.

        • Iamafan says:

          Greater than 60% alcohol is the recommendation.

          I like the Aloe idea. I bought ethyl alcohol to degrease my cars (yeah I polish my cars). So now, I am using them to spray everything in my path. Cheapest sanitizer that’s mot caustic or rusts.

    • VintageVNvet says:

      OMAD works great too for recently ”overweight” old folks such as myself, and the liquid part really helps too, at least to retain some semblance of sanity, eh?
      (As long as at least some of the liquid is the ”beverage of YOUR choice.”

    • Wisdom Seeker says:

      I went to an SF Bay Area Costco yesterday.

      Store shelves were full but the standard food-on-a-budget non-perishable commodities were gone: no more large bags of rice or flour. I was there for rice so I walked through the entire floorplan – no luck. No one had rice in a cart either. Even standard yellow onions were nowhere to be seen. And the standard Kirkland tomato sauce had been replaced by a small supply of Hunts. There were other “missing items” as well on my list.

      They had rearranged other products to make shelves appear full. That was actually quite an eye-opener. There was still plenty to be bought, but the experience of going to a store and not being able to find the usual basic things is going to hit a lot of people between the eyes. If further supply shortages develop, meals will no longer be choreographed may become more of an improv routine.

      Meanwhile, the customers were all walking to the back of the store to grab the toilet paper that had just been delivered. Most frequent items in the carts I observed: toilet paper, paper towels, bottled water, and disinfectants.

      Personally I stocked up on high-calorie-density frozen foods and pantry non-perishables. My kids had an activity cancelled this weekend since the host school had a staff member with possible corona exposure. Work-from-home is being encouraged by major tech companies. It’s going to get more interesting next week.

      • Greg Hamilton says:

        I still don’t understand the run on toilet paper.

        • Bobber says:

          Maybe people are thinking it fills your stomach when there is no food around?

        • A Citizen says:

          Try living comfortably if locked away at home unable to go out and get more.

        • Endeavor says:

          There was a blog by an Argentine during the collapse of their economy some years ago. He detailed such things to help you survive by getting food on the black market, how to secure you home by keeping a loaded gun hidden in every room, etc. But he said the most critical effort must be towards getting enough toilet paper because running out was a true hardship.

        • c1ue says:

          In Japan and Australia, there were blogs saying you can make facial masks using toilet paper.
          That’s what caused the runs there. No idea if this propagated in the US as well.

        • Wisdom Seeker says:

          I think the idea with toilet paper is that if you’re in a small household, likely one or both people will both get sick at the same time, and at that point you really don’t want to run out of anything that would force you to make a trip to the store. And you might not want to call neighbors and risk them getting infected either.

          The same precaution applies to standard medicines, food supplies, and cleaning / disinfecting supplies.

          The one I didn’t get was the bottled water. No evidence of water supply issues, and even if there were, a couple dozen single-use bottles won’t last long enough to matter. Except maybe it reduces the need to get out of bed? Best to have a good supply of reusable bottles.

          P.S. The checkout clerk made a point of asking me if there was enough soft-soap left. Guess that’s also been in short supply?

        • Seriously. If you don’t have a bidet you might as well just use your hand or your dog or something anyway. Or your life savings!

      • Cubicle Dweller says:

        Mandatory WFH is in force for at least one mega non-tech firm (wink, wink) in phases over the next few weeks to test remote connectivity infrastructure capacity.

        It’s a smart move as anticipated traffic is well beyond what the engineers envisioned when the systems were designed.

      • Bishie says:

        Here in Virginia the shelves are empty of rice, paper towels, sanitary wipes, and cheaper choices in pasta and pasta sauce in the Giant near my house. The Asian grocery stores (H-Mart and Great Wall) have some rice but less than usual supplies. Asian grocery stores are sold out of frozen bread products instead.

  14. GotCollateral says:

    Bloomberg Feb25: “JPMorgan Eyes Plan to Break Stimga of Fed’s Discount Window”

    NYTimes Mar05: “JPMorgan Chief Executive Jamie Dimon Has Emergency Heart Surgery”

    Stigma Broken™

  15. timbers says:

    “Cash is going to be tight…”

    What language is that? I’ve never seen that arrangement of symbols before.

    Did your fingers sear to ashes when you wrote that?

    • Wolf Richter says:

      “I’ve never seen that arrangement of symbols before.”

      Because you’ve never run or owned a business. You’ve equally never heard of a “cash crunch” and similar expressions that outline an existential threat for a business. Cubicle dwellers have no need to know this.

      • timbers says:

        You’re right. Though, it was more directed at Fed policy vocabulary as I bet you already knew.

      • VeryAmused says:

        Hey, no need to disparage cubicle dwellers.

        We are not all jaded ignorant timbers.


      • wkevinw says:

        I think Timbers was using sarcastic humor. His reply did make me laugh.

    • DawnsEarlyLight says:

      When working on the ‘Bank Side’ of the discussion, you rarely do.

  16. Mel says:

    “nobody ever regrets making fast and decisive adjustments to changing circumstances”

    This is contradicted by a scene in _Liars’ Poker_. One day the bond market tanked, and Gutfreund fired Salomon Bros. entire bond department. Later on, when that market turned around, he had nobody to make money from it.
    Along with fast and decisive, the adjustments have to work.

    • Lisa_Hooker says:

      nobody ever regrets making fast and CORRECT decisive adjustments to changing circumstances

      These adjustment can only be observed with hindsight.

  17. Iamafan says:

    They didn’t believe it when it was happening in China. Do they believe it now that Americans are getting sick?

  18. IdahoPotato says:

    Consummate capitalist Rick Santelli on CNBC:

    “Maybe we’d be just better off if we gave it to everybody, and then in a month it would be over because the mortality rate of this probably isn’t going to be any different if we did it that way than the long-term picture, but the difference is we’re wreaking havoc on global and domestic economies.”

    • IdahoPotato says:

      It dovetails nicely with the U.S. healthcare policy: If you get sick, hurry up and die.

      • Where do you live? Extend live as long as possible, and exact the most expensive procedures while you are it, until the patient is pumped dry and then pump the Medical system a bit more. It’s a pretty well known fact that indigent ER patients get the full range of tests. In a competitive insurance market one party seeks reimbursement from the other, now doctors are claims adjusters, who defend the monolithic insurance industry. They write policies so you cannot afford to use them. The best care you will ever get is when you sign your life over to Medical and if you have no assets that is a nobrainer. This is why Medicare for all is the only solution to making HC available. The end of life programs were done to keep them from propping your corpse up for public view, so we may all pretend what great humanitarians we are, and they may profit from that.

        • IdahoPotato says:

          I live in the USA – I can live without healthcare as long as I have freedumb.

        • Unamused says:

          I do believe you’re being sarcastic, IdahoPotato. Americans are not free and their health care ‘system’ is a your-money-or-your-life extortion racket. For now, it still retains the pretences of democracy, but those are for the convenience of your corporate masters.

        • Lisa_Hooker says:

          The American health care system is designed to use the ICU to extract the maximum amount of insurance money in the last 60 days of life. Some of that money is then used to subsidize the continuous stream of no-pays in the ER.

    • Ron says:

      Santelli most likely agreed with the administration idea to reduce the media’a access to the rate of infection within the U.S. with the slow distribution of test kits which has had the effect of keeping the reported number of infected virus patients down and will throughout this event due to confusion over testing procedures and methods.

      No doubt the President believed this would be positive for the market but failed to consider how it would instead create more confusion and fear.

      • Harrold says:

        He was fully aware it would create confusion and fear.

        That has been his playbook since 2016.

      • IdahoPotato says:

        Tea Party founder Rick Santelli was simply being true to form. On the floor of the Chicago Mercantile Exchange in Feb 24, 2009 in response to the admnistration’s Homeowners Affordability and Stability Plan to help homeowners in danger of losing their homes to foreclosure, he said this, cheered on by traders around him:

        “The government is promoting bad behavior. How about this, president and new administration, why don’t you put up a website to have people vote on the Internet as a referendum to see if we really want to subsidize the losers’ mortgages.”

        “The government should reward people that can carry the water instead of drink the water.”

        “We’re thinking of having a Chicago Tea Party in July. All you capitalists show up to Lake Michigan, I’m going to start organizing.”

        • Ron says:

          Well here is some reality:

          One of the things to keep in mind is that based on clinical data from other countries, somewhere just under 18% of cases are “serious” or “critical”*. Serious means you have pneumonia that requires hospitalization. Critical means you are in an ICU attached to a respirator and your odds of survival are a coin toss. So even if you don’t die this virus is no joke, and if you don’t have health insurance in the US and end up for a week in the hospital you are going to be financially screwed. Remember, humans don’t have very much built up immunity to this thing. And the US health system has never dealt with something quite like this before (in contrast to Asia, where they had prior experience with SARS1).”

        • wkevinw says:

          I usually find Santelli to be fair. He also said the banksters should have been bankrupted.

          What he/they want is for free markets have freedom and consequences.

          Everybody who got bailed out caused a problem: irresponsible RE owners (by the way many were pretty well off!), business owners, big corporations- all these bailouts are causing problems now.

          The US has orderly bankruptcy laws. They need to be enforced.

    • Wisdom Seeker says:

      Santelli is even less worth watching than the station as a whole.

      If one person gets sick, they have a problem, and they go to the hospital.
      If one million people get sick, the hospitals will all overflow and those people are on their own with a 10x higer fatality rate.

      If everyone got sick at once, the case fatality rate would surge by 10x because of the significant fraction of people who get seriously ill and need hospital care. If everyone gets sick at once, those hospitals will be in full Wuhan and very few patients will get care. Meanwhile, care for every other hospitalization will be compromised as resources will be stretched beyond all limits anyone has ever known. So excess mortality of all types will surge beyond belief.

      Everyone’s number one goal for the next 6 months is to do whatever it takes to stay out of a hospital.

    • Xabier says:

      This imbecilic comment of Santelli’s (because the mortality rate will be very much higher if the cases occur in a narrow time-frame and overwhelm medical services) was also made by the UK’s PM Boris Johnson:

      ‘There is this theory that you should just let it rip…’

      Epidemics on this scale are NOT like ripping off a ticking plaster, for God’s sake!

      They also have a long aftermath…..

    • Shiloh1 says:

      Doesn’t take into account of ICU rooms as limiting factor. Chicago would be even more interesting because of the weekend shoot em ups causing several hospitals to routinely go on bypass.

  19. Keepcalmeverythingisfine says:

    Jamie Diamond is recovering from emergency heart surgery, doctors found they had to install one.

    There, let it be known that I started the first of many Jamie Diamond jokes to be heard over the next few days.

    • Lisa_Hooker says:

      Soon to be a classic. Bravo.

    • jraynor says:


    • Shiloh1 says:

      The Dick Cheney Go F Yourself Model. Was Jamie wearing his White House cufflinks at the time?

    • Thomas Roberts says:

      Jamie Diamond already had an artificial heart, it’s powered by coal and causes him to give off toxic fumes. The only thing his body is missing is a soul.

  20. Iamafan says:

    I have a feeling China will make a covid-19 vaccine ahead of everyone else. Like to see what the tariff will be on that.

    • Harrold says:

      In the holy name of the profit, I predict US drug manufacturers will lobby to keep that inferior vaccine out of the US.

      • Unamused says:

        In the holy name of the profit, I predict US drug manufacturers will grab exclusive rights and mark it up a couple of orders of magnitude.

      • Thomas Roberts says:

        Considering China steals all our inventions, it’s only fair to steal theirs. They don’t have much, but, DJI “the drone company” and 5G wireless “massively less important than everyone claims it is” are good places to start. If and when they make a vaccine “a long shot” it’s stealing time.

    • Wisdom Seeker says:

      US just waived tariffs on other essential medical items from China.

      Also, I predict that US will make all pneumonia treatments free-to-populace (maybe reimburse at medicare rates) because it’s going to be the only way to get people who need it to places where they can control the outbreak and avoid catastrophic death tolls. China took that step for very good reasons. (And they also don’t have universal healthcare, normally it’s cash on the barrelhead.)

      • roddy6667 says:

        Most people here in China have health insurance. It is mostly from your job, but others have it from a retirement policy or something else. Some buy private insurance. You do have to show proof that you can pay to get treated at a hospital. Family support is a very important part of the picture. A few phone calls and a few texts on WeChat can raise thousands in minutes. That doesn’t happen in America.

  21. Trailer Trash says:

    I recall that in Olden Days whenever the economy started to sputter, the talking heads would yap about “Soft Landing”. I’m not hearing that anymore. Seems like everyone is too busy heading for the exits and the bunkers.

    As for the “unicorn startups”, piss on ’em. I learned from up-close-and-personal experience 20 years ago that their only “product” is stock, as in the magic IPO. It’s fitting that the golden streets of San Francisco are covered in shit.

    • Wisdom Seeker says:

      Good observation about the complete absence of “soft landing” scenario.

  22. akiddy111 says:

    Hands down, the most important economic development point i have seen in a long long time is the absolute collapse in recent days of US long dated yields.

    At least i can say with complete sincerity, that i was never for a minute suckered in to thinking that the 2017/2018 interest normalisation fiasco ever belonged in the real world.

    NIRP, QE, deflation and debt elimination is priced in. Period.

  23. David Hall says:

    I remember 1999 was a year surging with startups reporting no earnings. Am not sure if 2019 was as bad, but investors seemed to be looking at revenues more than earnings in 2019 same as 1999.

  24. Jeff Harbaugh says:

    Uh, it occurs to me that doing those six things, if not at quite the dramatic level they are suggesting, would be a good way to do business any time and any where. But what do I know. I’m not even a venture capitalist.

    • IslandTeal says:

      You beat me to this same observatioon. This is what should always be the rule. Now if this could happen in the public sector we, as a country could have a chance.

  25. LibDis says:

    I dunno, it reads like a letter from a bunch of pussys. How could any of these people ever cross the country in a Conestoga wagon or fight in WWI trench war fare, or go without a meal for a day.

    Whine, cry, moan, fear monger. We are a world of worthless babies.

    • RD Blakeslee says:

      Gee, I wish so many folks (pols especially) wouldn’t say “we”, which ostensibly includes me!

      In this case: I’m not a baby (old man in fact) and worth a little something …

    • Unamused says:

      We are a world of worthless babies.

      Personal weakness, dependency, narcissism, and irresponsibility have been actively cultivated by your mass-marketing ‘culture’ for a hundred years, and not just because it’s profitable.

      Democracy, which has grown up in the last three hundred years, represents, with its emphasis upon individual responsibility and individual actions, the most difficult societal system, requiring a definite human maturity. Totalitarianism can in many ways be regarded as an escape from this difficulty into the irresponsibility of following a leader who deprives the people of their liberty and their maturity but promises them ‘security’ and ‘economic progress’. To that end, personal immaturity and self-gratification are therefore celebrated and promoted by corporate America in particular, and in U.S. culture in general, because it prepares the electorate to give up its responsibility to maintain democracy in favor of totalitarian leadership.

      You’re not going to like it, but you no longer have a choice.

  26. Iamafan says:

    The Fed owns (in millions) $2,038,824 notes and bonds and
    $1,371,844 MBS.

    If the yields have gone to new lows nowadays, then why doesn’t the Fed SELL its securities and just keep the cash or buy new ones after auction.

  27. Lisa_Hooker says:

    “qui s’excuse, s’accuse”

    As my HS biology teacher said repeatedly: “Obvious to the meanest intelligence.

  28. Abomb says:

    Heh, Are all the annoying electric scooters finally going to go away?

  29. Michael Engel says:

    1) WTI 2014 plunge was stopped by the selling climax in March 2016(L) @ 42.41.
    2) This support line was tested on May 2017(L) @ 42.05, in
    Dec 2018 @ 42.36. Today WTI breached support.
    3) SPX weekly is still above the cloud. Chikou, the back line, currently pricked the closing price in the back, but chikou is above T+K and the cloud in the back.
    4) Both SPX daily price and chikou are under the cloud.
    5) SPX is testing support @ 2,855.84. The support line might be breached and SPX price can go further down below.
    6) The first stage of the trading range is wild and violent. It can last
    for several weeks, or months.
    7) Its possible that next week SPX will move higher, breach the
    resistance line @ 3,136.72 from 3/3 and make an upthrust, under the
    daily cloud.

    • nick kelly says:

      After the record 1987 one day 23% crash, Lou Rukeyser asked head tech Bob Nurock: ‘So do you still believe in this stuff?’ meaning all the chart babble about support levels, double tops, moving day averages etc. etc. that had, needless to say, given no warning.

      All that stuff has some use in a normal environment. It is worse than useless in a Black Swan event.

      • Joe Granville called the 87 crash using his proprietary OBV oscillator (on balance volume). In the context of extra monetary measures TA has fallen by the wayside. I can say it still works. I watch it every day in real time. Then of course after the market breaks trend line, the money comes in and lifts the price to new highs. I do have a basic measure of that which works pretty well. The drop in money in this context is unprecedented, in depth and speed. I cannot say why the money is disappearing. The US monetary base is contracting, and money velocity is making new lows. I suspect this is a watershed event unfolding, and the Fed will soon step back and allow markets to correct. Their path to monetization has been blocked, which is another subject. Rukeyser is mostly correct, TA works best in an efficient market, and in liquidity crashes those methods are less useful.

        • Gandalf says:

          Er, maybe you are a few months in the past? Every chart I find says that the US monetary base skyrocketed straight upwards due to ZIRP and QE, starting with the 2008 GFC, started to drop in 2018 with increased rates, but since Sept 2019 has been rising again with the repo QE and rate cuts. I’m sure the recent Fed rate cut and future rate cuts will cause the monetary base to shoot up again.

          And I doubt the current Fed will ever step back and let the markets correct spontaneously. The Fed may not be able to stop a correction, but it’s going to do its best by throwing money at it

  30. c smith says:

    “The memo provides “guidance” on how to run a startup so it can survive the business and economic challenges…”

    Oh, you mean the way they should’ve been run all along…or before the idiotic Fed Put made it’s appearance 25 years ago ???

  31. c smith says:

    BTW, nobody knows better than Taleb that the fragility of the current financial system is a direct result of Fed coddling.

    • wkevinw says:

      c smith: Fed coddling + govt bailouts = excessive risk taking/moral hazard.

      It’s on full display.

      Gigantic appreciation of financial assets (stocks and bonds).

  32. Michael Engel says:

    Correction : CL, WTI futures :
    1) The selling climax, the support line is @ 42.03 from Mar 2015.
    2) This support was tested several times :
    on Nov 2016(L) @ 42.31, on June 2017 @ 42.05, on Dec 2018 @ 42.36.
    3) Today low was : 41.77.

  33. Some things are different this time around. Central bankers no longer control the monetary spigot. The system is shadow banking, and dark pools (even Buffett owns a shadow bank). Fed is exploring ways to back up debt held by nontraditional banks. The system can not deleverage. Collateral once out of the purview of the government (CBs) becomes a problem, as their claim on that money, seigniorage, is broken. 2008 was a collateral hole which formed in the US economy, acerbated by capital flight caused by war, corruption being a secondary byproduct. The cottage industry in tax havens had been in place for years before the event. The present rush into government bond (funds) is the biggest head fake in financial history. Powell is working to save hedge funds (through REPO) and corporate debt, Fed being a servant to those interests since 2009. If you want to destroy a market, blow the biggest bubble you can, then step back.

    • Iamafan says:

      The system can not deleverage.

      People should remember these wise words.

      In other words, someone else will. Or, they will force it.

      • VeryAmused says:

        “The system can not deleverage.”

        There is no such thing as a system that cannot deleverage. Valuations do not work like that.

        I will agree that the system, at points in time, will, with sane and insane encouragement, leverage up immensely and not deleverage without one hell of a fight.

        I believe the a new bout of deleveraging started awhile ago. The virus has just accelerated the inevitable.

        People should remember these wise words.

      • Unamused says:

        The system can not deleverage.


        Worse, it appears that the distortions caused by financialisation of the US economy, at least, ensure that it cannot ‘grow’ unless it piles on even more debt, which contradicts the notion of ‘growth’.

        To put it simply, nothing of real economic significance can happen in the US unless the Financial Industrial Complex and dominant corporations get such a thick percentage that it may not even be worth doing at all. There’s little point in borrowing at 5% to expand company operations when your expected return on your investment is 5.1%.

        Similarly, there’s little point in accumulating savings at 1% when inflation is at 2%. Where does the difference go? It goes uphill, with the rest of it. This makes capital accumulation difficult in the extreme, leaving debt as the only resort.

        Worse still, the FIC is depending on future economic ‘growth’, and that is increasingly prevented by the debt it has itself imposed, one way or another, on the present. The FIC also has obligations it must meet, and unless the economy grows in time it will be unable to do so.

        The US economy cannot ‘grow’ out of its debts because it has been eating its future for years. It can only continue to eat its future to pay for the past and the present until there is no future left. And western economies are nearly there.

        When they said ‘unsustainable’ they meant unsustainable.

        • Corporate debt is better because they have revenue, which they can expand by paying more interest than government bonds. USG runs its books like a startup/unicorn. Inflation in US wages was offset by temporary advantage in the use of offshore labor. Once that ends expect real inflation to match asset inflation (30% YOY?). They printed the money, they lost control of the money, and the money returned.

        • Unamused says:

          the money returned

          To the billionaire class. Still, trillions in debt, with more trillions to come, blow your spin out of the water.

          USG runs its books like a startup/unicorn.

          Trying to shift the blame from corporations to the US government doesn’t help you because the US government is of, by, and for corporations. All you can do is what every corporatist in the country does: use the government as your scapegoat while using it as your proxy.

          Corporate debt is better because they have revenue, which they can expand by paying more interest than government bonds.

          Non sequitur. Corporations can expand their debt by paying more interest, but not their revenues.

  34. Longtime Listener First Time Caller says:

    To paraphrase Sequoia, your unicorn just became a mule.

  35. OutWest says:

    Wolf –

    Since so many people are probably looking to preserve capital, perhaps you could do an article on the topic. Or maybe you have.

    I have money in a Vanguard Money Market Fund but even those seem risky in this environment and rates are plummeting.

    12 month CD’s pay 1% at my bank including FDIC insurance. I could sleep better with that.

    Looking for bullet-proof ways to preserve capital as the wheels come off this thing!

    • Iamafan says:

      It depends how much money you have. If you have a balance higher than the FDIC Insured limit ($250k), you MAY need to protect your investment with Treasuries. This is the reason why your Vanguard MMF is either Federal or Treasury only unless you opt to use another fund. Or else, they can be gated.

    • Bobber says:

      Don’t be afraid to lose money, as long as you lose less than everybody else. This is why treasuries are rallying. A loss equal to a year of inflation is a wonderful thing, when others have lost 10%-50.

      Wealth is a relative concept. If your share increases, you command more of the “real” wealth.

      • THAT… I will meditate on. Seriously. But… WHAT ABOUT COVID 19!? If I get sick, but get a few people sicker than me, will I be okay?

        (Sorry. And there we’d gone a whole minute talking about economics instead of the plague. It was nice.)

  36. Rcohn says:

    30 year bond yield down almost 30 basis points to below 1.30%
    This in the context of a trillion dollar and increasing deficit .
    Bonds are starting to price in a depression

    • Iamafan says:

      I like to repeat my comment above. The Fed should sell its Treasuries to increase the SUPPLY of Treasuries in the secondary market and stabilize the YIELDS in the longer bond market.

      Yeah, reverse QE.

  37. Michael Engel says:

    1) Oct 1987 black swan have landed on the resistance line coming from :
    support line from : Oct 1973(L) @ 60.96 to Aug 1982(L) @ 102.20 //resistance line draw a parallel line from Nov 1980(H) @ 141.96.
    2) Oct 1987 was a backup, a test, LPSY, the last opportunity to get in and buy.
    3) Today might be another test, SPY test, on low volume. No guaranties.
    4) Bubble up// bubble down above and below SPY backbone :
    take Jan 2018(H) to Sept 2018(H) and a parallel line from the bottom
    of Apr 2018.
    5) Things can always change fast.

  38. Social Nationalist says:

    Reminds me of early 2000 when the credit lines had begin to shrink. Census was making data better than it should have and issues began to sink in, but it wasn’t until the 3rd quarter the slowdown really showed itself.

    The virus is speeding things up by rattling credit markets. Weak hands in Energy and CRE will fall first. Then they will come for the tech companies.

  39. Lisa_Hooker says:

    Traders buy in during the last 20 minutes Friday.
    Traders practice catching a falling knife over the weekend.

    • TownNorth says:

      Up 600 points in the last hour. I guess volatility is the new kid in town.

  40. Michael Engel says:

    1) SPY, a lot of invisible hands buying at the bottom.
    2) SPY today had a test of the Feb 28 lows. Market makers are happy because the daily vol was falling. It show that the panic selling at wholesale prices is over and its time to move on.
    3) SPY weekly was stopped on top of the cloud. SPY bounced backup
    4) SPY weekly is a long legs doji on high volume. The market
    hesitate, didn’t know where to go.
    5) The weekly chikou is above the cloud, T+K and almost
    on the close of the candle in the back. Chikou might move up above price and T +K in the next few days, above resistance.
    6) SPY body (open to close, no wicks) was much smaller in the last two days than the previous six out of seven days.
    7) Dr. Mandelbrot is resting in heaven.

  41. Joe in LA says:

    I just read a story in the NYT that Federal Reserve Bank of Boston President Eric Rosengren is advocating for the Fed to expand the kinds of assets it buys. Does that mean the Fed wants to get authority to buy stocks outright? Is this likely?

    This all sounds Karl Marx for the country club set….

    • Wolf Richter says:

      The NYT wants the Fed to buy NYT shares and bonds. That’s all. For the NYT, inflation (subscription-price increases) is never fast enough; interest rates (cost of funding for the NYT) are never low enough; and assets prices (NYT stock) are never high enough.

    • Michael Fiorillo says:

      We’ve had socialism for the rich for quite a while now.

      And why not, since wealth is the sole metric of worthiness, right?

      If you’re one of the Prolz, you have three choices: take out a loan and get “training,” move, or die.

  42. Iamafan says:

    Let’s start a discussion here. I created a pic of what I think the Fed can do.


    I really think the Fed can do something different that its usual tools like money printing, etc. Yield is dropping too fast causing a ‘deflationary’ effect. The demand for safe assets are going wild.

    • Unamused says:

      I really think the Fed can do something different that its usual tools like money printing, etc.

      Interesting, but no.

      Finance can do little more than shuffle the liabilities around in shell games that obscure the problems, ensuring the economic extraction continues until the parasite kills the host and the system collapses. I like you, but all you’ve done is come up with another such game. It cannot solve the problem. My apologies.

      The Fed will have no choice but to assume more trillions in toxic financial waste, just like last time. You can bank on it. Clawing back the ill-gotten gains of the FIC won’t help because that would crash the real economy by crashing the financial economy that controls it. At this point killing the parasite would also kill the host. It’s a hostage situation with no possible positive resolution.

      Huis clos. There is no exit. The FIC has made certain of it.

      I did not make the decision to distance myself and mine from the prevailing system lightly. I made it under extreme duress after careful consideration over many years, and under the circumstances I am more convinced of the wisdom of that decision with every passing year.

    • You had me at ‘deflationary effect’. Yields go up how does USG pay the interest on it’s debt much less its deficit spending ways. Would be ironic if the candidates advocating MMT are not elected and the candidate who wins adopts those policies. Just not sure if rising bond yields correlates with economic growth at this juncture, or merely brings hyper-stagflation, or stag-deflation if asset prices crater while prices rocket higher. The downside to this is volatility, and Fed’s new inflation overshoot policy allows for short term extremes in order to achieve a future inflation mean to which we may all revert someday, volatility fostered in order to achieve stability.

  43. nick kelly says:

    The Black Swan memo is great stuff but for the vastly more indebted than 2008 US corporate sector, especially the huge swath rated BBB ( one above junk) it will be too late.

    The trap has sprung.

  44. Wisoot says:

    After the Fed was audited for the very first time, it exposed the list of bung sizes to which banks during the 2008/2009 system failure. All kept secret at the tine and revealed after much feet dragging. Its not what they do they fear you knowing, its why they do it. Suggest you review this llist now then see who owns what and who directs what and when they moved. Reading the top 15 is insight enough, hindsight, knowing what we know now, tells much about the thinking behind what will happen next . . . If . . .factoring in the release of virus was by the same directors. And who got hit by the virus . . .first . . . Let it percolate – meditate – dont try too hard – allow all to be revealed – if I hear you – I’ll send you my insights.

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