Frank Holmes on Bloomberg March 2020

Extraordinary times call for extraordinary measures, as they say, and this past week has been nothing if not total confirmation of that adage.

As of Friday morning, the number of confirmed coronavirus cases in the U.S. stood at more than 86,000. That’s now more than any other nation on earth, including China. New York City, home to roughly half of all U.S. cases, appears to have become the new global epicenter of the pandemic.

Hospitals in the hardest-hit areas of the countries “have passed a tipping point,” writes the Wall Street Journal, with New York having to quickly set up makeshift treatment centers and morgues to meet the spread of infection.

The news comes at a time when President Donald Trump is weighing whether the “cure”––social distancing, business closures and more––is worse than the problem itself.

To be clear, the “cure” has taken an unprecedented toll on the U.S. and world economies.

Initial jobless claims soared to a new record high of 3.28 million people as layoffs around the country have accelerated. As recently as February, the weekly figure was little more than 200,000, a historically low number, showing just how rapid the economic deterioration has been. The tidal wave of people seeking jobless benefits this week was so great, in fact, that state-run unemployment websites reportedly couldn’t handle the traffic and were crashing.

u.s. initial jobless claims soar to a new record high (by far)

click to enlarge

In a press conference following the data’s release, Treasury Secretary Steven Mnuchin called the jobless number “not relevant,” saying that the president “is protecting those people.”

Indeed, “protection” is on the way, with Congress and the Federal Reserve both opening the stimulus floodgates as we’ve never seen before.

Trillions in Assistance Headed to U.S. Families and Businesses, Including Airlines

On Friday, Congress approved and President Trump signed into law a $2.2 trillion emergency economic stimulus package, the largest in U.S. history, meaning sometime soon, most American adults will be receiving a one-time payment of $1,200 in cash. (The median personal income in the U.S. as of last year was around $40,000, well below the $75,000 cutoff point to receive the full amount.) On top of that, families will receive $500 per child.

Remarkably, the final vote in the Senate for the landmark bill was a unanimous 96 to 0, which demonstrates to me just how united lawmakers are in getting help to struggling families and businesses. In 2009, when the Senate voted in favor of the $787 billion stimulus bill to mitigate the impact of the financial crisis, the tally was 60 to 38––just barely enough to pass.

Included within the stimulus package is $50 billion in earmarked liquidity for coronavirus-hit domestic airlines. This includes $25 billion in loans and guarantees for passenger carriers and $25 billion in direct grants.

I’m pleased to see that airline stocks have bounced off their lows as deep-value investors such as Warren Buffett have sought discounted exposure to an industry that I believe most people consider essential in today’s interconnected world. Some 2.8 million passengers flew every day in and out of U.S. airports in 2019, according to the Federal Aviation Administration (FAA). The industry also generated a whopping 10.6 million U.S. jobs, or 1 out of every 15 jobs.

As for the Federal Reserve, the central bank is poised to “spray trillions of dollars into the U.S. economy,” according to Bloomberg. As of March 26, the size of the Fed’s balance sheet had shot up to a never-before-seen $5.25 trillion, far beyond anything it did in the months and years following the financial crisis.

the federal reserve's balance sheet just topped $5 trillion... and it's just getting started

click to enlarge