Friday, February 28, 2020

Covid-19 Outbreak Meets Another Catastrophe Bond Trigger Condition

From Zero Hedge:

The outbreak of Covid-19 in China, South Korea, Japan, Iran, Italy, and other parts of Europe and the Americas has likely "met another of the conditions within the trigger mechanism of the World Bank's pandemic catastrophe bond transaction, raising the chance that noteholders face losses in the coming weeks," reported Artemis, a market intelligence firm with the focus on catastrophe bonds. 
The World Bank's $320 million IBRD CAR 111-112 pandemic catastrophe bond issue supports its Pandemic Emergency Financing Facility (PEF), is now at risk of default as the virus rapidly spreads across the world.
Artemis said pandemic cat bonds "can be triggered if the outbreak reaches pandemic levels and meets certain pre-defined trigger criteria, in terms of officially confirmed cases, growth rate, fatalities, and international spread." 
Artemis notes that several conditions have already been met, which means the cat bonds could be triggered in the next couple of weeks: 
The first condition that was met was for the number of confirmed deaths occurring in China, the source country of the outbreak.
As deaths in China have continued to escalate, reaching some 2,744 as of today (Feb 27th), this trigger condition had already been met.
Now, Iran has reported deaths in the country from the coronavirus have reached 26, which is higher than the trigger condition concerning international spread of any outbreak, further heightening the risk of default to the pandemic catastrophe bond notes.
Artemis notes Iran's confirmed cases and deaths must be reported through the WHO to become official:
We have to stress here that this is the Iranian government's figure, not the official WHO reported number that would be used to determine whether any default or payout was due. So while the number has surpassed the point required by the trigger, it would still need to be reported as such by the WHO and also be subject to a calculation agent review as well, before it would be determined whether a payout came due.
But at 26 already it seems like we can consider that this second important trigger condition for the pandemic catastrophe bond will now be breached.
As a reminder, the World Bank facilitated pandemic cat bonds in two separate issues
The World Bank facilitated pandemic catastrophe bond is structured into two tranches, issued to investors as $225 million of Class A notes and $95 million of Class B notes, with both exposed to a coronavirus outbreak, but under different terms and reflecting different levels of risk.
The Class A notes require a coronavirus outbreak to result in over 2,500 deaths (already met in China alone), with at least 250 cases being confirmed on a rolling basis, as well as more than 20 deaths being seen in at least one country overseas (now met in Iran), for an initial 16.67% loss of principal to this tranche to occur.
Higher losses require higher numbers in all cases and there is a stepped payout mechanism for both tranche of notes.
The Class B notes are the more likely to face triggering under a qualifying outbreak event, as only more than 250 confirmed deaths are required, alongside the other factors, for a payout to be due.
The trigger criteria for the Class B notes is more complicated though, as different payout rates are applicable depending on how many countries outside of the originating country see more than 20 confirmed deaths each. Right now it looks like this is just one country so far, in Iran, although Italy has now seen 14 deaths and South Korea 13.
Alone this isn't going to trigger the pandemic cat bonds, as other conditions also need to be met, as defined in the underlying insurance contract terms.

Artemis said, "there is no need for a pandemic to be declared by the WHO, or any other body, for the cat bond to trigger." 
And here it's is: "the earliest we could see any triggering of the pandemic catastrophe bond, at any percentage level of payout, will be after March 23rd and only if the growth rate is positive and meets the necessary terms of the trigger contract language as well." 
As "two conditions of the trigger met" – Artemis warns: "The market will consider the risk heightened further for the pandemic catastrophe bond notes." 
The World Health Organization's (WHO) Dr. Michael Ryan was quoted on Friday as saying, "declaring a pandemic would be unhelpful." As to why WHO officials continue to downplay the virus outbreak remains a mystery, or maybe not - perhaps declaring a pandemic is terrible for the cat bondholders and financial elites who run global financial markets. 

Democrats Have No Choice Left But To 'Feel The Bern'

Now that Bernie Sanders has been informed that the Kremlin is trying to support him (whether he likes it or not) he has officially become a viable candidate who may actually desire to make real systemic change. In a way the Russia connection accusation can now be worn as a badge of honour by Gabbard and Trump due to them truly being a limited threat to the status quo. Sanders got a gentler version of this form of Deep State virtue signaling by just being told that Russians are pushing for him on their own, meaning that there “may be hope for him yet” to turn around and jump right back on the Beltway bandwagon. Ultimately, the #Russiagate tactic did not disway voters from electing Trump but it did eat up a massive amount of his precious time/resources as US President and put an invisible Iron Curtain between any possible positive cooperation between America and Russia. This “collusion” revelation of dubious validity for Sanders will probably have a similar impact on his campaign and possible time in the Oval Office as it did with Trump, but regardless he is the only chance the Democrats have of winning in 2020.
Democratic and Republican voters are obviously different in their beliefs falling onto one of two different sides of every wedge issue, but one thing unites all American voters – no one actually cares about Russia or really any foreign power. Over the last 6 months, less than 0.5% of Americans said their primary concern was “Situation with Russia” based on polling by Gallup. (Gallop lists all concerns with a tiny response at 0.5% meaning that literally one person could have listed this as their big issue and it would be rounded up to half a percent). If we then take a look at the biggest concerns that Americans do have, then not surprisingly it is things like the economy, healthcare, government/poor leadership, immigration, poverty and surprisingly unifying the country.
This has been a consistent fact for decades, the American voter is vastly more concerned about things that affect them personally than some greater threat or ideological goal. America is a society of individualists so naturally most people’s demands from power are based their own individual needs. There is nothing surprising here, except for the desire to “unify the country” which has not been a priority in previous years.
Photo: Bernie speaks to youth better than men half his age
Perhaps some people in the Beltway are concerned with Russia, but the voting masses are not and the narrative that “Bernie is getting help from Moscow, but then again he didn’t ask for it and is not involved” is very weak sauce. This will not dissuade any real large number of people away from voting for him as the Democratic Candidate.
What Sanders offered in 2016 that got crushed by inner Democratic Party moves and Hillary Clinton is still fresh and relevant today – “Free” Stuff and cutesy poo Socialism. Just like last time the only hope the Dems have is the man from Vermont with the thick New York accent as all the other candidates are dismal offerings to the public. Sanders’ position is what a large portion of the population wants. Is it viable and can Sanders actually do it? These questions do not matter as the average voter does not think about them, they want their college debt annulled and medical care guaranteed and who cares how it gets done. Sanders promises this clearly and bluntly while the others are too busy looking at percentages from focus group reactions to shift their image from day-to-day. Bernie is really the only choice for the Democrats to compete with Trump.
Graphic: A simple message that is deeply relevant to Americans is what gets votes
Biden managed to throw away all the years of positive brand recognition that he had attained thanks to standing next to Barack Obama by allowing #Russiagate to meltdown into #Ukrainegate expositing his corrupt dealings in America’s newest colony. Additionally there are lots of videos of Biden inappropriately touching children, which is far more important from an electoral standpoint. Biden had it and lost it.
Tulsi Gabbard as a female veteran (who doesn’t look White) should have gotten the Left excited, but instead they trounced her as she seemed unwilling to play ball. Yang has one idea (Universal Basic Income) and the complete lack of personality needed to push it. Elizabeth Warren has all the problems of Hillary Clinton while still managing to have less humanity on camera. Stuffy anti-gun nut Buttigieg will probably give the Republicans the largest amount of minority votes seen during our lifetimes. Bloomberg is a boring version of Trump who seems to be obviously trying to buy his way into the election, which will ultimately backfire. Who is this Amy Klobuchar woman and how did she actually get a tiny amount of delegates? Bernie’s competition is a joke.
Sanders, despite being the old rich bald White guy the Left claims to loath, is head and shoulders above anyone else in terms of his ability to deliver a message and get a positive reaction out of people. Basically, he has the showmanship and the ability to relate to people well enough to get the youth and minority vote. Most of all, he promises free stuff that he is going to tax us for which is the naive instant gratification solution that the masses want. The entire country has brutal college debt and the fear of life-crushing medical debt. Even though Sanders has almost zero chance of actually getting Scandinavian Style Socialized Medicine or a Student Loan Amnesty accomplished, just the promise alone is very tempting. When faced with the option of possibly getting tens of thousand of dollars of debt cancelled vs. a 0% chance of that happening with Trump, well you can see whom debt ridden Americans will be casting their ballots for.
Yang’s Universal Basic Income also speaks to the millions of voices fighting to get from paycheck to paycheck but he was unable to deliver it. Sanders has the charisma and the big pleasant sounding simple solutions that the common man will buy into. If the Democrats again somehow try to sabotage Bernie, then they will be the ones feeling the “Bern” as they will be utterly crushed by Trump, allowing the Republican party to continue its transformation from the perception of a pro-business party to one of a multi-racial pro-Constitutional populist party. The DNC can either back someone they don’t like or shoot themselves in the foot, but judging by their overall irrational political views and emotion driven logic they are probably already trying to put the “magazine” in the revolver as we speak.

US Spy Agencies Monitor Covid-19 Spread, Warn Of Threat To India's 1BN+ Population

From Zero Hedge: 

This could actually be a rare example of taxpayer money being put to good use by US intelligence agencies for a change, instead of the usual overthrowing governments, funding fanatical "rebels", and eavesdropping on domestic communications.
Reuters reports that US spy agencies are closely monitoring the coronavirus and as a global threat to the homeland, and foreign governments' ability to respond:
U.S. intelligence agencies are monitoring the global spread of coronavirus and the ability of governments to respond, sources familiar with the matter said on Thursday, warning that there were concerns about how India would cope with a widespread outbreak.
CIA headquarters in Langley, VA. Image source: Library of Congress
Both India and Iran are said to be of top concern for intelligence officials, given especially India's densely packed population of over 1 billion people.
The New York Post writes
Spy agencies in the US are monitoring the spread of coronavirus across the world — with a focus on India — as officials grapple with concerns over the country’s ability to handle a widespread outbreak.
India has confirmed just three cases of COVID-19 in the country, while its government says 23,531 people are under observationthe Economic Times reported.
As for Iran, it's widely believed the Islamic Republic's leaders are concealing the true numbers in the hardest hit Middle East country, while lashing out at Washington for stoking fear and "propaganda" - as President Hassan Rouhani put it in a Wednesday speech.
A new report in The Daily Beast  cites health researches who say Iran's true numbers of infected could be closer to 18,000 and not the current official figure of over 240.
India's Economic Times: "Places like Mumbai’s Dharavi slum can facilitate contact with virus-bearing droplets emitted by breathing, talking, coughing or sneezing."
Secretary of State Mike Pompeo said earlier this week that US remains “deeply concerned” Tehran is covering up the true level of its outbreak.
Meanwhile, the Reuters report notes further that the House Intelligence Committee is being regularly briefed by US intelligence
“The Committee has received a briefing from the IC (intelligence community) on coronavirus, and continues to receive updates on the outbreak on a daily basis,” a House Intelligence Committee official told Reuters.

“Addressing the threat has both national security and economic dimensions, requiring a concerted government-wide effort and the IC is playing an important role in monitoring the spread of the outbreak, and the worldwide response,” the official said.


Thursday, February 27, 2020

Boston Considers Income-Adjusted Parking Tickets

The Boston City Council is considering a new system for parking tickets that would set the amount paid by violators based on their income. The proposal newly elected city councilor at-large Julia Mejia would implement the system of income-adjusted fines — a system that could trigger some novel legal and political questions.
Mejia has declared that she is “introducing legislation on income-adjusting parking tickets so low-income families don’t have to decide between paying a parking ticket or putting food on their table.”
[ZH: Or maybe not breaking the law?]
Drivers could soon pay different prices for parking tickets in depending on how much $ they make. A hearing order on this is expected to be held at a City Council meeting today. Should parking tickets should be income driven or remain the same for everybody? @wbz
28 people are talking about this
However, it also means that the wealthier citizens will be charged more for the same offenses. The implications of such a system is fascinating for those of us who have complained (as recently as this week) of cities using parking and traffic tickets as a form of revenue. This proposal would seem to reinforce the concept of tickets as a revenue-generating source. The alternative model is the tradition one. Historically, the amount of tickets was not defended as a revenue source but a reflection of the costs of such violations for the cities. Under that approach, citizens are paid the amount that the city deems as reflective of the misconduct and its costs.
If we treat these tickets as a revenue source (adjusted like taxes for wealth levels), the question is what other areas should also be adjusted. How about environmental fines or housing fines or misdemeanor fines? Tickets are imposed for conduct that could have been avoided in compliance with the law. There are a host of similar fines for such violations.
The legal dimension is rather fluid and uncertain.
Charging wealthier citizens for the same acts can raise equal protection and other concerns. However, wealth is not a suspect classification. Thus, the courts would likely review such a proposal under a rational basis test, which is easily satisfied. Yet, this is a highly novel proposal that could lead to equally novel case law. There is an alternative approach to an income-adjusted fine system, which raises troubling issues. Instead, if Boston wants to protect low-income families, it could leave the fines as uniform and have a special program for deferred payments or even public support for low-income citizens. That would leave the tickets as “priced” at the cost of the offense or violation while allowing for public support of families. That system would also more clearly and directly show the costs of such a system.
One other concern with this approach is that it will only accelerate the trend toward using tickets for revenue. Once uncoupled from the expectation of uniformity or the inherent costs of violations, Boston would be free to redefine tickets as a taxing mechanism. Such predatory measures are already out of hand in our cities like Washington, D.C. and Chicago. The Mejia proposal would reduce the political costs of such alternative tax techniques.

For those reasons, I have serious reservations about the Mejia proposal from both legal and economic perspectives.