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Fed's Bullard: Coronavirus shutdown not a recession but an investment in survival – TheChronicleHerald.ca

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By Howard Schneider

WASHINGTON (Reuters) – In normal times massive unemployment and a collapse in economic output would be tragic.

This time, as the coronavirus cloisters millions of Americans and shuts down the U.S. economy, it should instead be saluted as an investment in public health that lays the groundwork for a rapid rebound.

That is the view of St. Louis Federal Reserve President James Bullard, who argues that a potential $2.5 trillion hit coming to the economy is both necessary and manageable if officials move fast and keep it simple. It may seem an unconventional view in a moment of global anxiety, but Bullard argues the shutdown measures now being rolled out are essential to shortening the course of the pandemic.

They must also be coupled with massive federal government support to sustain the population through its coming isolation and prime the economy to pick up where it left off.

To Bullard that means:

Match any lost wages.

Match any lost business.

No questions asked.

No arguments about bailouts or “moral hazard” – the sticky issue of publicly funded rescues of bad actors.

And, above all, when the losses are tallied, don’t call it a recession.

Recessions are the ordinary – even predictable – contractions in activity that mark the end of normal business cycles. Bullard, who has earned a reputation inside the Fed for a penchant to rethink problems and reframe debates, said this is anything but.

“Frame this as a massive investment in U.S. public health,” Bullard said in a Friday telephone interview.

“CRAZY HEAVY” JOBLESS CLAIMS? THAT’S OK

Bullard’s comments came as U.S. lawmakers debated emergency economic measures worth $1 trillion or more, a figure Bullard says may underestimate what’s needed.

Nonetheless it is still opening old wounds from the 2007-2009 economic crisis over who deserves what, whether corporations should get help, and how generous the government should be with workers.

The spread of the coronavirus has touched off those discussions worldwide, but with an urgency that is shredding old hesitancies. United Kingdom Prime Minister Boris Johnson’s government on Friday announced it would pick up 80% of the national wage bill for the next three months.

Many Fed officials have called for a stronger U.S. fiscal response in recent days, but Bullard went a step further with an explicit call for the U.S. government to match what is being lost dollar for dollar.

For now, he said, economists and policymakers should turn their view of data on its head because little will make sense otherwise.

The recent jump in unemployment claims? That’s a win, a sign that so-called government stabilizers are being used. The hope should be that such programs get “crazy heavy use” in coming weeks, he said.

If economic output falls by half in the second quarter, that’s a win – not a record-setting defeat. It means businesses have heeded orders to close and customers to stay home.

“We are not trying to move production and income up in the second quarter. We are trying to keep it out of the second quarter,” Bullard said.

“You want capital to just sit in place. Switch off the factory … Then switch it back on.”

30% UNEMPLOYMENT A POSSIBILITY

Bullard was among the large group at the Fed who at first felt the virus risk would pass with little economic damage, as have other similar health scares such as SARS and ebola.

They are all now trying to catch up, with emergency rate cuts, extensive new programs to keep markets working, and other steps to aid an economy grinding to a halt.

In line with his colleagues, he said he was ready to do more, including putting more of the Fed’s direct lending powers to work if needed.

“It is early days and we are willing to do more. I am willing to do more,” he said.

Bullard was blunt about the dilemma posed, saying the economics profession was “reeling” as it tries to understand what is taking place.

For now what’s usually good – jobs and production – are bad, and the headline numbers are going to be staggering.

Bullard’s ballpark estimate is that unemployment could hit 30%, higher than in the Great Depression and three times more than the 2007-2009 recession. Output in the second quarter could be half the norm, a hit of about $2.5 trillion.

That is unavoidable if the virus is to be contained through “social distancing” or government orders to stay at home.

KEEP EVERYONE WHOLE

All this needn’t wreck the economy. Legislation working its way through Congress has begun to roll out some support.

Bullard said the “core aim” can be kept simple: “keep everyone, households and businesses whole through the second quarter.” Do it with a quick expansion of unemployment insurance to cover lost wages, and through grants and loans to business to cover losses from “unemployed” capital.

From a macroeconomic standpoint, he argues, it is a tractable problem.

Again using back of the envelope math and a 30,000-foot view, he said perhaps half a trillion dollars of lost output will be accounted for by necessarily lost consumption – all the movie tickets and clothes no one buys and trips people will not take.

As to the other $2 trillion, Bullard said the federal government should borrow and distribute it to people and business.

“That is completely feasible,” in service of limiting economic damage, he said. “This is a planned, organized partial shut down of the U.S. economy. We are throttling back output on purpose to meet health guidelines… Transfer income to affected households.”

“Call it pandemic relief,” Bullard said. “Get transfers to businesses that are affected heavily, and come out on the other side. Identical economy. Produce the same goods as before.”

(Reporting by Howard Schneider; Editing by Dan Burns and Daniel Wallis)

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Big Oil's interest in renewable energy investments expected to waver: report – Yahoo Canada Finance

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Big Oil's interest in renewable energy investments expected to waver: reportBig Oil's interest in renewable energy investments expected to waver: report

CALGARY — Budget cutting in response to the twin challenges of COVID-19 demand destruction and low oil prices mean the world’s oil and gas industry will likely spend less on renewable energy going forward.

But a report from consultancy Wood Mackenzie says that won’t likely slow the overall investment in renewables — fossil fuel players really weren’t putting much money into it anyway.

“In a US$60 per barrel oil price environment, most companies were generating strong cash flow and could afford to think about carbon mitigation strategies,” said Valentina Kretzschmar, vice-president, corporate analysis, at Wood Mackenzie.

“But now … all discretionary spend will be under review — that includes additional budget allocated for carbon mitigation. And companies that haven’t yet engaged in carbon reduction strategies are likely to put the issue on the back burner.”

Earlier this week, Calgary-based oilsands giant Suncor Energy Inc. announced it would cut its 2020 capital budget by 26 per cent or $1.5 billion in response to lower global oil prices linked to a price war between Saudi Arabia and Russia.

Two previously approved projects were put on hold for as much as two years: A $1.4-billion plan to install two cogeneration units at its Oil Sands Base Plant in northern Alberta that would have reduced greenhouse gas emissions, as well as a $300-million wind power plant in southern Alberta.

But the company insists it still intends to meet its environmental targets.

“We’re committed to our 2030 goal to reduce the GHG intensity of our operations by 30 per cent,” said Suncor spokeswoman Erin Rees. “Commissioning of the cogen was originally slated for 2023.”

Fellow oilsands producer Cenovus Energy Inc. has cut its capital spending plan for 2020 by 32 per cent and, although the details haven’t all been worked out, spokeswoman Sonja Franklin said it remains committed to its target of net zero GHG emissions by 2050 and a 30 per cent reduction in carbon intensity per barrel by 2030.

Choosing fossil fuel investments over renewables is like Kodak investing in film after inventing the digital camera in the 1970s, said Greenpeace Canada campaigner Keith Stewart.

“The current oil price crash is a preview of what will play out in the coming years, as electric vehicles coupled with cheap solar and wind power do to oil demand what digital cameras did to the market for film,” he said.

“If oil companies can’t evolve to deal with investors increasingly concerned about climate risk, then we should make sure they don’t take their workers and communities down with them.”

On Wednesday, Spanish energy giant Repsol, which produces some of its oil and gas in Canada, said it would cut its 2020 capital budget by more than one billion euros (about C$1.55 billion), but would still maintain its target to reduce its carbon intensity for 2020 by three per cent compared to 2016.

It vowed to significantly increase its renewable power generation capacity and to reduce carbon dioxide emissions across all its businesses.

“With these measures, amidst the current extraordinary conditions, Repsol ensures the robustness of its balance sheet in the short term while it continues to pursue its goal to achieve net zero carbon emissions in 2050,” it said in a statement.

In its report, Wood Mackenzie notes that the five European oil and gas majors have committed to spend just over US$5 billion per year between them on zero carbon technologies in the near term, about nine per cent of their pre-crisis upstream development budget out to 2022.

But it notes the total renewable energy portfolio by the group, including those most focused on diversifying into renewables such as Repsol and Portugal’s Galp, is about 7.4 gigawatts of operational renewable capacity (a gigawatt is enough to power roughly 700,000 homes).

By comparison, Iberdrola, one of the world’s largest renewable power asset owners, has almost five times that capacity (32 GW, including hydro) and added almost three GW during 2019, it said.

Installations of both wind and solar continued to increase through the last oil price downturn, Wood Mackenzie’s analysis shows, because most investment comes from outside the oil and gas sector.

It adds that oil prices that average around US$35 per barrel reduce the returns from new oil and gas projects to a level where renewable investments can compete on an economically level playing field.

“Capital allocation is no longer a one-way street for Big Oil. Renewables projects suddenly look as attractive as upstream projects at US$35 per barrel.”

This report by The Canadian Press was first published March 29, 2020.

Companies in this story: (TSX:SU, TSX:CVE)

Dan Healing, The Canadian Press

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An Investment Opportunity for a Better Pharmaceutical Industry – Entrepreneur

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NowRx is improving the way we get our prescriptions.

March
29, 2020

2 min read

Disclosure: Our goal is to feature products and services that we think you’ll find interesting and useful. If you purchase them, Entrepreneur may get a small share of the revenue from the sale from our commerce partners.


It’s no secret to anyone that the American pharmaceutical industry is firmly entrenched in its ways. And that’s not necessarily a good thing for customers. Retail pharmacy is a $330 billion industry, driven by high medication costs and stringent means of delivery through brick-and-mortar stores.

NowRx, however, is disrupting the market. Founded in 2016, NowRx is spearheading innovations in technology, convenience and service, carving out a significant chunk of the pharmaceutical market. They say they’ve seen a 280 percent jump in revenue since 2017 and a 1,000 percent account growth rate since 2016, demonstrating clear resonance in a market that is desperate for change.

NowRx’s modern business model focuses on low-cost, highly automated micro fulfillment centers that facilitate same-day delivery to patients in cities across the U.S. Their fast, over-the-phone pharmacist consultations allow customers to get prescriptions quickly, cutting out the middleman pharmacies and reducing overhead to a fraction of what a regular pharmacy costs. In short, NowRx is pioneering a better, more convenient way for people to get the prescriptions they need.

As NowRx continues to grow, it’s looking for new investors to help it continue shaking up the field. Right now, you can invest at any level you’d like, giving you the opportunity to be on the ground floor of an exciting new innovation in the pharmaceutical industry.

You can find NowRx on the SeedInvest platform, which offers ground floor investment opportunities at highly vetted startups on the verge of exploding into the mainstream. Read more about NowRx here.

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Read Investing in the time of COVID-19 – MoneySense

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Photo created by freepik – www.freepik.com

COVID-19 has changed life as we know it. It’s still hard to fathom exactly what’s going on, both with the markets, which fell by about 6% in Canada and 8% in the U.S., and in life. My kids are now home all of the time, FaceTime cocktails are now a thing (and more fun than I had expected), and date night consists of a quick trip to the grocery store. Romance in Aisle 1? 

I’ve also had a lot of talks with friends about the economy and the markets. They tell me their portfolio is down a ton, I say mine is too, though I don’t know by how much because I’m not checking. I know they’re down by 30%, but I don’t need to obsess over the specifics. I’m not selling because, what’s the point? My portfolio has already fallen and you only lose that money if you liquidate. I still have at least a couple decades to go before I need those savings, and my hope is that the markets, like they always have, rise at some point before then. 

Still, all of this is confusing and it’s hard for anyone, including a personal finance journalist, to know why the market is reacting the way it is and what they should do. So I asked four smart people for their thoughts on the current state of the markets. Here’s what they had to say. 

Norman Raschkown

President and portfolio manager at TenSquared Investments

People want to come up with comparable periods to help them put this into context. A lot of people are talking about 2008 because of the severity of that market shock, but it’s different. In 2008 the real problem was excessive leverage, so the solution was backstopping banks and re-capitalizing them. 

This time the issue isn’t financial. Cutting rates isn’t going to do anything. It’s not like if there’s a cut everyone is going to get back to work. The governments do have the right idea of getting cash in the hands of the public to help them get through this period. But the reality is that we don’t know how long this will last and what the fallout will ultimately be.  

The biggest risk is how long this lasts and how deep the impact is in the U.S.—but the U.S. is behind in terms of taking it seriously. So, the best case is that it lasts through the summer. My best guess right now is that you’re looking at having a recession—two quarters of negative growth—but there will be enough pent up demand and you will see positive growth by the third quarter of the year and the recession will be over.  

There are opportunities for people who have some cash and we have started to dip our toe in and make selective purchases of high-grade stocks. Canadian banks have gotten really cheap and they’re offering yields of 7%. It’s good to remember that in 2008 and 2009, none of the Canadian banks cut their dividends. We also added to [our holdings of] Canadian Tire, which is down 50% from where it was months ago. It’s an example of a high-quality business, and when things recover, they will be well positioned. In this environment, you don’t need to speculate. 

Gaelen Morphet

Chief investment officer at Cinnamon Investments

We’re seeing incredible values out there, and it’s exciting from an investment point of view. The big question is timing and where we see the bottom. If you were to look out 10 years, I would say there’s a lot of opportunities to make money right now—and that’s the biggest message I can deliver right now, given my 35 years of experience. Over the medium term, though, how long does this go and how depressed does the stock market get? 

The stock market does discount that in advance, and so that’s why we’ve seen such a swift reaction and this pullback. I’ve been involved in 1987, 2000, 2008 and 2011, and this one is the swiftest—and the impact to the economy, or at least the perceived impact to the economy has happened much faster. If this is short, then there’s an unbelievable opportunity here, because as soon as the market sees some signs of improvement, it will respond accordingly. If we get any good news, I expect the rally to be swift and large—but it may not last, that’s the problem. You have to be careful in times of so much volatility. 

There are a lot of good financial stocks that have been absolutely crushed, and they’re trading around book value with really decent yields. There are also companies that are always expensive that investors never feel comfortable owning, but if they focus on the basic investing tenets of low price-to-earnings ratio and a great balance sheet, then you can find things you normally couldn’t buy. I’m looking at CGI (a Canadian tech company that’s down 30% since Feb. 21) and Brookfield Asset Management (down 38%), which has had a huge run. I’m watching those two closely. 

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