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For The Record  

FTR #1116 Update on The Chinese Winter and the Coronavirus “Bio-Psy-Op”

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FTR #1116 This pro­gram was record­ed in one, 60-minute seg­ment

Intro­duc­tion: In our ongo­ing series about the Covid-19 break­out and the Chi­nese win­ter, we have dis­cussed the dam­age the break­out has done to the Chi­nese econ­o­my, our belief that the out­break is part of a desta­bi­liza­tion effort against Chi­na, and the invest­ments of Steve Ban­non asso­ciate J. Kyle Bass and, in turn, Bass’s polit­i­cal asso­ci­a­tion and prob­a­ble co-invest­ment posi­tion with Trump asso­ciate Tom­my Hicks, Jr.

Posi­tioned to prof­it as a result of a Chi­nese eco­nom­ic down­turn, Bass and Hicks may  well be prof­it­ing from Chi­na’s eco­nom­ic prob­lems, which are grow­ing more severe as a result of the out­break.

Now, many Chi­nese firms say they can­not pay their work­ers their full salaries–a devel­op­ment that will fur­ther strain the Chi­nese econ­o­my.

NB: With the eco­nom­ic con­se­quences of the out­break spread­ing glob­al­ly, Bass, Hicks et al would not nec­es­sar­i­ly have to be invest­ed in Chi­nese equi­ties to prof­it enor­mous­ly from this event.

New bank loans in Chi­na hit a record high in Jan­u­ary, reflect­ing the grow­ing need for cash to keep the busi­ness­es oper­at­ing and employ­ees  paid. The PBOC, China’s cen­tral bank, also cut its bench­mark lend­ing rate today as part of a push to ease the financ­ing costs for busi­ness. As the arti­cle notes, small and rur­al banks are most at risk–a stress test last year by the PBOC found that 13 per­cent of banks were con­sid­ered “high risk”.

As not­ed below, Tom­my Hicks brought in J. Kyle Bass to lec­ture to inter­a­gency gov­ern­ment net­works about Chi­na’s bank­ing sys­tem.

We review the fact that Bass is close to, and may well be a co-investor with, Tom­my Hicks Jr., a key mem­ber of Team Trump. Hicks, Com­merce Sec­re­tary Wilbur Ross and nation­al secu­ri­ty offi­cials are, in turn, work­ing to deny Chi­nese elec­tron­ics firm Huawei access to devel­op­ing 5G net­works, fur­ther ham­string­ing the Chi­nese econ­o­my.

Paul Krug­man, among oth­ers, has not­ed that Wilbur Ross was open­ly cel­e­brat­ing the coro­n­avirus as a boon to the Unit­ed States.

We high­light key aspects of this dis­cus­sion:

  • Tom­my Hicks is at the epi­cen­ter of Trump admin­is­tra­tion maneu­ver­ing that, ulti­mate­ly, will hurt Chi­na eco­nom­i­cal­ly (and will ben­e­fit the invest­ments of J. Kyle Bass.) Hic Over the past two years, the Trump admin­is­tra­tion has been grap­pling with how to han­dle the tran­si­tion to the next gen­er­a­tion of mobile broad­band tech­nol­o­gy. With spend­ing expect­ed to run into hun­dreds of bil­lions of dol­lars, the admin­is­tra­tion views it as an ultra-high-stakes com­pe­ti­tion between U.S. and Chi­nese com­pa­nies, with enor­mous impli­ca­tions both for tech­nol­o­gy and for nation­al secu­ri­ty. Top offi­cials from a raft of depart­ments have been meet­ing to hash out the best approach. But there’s been one per­son at some of the dis­cus­sions who has a dif­fer­ent back­ground: He’s Don­ald Trump Jr.’s hunt­ing bud­dy. . . .”
  • Hicks is not a gov­ern­ment offi­cial but has access to high-lev­el gov­ern­men­tal process, includ­ing (appar­ent­ly) CIA activ­i­ties. ” . . . . Tom­my Hicks Jr., 41, isn’t a gov­ern­ment offi­cial; he’s a wealthy pri­vate investor. And he has been a part of dis­cus­sions relat­ed to Chi­na and tech­nol­o­gy with top offi­cials from the Trea­sury Depart­ment, Nation­al Secu­ri­ty Coun­cil, Com­merce Depart­ment and oth­ers, accord­ing to emails and doc­u­ments obtained by ProP­ub­li­ca. In one email, Hicks refers to a meet­ing at ‘Lan­g­ley,’ an appar­ent ref­er­ence to the CIA’s head­quar­ters. . . .”
  • Hicks has used his posi­tion to arrange for J. Kyle Bass to net­work with gov­ern­ment agen­cies and offi­cials. Bear in mind that Bass is posi­tioned to ben­e­fit from a down­turn in Chi­na’s econ­o­my. ” . . . . Hicks used his con­nec­tions to arrange for a hedge fund man­ag­er friend, Kyle Bass — who has $143 mil­lion in invest­ments that will pay off if China’s econ­o­my tanks — to present his views on the Chi­nese econ­o­my to high-lev­el gov­ern­ment offi­cials at an inter­a­gency meet­ing at the Trea­sury Depart­ment, accord­ing to the doc­u­ments. . . .”
  • Hicks is no co-chair­man of the Repub­li­can Nation­al Com­mit­tee. ” . . . . Hicks lever­aged his Dal­las finan­cial net­work to become a top Trump cam­paign fundrais­er in 2016 and a vice chair­man of the inau­gur­al finance com­mit­tee; in Jan­u­ary, he was named co-chair­man of the Repub­li­can Nation­al Com­mit­tee. . . . ”
  • In addi­tion to his rela­tion­ship with Don­ald Trump, Jr., Hicks is net­worked with Jared Kush­n­er. ” . . . . Even before becom­ing the sec­ond high­est-rank­ing GOP offi­cial, Hicks was a fre­quent White House guest. He liked to have lunch in the White House mess with his half sis­ter, who worked for a time in the com­mu­ni­ca­tions oper­a­tion. . . .  Hicks would then stroll the halls, accord­ing to a for­mer senior admin­is­tra­tion offi­cial, drop­ping in to offices for impromp­tu chats with var­i­ous offi­cials, includ­ing Jared Kush­n­er. Those sorts of con­nec­tions have giv­en Hicks a con­ven­ing pow­er, the abil­i­ty to call togeth­er mul­ti­ple offi­cials. . . . ”
  • Again, Hicks net­work­ing can influ­ence pol­i­cy­mak­ing that could dam­age Chi­na eco­nom­i­cal­ly and assist Bass. ” . . . . ‘He basi­cal­ly opened the door for hav­ing a con­ver­sa­tion with peo­ple who I didn’t know but need­ed to know,’ said Robert Spald­ing, a for­mer senior direc­tor for strate­gic plan­ning at the Nation­al Secu­ri­ty Coun­cil dur­ing the Trump admin­is­tra­tion. The efforts, detailed in hun­dreds of pages of gov­ern­ment emails and oth­er doc­u­ments obtained under the Free­dom of Infor­ma­tion Act, show that Hicks had access to the high­est lev­els of gov­ern­ment to influ­ence pol­i­cy­mak­ing in ways that could lead to painful eco­nom­ic out­comes for the Chi­nese — and a poten­tial­ly lucra­tive result for Hicks’ hedge fund friend, Bass. . . .”
  • Hicks and Bass have invest­ed togeth­er since 2011. ” . . . . Bass pre­sent­ed his views on China’s bank­ing sys­tem in the office of Heath Tar­bert, an assis­tant sec­re­tary at Trea­sury in charge of inter­na­tion­al mar­kets and invest­ment pol­i­cy and a pow­er­ful inter­gov­ern­men­tal com­mit­tee that reviews for­eign invest­ments in the U.S. for nation­al secu­ri­ty con­cerns. Among the offi­cials at the meet­ing with Tar­bert were Bill Hin­man, the direc­tor of the divi­sion of cor­po­ra­tion finance at the Secu­ri­ties and Exchange Com­mis­sion, and Ray Wash­burne, a wealthy Dal­las restau­rant own­er and fam­i­ly friend of Hicks’ who was nom­i­nat­ed by Trump to head the Over­seas Pri­vate Invest­ment Cor­po­ra­tion. Hicks and Bass, both Dal­las res­i­dents and long­time denizens of the finan­cial com­mu­ni­ty there, have invest­ed togeth­er since at least 2011, accord­ing to secu­ri­ties fil­ings and court records. . . .”
  • Hicks did not deny that he par­tic­i­pat­ed in Bass’s funds, but was eva­sive.” . . . . But it’s not clear if Hicks or his fam­i­ly have an invest­ment in Bass’ Chi­na-relat­ed funds. Reached twice on his cell­phone, Hicks declined to be inter­viewed by ProP­ub­li­ca. In the sec­ond call, in June, Hicks didn’t dis­pute that he and his fam­i­ly have invest­ed in Bass’ funds. But when asked to detail their busi­ness rela­tion­ship, he cut the con­ver­sa­tion short. . . . ”
  • Bass has a his­to­ry of bet­ting against trends that will turn down­ward, hav­ing made his for­tune on the 2008 crash. ” . . . . Bass, who made his name and for­tune by bet­ting against sub­prime mort­gages before the crash and is known for large bets that economies or cer­tain macro trends will turn down­ward, declined to com­ment. . . .”
  • Offi­cial review did not exam­ine pos­si­ble busi­ness rela­tion­ships between Hicks and Bass. H” . . . . An admin­is­tra­tion offi­cial briefed on the Bass meet­ing at the Trea­sury down­played it as ‘strict­ly a lis­ten­ing ses­sion.’ . . . . He acknowl­edged that the review didn’t include an exam­i­na­tion of any finan­cial rela­tion­ship between Hicks and Bass. . . .”
  • Bass is posi­tioned to main­tain “mas­sive asym­me­try” to down turns in Hong Kong and Chi­na, in oth­er words, he will ben­e­fit if they go down. ” . . . . Bass has become a vocal advo­cate for an aggres­sive U.S. pol­i­cy toward Chi­na. On Twit­ter and on cable busi­ness chan­nels he’s denounced every­thing from the country’s Com­mu­nist Par­ty gov­ern­ment to its busi­ness prac­tices. Secu­ri­ties fil­ings show Bass raised $143 mil­lion from about 81 investors in two funds — invest­ments that would ben­e­fit if China’s cur­ren­cy were deval­ued or the coun­try faced cred­it or bank­ing crises. In April, in a let­ter to his investors, Bass wrote that his com­pa­ny, Hay­man Cap­i­tal Man­age­ment, was posi­tioned for com­ing prob­lems in Hong Kong and was set up to ‘main­tain a mas­sive asym­me­try to a neg­a­tive out­come in Hong Kong and/or Chi­na.’ . . . ”
  • Hicks has net­worked with Wilbur Ross, who has open­ly cel­e­brat­ed the coro­n­avirus out­break. Ross is deeply involved with the 5G maneu­ver­ing.” . . . . Hicks’ work on the 5G ini­tia­tive was exten­sive. . . . .  he was part of an infor­mal group led by then NSC offi­cial Spald­ing, that advo­cat­ed for a strat­e­gy in which the fed­er­al gov­ern­ment would plan out a nation­al pol­i­cy for 5G. . . . That same month Hicks attend­ed a 5G meet­ing that he’d arranged with Com­merce Sec­re­tary Wilbur Ross. Com­merce plays a key role in the future of 5G since a divi­sion with­in the agency man­ages gov­ern­ment spec­trum and anoth­er main­tains a list of com­pa­nies the gov­ern­ment believes are, or will become, nation­al secu­ri­ty threats. Com­pa­nies that end up on that list can be effec­tive­ly shut out from glob­al deal-mak­ing. The meet­ing with Ross focused heav­i­ly on the threat of Chi­na, said Ira Green­stein, who served as a White House aide and was part of Spalding’s 5G crew. . . .”
  • Hicks is net­work­ing with ele­ments in Tai­wan with regard to the 5G devel­op­ments. ” . . . . It isn’t clear what influ­ence, if any, Hicks had in those deci­sions. But his pro­file is only ris­ing. In April, he led a Repub­li­can del­e­ga­tion to Tai­wan along­side a U.S. gov­ern­ment del­e­ga­tion. Hicks met with the country’s pres­i­dent, Tsai Ing-wen, who has late­ly been posi­tion­ing her country’s cor­po­ra­tions as safer providers of 5G equip­ment than those in Chi­na. Tsai thanked the U.S. for sell­ing arms to Tai­wan. She asked Hicks to con­vey her regards to the Trumps. . . .”

It is impor­tant to note that the Covid-19 out­break has not tak­en place in a vac­u­um. Had that been the case, paths of inquiry into the cause of the phe­nom­e­non would be less clear.

The out­break, how­ev­er, did NOT take place in a vac­u­um. Rather, it took place in the his­tor­i­cal and polit­i­cal con­text of a full-blown desta­bi­liza­tion effort against Chi­na.

The pro­gram high­lights sev­er­al anti-Chi­na moves tak­en by the Trump admin­is­tra­tion over the course of a cou­ple of weeks:

  1. The State Depart­ment has moved against the staffs of Chi­nese media in the U.S.: “State Dept. Labels Chi­nese News Out­lets as Agents of Com­mu­nist Par­ty” by Lara Jakes and Steven Lee Myers; The New York Times; 2/19/2020; p. A5 [West­ern Edi­tion].
  2. The U.S. gov­ern­ment charged Huawei with indus­tri­al espi­onage: “U.S. Charges That Huawei Tried to Steal Trade Secrets” by David McCabe, Katie Ben­ner and Nicole Hong; The New York Times; 2/14/2020; p. B1 [West­ern Edi­tion].
  3. The Com­merce Department–headed up by Wilbur Ross (see above)–is mov­ing against cor­po­ra­tions shar­ing advanced tech­nolo­gies with Chi­nese firms: “Lim­its on Tech May Hurt U.S. In Longer Run” by Ana Swan­son and David McCabe; The New York Times; 2/17/2020; p. A1 [West­ern Edi­tion].
  4. Sec­re­tary of State Mike Pom­peo labeled the Chi­nese Com­mu­nist Par­ty as the dom­i­nant threat to the U.S.: “Pom­peo Calls Chi­nese Com­mu­nist Par­ty ‘the Cen­tral Threat of Our Times’ ” by Marc San­to­ra; The New York Times; 1/31/2019; p. A4 [West­ern Edi­tion].

Next, we turn to dis­cus­sion of the pos­si­ble manip­u­la­tion of the virus to make it com­mu­ni­ca­ble through air­borne trans­mis­sion, sim­i­lar to the trans­mis­sion of influen­za.

Researchers found that lev­els of the virus increased soon after symp­toms first appeared, with high­er amounts in the nose than in the throats–more con­sis­tent with influen­za than SARS. Of the 18 patients they exam­ined, one had mod­er­ate lev­els in their nose and throat but no symp­toms. Peo­ple who are asymp­to­matic can still spread the virus. It’s this com­bi­na­tion of air­borne trans­mis­sion and asymp­to­matic patients who are still shed­ding the virus that makes this a par­tic­u­lar­ly infec­tious dis­ease.

This sud­den anom­alous (for SARS-like coro­n­avirus­es) new abil­i­ty to infect the upper res­pi­ra­to­ry tract, of course, brings up chill­ing exper­i­ments in which researchers mod­i­fied the H5N1 bird flu virus to become capa­ble of air­borne trans­mis­sions between fer­rets. That research was banned by the NIH fol­low­ing pub­lic out­cry but resumed in ear­ly 2019. The orig­i­nal 2012 study specif­i­cal­ly found that it was the genet­i­cal­ly engi­neered muta­tions that gave the virus the abil­i­ty to infect the upper res­pi­ra­to­ry tracts of the fer­rets. We have yet to hear if the SAR-CoV­‑2 virus had the same or sim­i­lar muta­tions to those that were induced in the H5N1 bird flu virus exper­i­ment but it seems like­ly.

Thus, the infec­tious­ness of the SARS-CoV­‑2 coro­n­avirus is unprece­dent­ed based on this new study. As one immu­nol­o­gist put it, “This virus is clear­ly much more capa­ble of spread­ing between humans than any oth­er nov­el coro­n­avirus we’ve ever seen. This is more akin to the spread of flu”.

The virus can also be spread through human fecal mate­r­i­al from an infect­ed per­son.

Yet anoth­er spec­u­la­tive ele­ment of dis­cus­sion con­cerns a cult/church in South Korea which is the epi­cen­ter of a burst of cas­es in that coun­try. A reput­ed pres­ence of a branch of the orga­ni­za­tion is in Wuhan, which has direct­ed dis­cus­sion in the direc­tion of the virus hav­ing migrat­ed from Hubei province to South Korea.

Against the back­ground of Uni­fi­ca­tion Church activ­i­ty dur­ing the Cold War, in con­nec­tion with CIA, in con­nec­tion with the fas­cist pow­er elite in Japan that is con­tin­u­ous with that coun­try’s activ­i­ties dur­ing World War II, we won­der about the pos­si­bil­i­ty of the use of this cult as a vec­tor­ing agent.

Might it be pos­si­ble that it was used to intro­duce the virus into Chi­na in the first place?

As will be high­light­ed in future pro­grams, there appear to be operational/networking links between the Shin­cheon­ji and the Uni­fi­ca­tion Church, as well as doc­tri­nal sim­i­lar­i­ties.

1.  In our ongo­ing series about the Covid-19 break­out and the Chi­nese win­ter, we have dis­cussed the dam­age the break­out has done to the Chi­nese econ­o­my, our belief that the out­break is part of a desta­bi­liza­tion effort against Chi­na, and the invest­ments of Steve Ban­non asso­ciate J. Kyle Bass and, in turn, Bass’s polit­i­cal asso­ci­a­tion and prob­a­ble co-invest­ment posi­tion with Trump asso­ciate Tom­my Hicks, Jr.

Posi­tioned to prof­it as a result of a Chi­nese eco­nom­ic down­turn, Bass and Hicks may  well be prof­it­ing from Chi­na’s eco­nom­ic prob­lems, which are grow­ing more severe as a result of the out­break.

Now, many Chi­nese firms say they can­not pay their work­ers their full salaries–a devel­op­ment that will fur­ther strain the Chi­nese econ­o­my.

NB: With the eco­nom­ic con­se­quences of the out­break spread­ing glob­al­ly, Bass, Hicks et al would not nec­es­sar­i­ly have to be invest­ed in Chi­nese equi­ties to prof­it enor­mous­ly from this event.

“Chi­nese Com­pa­nies Say They Can’t Afford to Pay Work­ers Now” by Lulu Yilun Chen and Jin­shan Hong, Bloomberg News, 02/18/2020

* Coro­n­avirus pre­cau­tions are keep­ing cus­tomers, trav­el­ers home
* The pri­vate sec­tor, China’s fastest-grow­ing, is hard­est hit

A grow­ing num­ber of China’s pri­vate com­pa­nies have cut wages, delayed pay­checks or stopped pay­ing staff com­plete­ly, say­ing that the eco­nom­ic toll of the coro­n­avirus has left them unable to cov­er their labor costs.

To slow the spread of the virus that’s claimed more than 2,000 lives, Chi­nese author­i­ties and big employ­ers have encour­aged peo­ple to stay home. Shop­ping malls and restau­rants are emp­ty, amuse­ment parks and the­aters are closed, non-essen­tial trav­el is all but for­bid­den.

What’s good for con­tain­ment has been lousy for busi­ness. With class­es can­celed at a cod­ing-and-robot­ics school in Hangzhou, employ­ees will lose 30% to 50% of their wages. The Lion­s­gate Enter­tain­ment World theme park in Zhuhai is closed, and work­ers have been told to use up their paid vaca­tion time and get ready for unpaid leave.

“A week of unpaid leave is very painful,” said Jason Lam, 32, who was fur­loughed from his job as a chef in a high-end restau­rant in Hong Kong’s Tsim Sha Tsui neigh­bor­hood. “I don’t have enough income to cov­er my spend­ing this month.”

Across Chi­na, com­pa­nies are telling work­ers that there’s no mon­ey for them — or that they shouldn’t have to pay full salaries to quar­an­tined employ­ees who don’t come to work. It’s too soon to say how many peo­ple have lost wages as a result of the out­break, but in a sur­vey of more than 9,500 work­ers by Chi­nese recruit­ment web­site Zhaopin, more than one-third said they were aware it was a pos­si­bil­i­ty.

The salary freezes are fur­ther evi­dence of the eco­nom­ic hit to China’s volatile pri­vate sec­tor — the fastest grow­ing part of the world’s sec­ond-biggest econ­o­my — and among small firms espe­cial­ly. It also sug­gests the stress will extend beyond the health risks to the finan­cial pain that comes with job cuts and salary insta­bil­i­ty. Unsur­pris­ing­ly, hir­ing has all but ground to a halt: Zhaopin esti­mates the num­ber of job resumes sub­mit­ted in the first week after the Jan­u­ary out­break was down 83% from a year ear­li­er.

“The coro­n­avirus may hit Chi­nese con­sump­tion hard­er than SARS 17 years ago,” said Chang Shu, Chief Asia Econ­o­mist for Bloomberg Intel­li­gence. “And SARS wal­loped con­sump­tion.”

By law, com­pa­nies have to com­ply with a full pay cycle in Feb­ru­ary before cut­ting wages to the min­i­mum, said Edgar Choi, author of “Com­mer­cial Law in a Minute” and host of a legal-advice account on WeChat. For com­pa­nies that aren’t mak­ing enough to cov­er pay­roll, it’s per­mis­si­ble to delay salaries, as long as staff get the mon­ey they’re owed even­tu­al­ly.

Choi said he’s heard from thou­sands of for­eign work­ers who say their pay­ments have been cut in half this month or halt­ed althogeth­er. That, he said, is ille­gal. “A lot of these employ­ees are for­eign­ers, they don’t know Chi­nese,” he said. “What­ev­er their boss tells them, that’s it. It’s easy for them to get bul­lied.”

NIO Inc., an elec­tric car-mak­er based in Shang­hai, recent­ly delayed pay­checks by a week. The company’s chair­man William Li also encour­aged employ­ees to accept restrict­ed stock units in lieu of a cash bonus.

At Fox­conn Tech­nol­o­gy Group’s Shen­zhen fac­to­ry, work­ers return­ing from the Lunar New Year break are quar­an­tined in the dorms before they can return to work. They’re get­ting paid, but only about one-third of what they’d earn if they were work­ing.

With­out full, reg­u­lar pay­checks and few places to spend them these days any­way, Chi­nese con­sumers could cut spend­ing in some cat­e­gories to zero, said Bloomberg’s Shu. And it may not bounce back: For exam­ple, she said, if you skip your dai­ly lat­te for two months, you’re not like­ly to make up for those missed drinks lat­er in the year.

With lim­it­ed reserves and less by way of remote tech­nolo­gies, the small­er com­pa­nies that under­pin China’s vast pri­vate sec­tor are par­tic­u­lar­ly vul­ner­a­ble. Among broad­er efforts to help firms stay afloat, pol­i­cy mak­ers have called on state-run banks to make loans at cheap­er rates to small busi­ness­es in par­tic­u­lar.

2. New bank loans in Chi­na hit a record high in Jan­u­ary, reflect­ing the grow­ing need for cash to keep the busi­ness­es oper­at­ing and employ­ees  paid. The PBOC, China’s cen­tral bank, also cut its bench­mark lend­ing rate today as part of a push to ease the financ­ing costs for busi­ness. As the arti­cle notes, small and rur­al banks are most at risk–a stress test last year by the PBOC found that 13 per­cent of banks were con­sid­ered “high risk”.

As not­ed below, Tom­my Hicks brought in J. Kyle Bass to lec­ture to inter­a­gency gov­ern­ment net­works about Chi­na’s bank­ing sys­tem.

“Chi­na Jan new bank loans hit record, more pol­i­cy sup­port seen” by Judy Hua, Kevin Yao, Reuters, 02/20/2020.

New bank loans in Chi­na rose more than expect­ed to a record high in Jan­u­ary, as author­i­ties step up sup­port for an econ­o­my hit by trade ten­sions and fac­ing a new threat from a fast-spread­ing coro­n­avirus out­break.

Chi­nese banks tend to front-load loans at the begin­ning of the year to get high­er-qual­i­ty cus­tomers and win mar­ket share.

Banks extend­ed a record 3.34 tril­lion yuan ($476.42 bil­lion) in new yuan loans in Jan­u­ary, up from 1.14 tril­lion yuan in Decem­ber and exceed­ing ana­lyst expec­ta­tions, accord­ing to data released by the People’s Bank of Chi­na (PBOC) on Thurs­day.

Ana­lysts polled by Reuters had pre­dict­ed new yuan loans would rise to 3.00 tril­lion yuan in Jan­u­ary, com­pared with the pri­or record 3.23 tril­lion yuan a year ear­li­er.

House­hold loans, most­ly mort­gages, fell to 634.1 bil­lion yuan in Jan­u­ary from 645.9 bil­lion yuan in Decem­ber, while cor­po­rate loans rock­et­ed to 2.86 tril­lion yuan from 424.4 bil­lion yuan, accord­ing to Reuters cal­cu­la­tion based on cen­tral bank data.

Chi­nese reg­u­la­tors have been try­ing to boost bank lend­ing and low­er financ­ing costs for over a year, espe­cial­ly for small­er and pri­vate com­pa­nies which gen­er­ate a size­able share of the country’s eco­nom­ic growth and jobs.

Growth in the world’s sec­ond-biggest econ­o­my slowed to 6.1% in 2019, the weak­est pace since 1990, as demand at home and abroad slowed in part due to the Sino‑U.S. trade war.

On Thurs­day, the PBOC cut the bench­mark lend­ing rate – the loan prime rate (LPR), as the author­i­ties move to low­er financ­ing costs for busi­ness­es to help sup­port the econ­o­my jolt­ed by the virus out­break.

“We expect fur­ther mon­e­tary eas­ing in the com­ing weeks, both tar­get­ed and broad based, in an effort to shore up cred­it growth and eco­nom­ic activ­i­ty,” Julian Evans-Pritchard at Cap­i­tal Eco­nom­ics said.

The Lunar New Year, which fell at the end of Jan­u­ary, and China’s extend­ed hol­i­day break and lock­down of sev­er­al cities to con­trol the spread­ing epi­dem­ic, is like­ly to put a brake on lend­ing for some time.

But the cen­tral bank and reg­u­la­tors are gear­ing up to boost lend­ing and low­er fund­ing costs. Chi­nese banks have doled out more than 537 bil­lion yuan in cred­it to help fight the virus out­break, offi­cials have said.

MORE POLICY STEPS EXPECTED

Annu­al growth of out­stand­ing total social financ­ing (TSF), a broad mea­sure of cred­it and liq­uid­i­ty in the econ­o­my, stood at 10.7% in Jan­u­ary, unchanged from in Decem­ber.

TSF includes off-bal­ance sheet forms of financ­ing that exist out­side the con­ven­tion­al bank lend­ing sys­tem, such as ini­tial pub­lic offer­ings, loans from trust com­pa­nies and bond sales.

In Jan­u­ary, TSF jumped to 5.07 tril­lion yuan from 2.103 tril­lion yuan in Decem­ber. Ana­lysts polled by Reuters had expect­ed Jan­u­ary TSF of 4.3 tril­lion yuan.

Pol­i­cy sources have told Reuters the gov­ern­ment plans to roll out more sup­port mea­sures as the coro­n­avirus epi­dem­ic, which has killed more than 2,100 peo­ple and infect­ed over 74,000, is expect­ed to have a dev­as­tat­ing impact on first-quar­ter growth.

Over the past two years, Bei­jing has been rely­ing on a mix of mon­e­tary and fis­cal mea­sures to weath­er the down­turn, cut­ting tax­es and issu­ing local gov­ern­ment bonds to fund infra­struc­ture projects while try­ing to spur lend­ing, espe­cial­ly for small firms.

The PBOC has cut reserve require­ment ratios (RRR) eight times since ear­ly 2018, with the lat­est reduc­tion tak­ing effect on Jan. 6.

A sharp drop in cor­po­rate sales and cash flow caused by the out­break is like­ly to put more stress on China’s’s finan­cial sys­tem, par­tic­u­lar­ly small, rur­al banks. A stress test by the PBOC last year said more than 13% of lenders were con­sid­ered “high risk”.

Some relief could come from the trade front after Bei­jing and Wash­ing­ton signed a Phase 1 deal last month to defuse a pro­tract­ed tar­iff war. . . .

3. We review the fact that Bass is close to, and may well be a co-investor with, Tom­my Hicks Jr., a key mem­ber of Team Trump. Hicks, Com­merce Sec­re­tary Wilbur Ross and nation­al secu­ri­ty offi­cials are, in turn, work­ing to deny Chi­nese elec­tron­ics firm Huawei access to devel­op­ing 5G net­works, fur­ther ham­string­ing the Chi­nese econ­o­my.

Paul Krug­man, among oth­ers, has not­ed that Wilbur Ross was open­ly cel­e­brat­ing the coro­n­avirus as a boon to the Unit­ed States.

We high­light key aspects of this dis­cus­sion:

  • Tom­my Hicks is at the epi­cen­ter of Trump admin­is­tra­tion maneu­ver­ing that, ulti­mate­ly, will hurt Chi­na eco­nom­i­cal­ly (and will ben­e­fit the invest­ments of J. Kyle Bass.) ” . . . . Over the past two years, the Trump admin­is­tra­tion has been grap­pling with how to han­dle the tran­si­tion to the next gen­er­a­tion of mobile broad­band tech­nol­o­gy. With spend­ing expect­ed to run into hun­dreds of bil­lions of dol­lars, the admin­is­tra­tion views it as an ultra-high-stakes com­pe­ti­tion between U.S. and Chi­nese com­pa­nies, with enor­mous impli­ca­tions both for tech­nol­o­gy and for nation­al secu­ri­ty. Top offi­cials from a raft of depart­ments have been meet­ing to hash out the best approach. But there’s been one per­son at some of the dis­cus­sions who has a dif­fer­ent back­ground: He’s Don­ald Trump Jr.’s hunt­ing bud­dy. . . .”
  • Hicks is not a gov­ern­ment offi­cial but has access to high-lev­el gov­ern­men­tal process, includ­ing (appar­ent­ly) CIA activ­i­ties. ” . . . . Tom­my Hicks Jr., 41, isn’t a gov­ern­ment offi­cial; he’s a wealthy pri­vate investor. And he has been a part of dis­cus­sions relat­ed to Chi­na and tech­nol­o­gy with top offi­cials from the Trea­sury Depart­ment, Nation­al Secu­ri­ty Coun­cil, Com­merce Depart­ment and oth­ers, accord­ing to emails and doc­u­ments obtained by ProP­ub­li­ca. In one email, Hicks refers to a meet­ing at ‘Lan­g­ley,’ an appar­ent ref­er­ence to the CIA’s head­quar­ters. . . .”
  • Hicks has used his posi­tion to arrange for J. Kyle Bass to net­work with gov­ern­ment agen­cies and offi­cials. Bear in mind that Bass is posi­tioned to ben­e­fit from a down­turn in Chi­na’s econ­o­my. ” . . . . Hicks used his con­nec­tions to arrange for a hedge fund man­ag­er friend, Kyle Bass — who has $143 mil­lion in invest­ments that will pay off if China’s econ­o­my tanks — to present his views on the Chi­nese econ­o­my to high-lev­el gov­ern­ment offi­cials at an inter­a­gency meet­ing at the Trea­sury Depart­ment, accord­ing to the doc­u­ments. . . .”
  • Hicks is now co-chair­man of the Repub­li­can Nation­al Com­mit­tee. ” . . . . Hicks lever­aged his Dal­las finan­cial net­work to become a top Trump cam­paign fundrais­er in 2016 and a vice chair­man of the inau­gur­al finance com­mit­tee; in Jan­u­ary, he was named co-chair­man of the Repub­li­can Nation­al Com­mit­tee. . . . ”
  • In addi­tion to his rela­tion­ship with Don­ald Trump, Jr., Hicks is net­worked with Jared Kush­n­er. ” . . . . Even before becom­ing the sec­ond high­est-rank­ing GOP offi­cial, Hicks was a fre­quent White House guest. He liked to have lunch in the White House mess with his half sis­ter, who worked for a time in the com­mu­ni­ca­tions oper­a­tion. . . .  Hicks would then stroll the halls, accord­ing to a for­mer senior admin­is­tra­tion offi­cial, drop­ping in to offices for impromp­tu chats with var­i­ous offi­cials, includ­ing Jared Kush­n­er. Those sorts of con­nec­tions have giv­en Hicks a con­ven­ing pow­er, the abil­i­ty to call togeth­er mul­ti­ple offi­cials. . . . ”
  • Again, Hicks net­work­ing can influ­ence pol­i­cy­mak­ing that could dam­age Chi­na eco­nom­i­cal­ly and assist Bass. ” . . . . ‘He basi­cal­ly opened the door for hav­ing a con­ver­sa­tion with peo­ple who I didn’t know but need­ed to know,’ said Robert Spald­ing, a for­mer senior direc­tor for strate­gic plan­ning at the Nation­al Secu­ri­ty Coun­cil dur­ing the Trump admin­is­tra­tion. The efforts, detailed in hun­dreds of pages of gov­ern­ment emails and oth­er doc­u­ments obtained under the Free­dom of Infor­ma­tion Act, show that Hicks had access to the high­est lev­els of gov­ern­ment to influ­ence pol­i­cy­mak­ing in ways that could lead to painful eco­nom­ic out­comes for the Chi­nese — and a poten­tial­ly lucra­tive result for Hicks’ hedge fund friend, Bass. . . .”
  • Hicks and Bass have invest­ed togeth­er since 2011. ” . . . . Bass pre­sent­ed his views on China’s bank­ing sys­tem in the office of Heath Tar­bert, an assis­tant sec­re­tary at Trea­sury in charge of inter­na­tion­al mar­kets and invest­ment pol­i­cy and a pow­er­ful inter­gov­ern­men­tal com­mit­tee that reviews for­eign invest­ments in the U.S. for nation­al secu­ri­ty con­cerns. Among the offi­cials at the meet­ing with Tar­bert were Bill Hin­man, the direc­tor of the divi­sion of cor­po­ra­tion finance at the Secu­ri­ties and Exchange Com­mis­sion, and Ray Wash­burne, a wealthy Dal­las restau­rant own­er and fam­i­ly friend of Hicks’ who was nom­i­nat­ed by Trump to head the Over­seas Pri­vate Invest­ment Cor­po­ra­tion. Hicks and Bass, both Dal­las res­i­dents and long­time denizens of the finan­cial com­mu­ni­ty there, have invest­ed togeth­er since at least 2011, accord­ing to secu­ri­ties fil­ings and court records. . . .”
  • Hicks did not deny that he par­tic­i­pat­ed in Bass’s funds, but was eva­sive.” . . . . But it’s not clear if Hicks or his fam­i­ly have an invest­ment in Bass’ Chi­na-relat­ed funds. Reached twice on his cell­phone, Hicks declined to be inter­viewed by ProP­ub­li­ca. In the sec­ond call, in June, Hicks didn’t dis­pute that he and his fam­i­ly have invest­ed in Bass’ funds. But when asked to detail their busi­ness rela­tion­ship, he cut the con­ver­sa­tion short. . . . ”
  • Bass has a his­to­ry of bet­ting against trends that will turn down­ward, hav­ing made his for­tune on the 2008 crash. ” . . . . Bass, who made his name and for­tune by bet­ting against sub­prime mort­gages before the crash and is known for large bets that economies or cer­tain macro trends will turn down­ward, declined to com­ment. . . .”
  • Offi­cial review did not exam­ine pos­si­ble busi­ness rela­tion­ships between Hicks and Bass. H” . . . . An admin­is­tra­tion offi­cial briefed on the Bass meet­ing at the Trea­sury down­played it as ‘strict­ly a lis­ten­ing ses­sion.’ . . . . He acknowl­edged that the review didn’t include an exam­i­na­tion of any finan­cial rela­tion­ship between Hicks and Bass. . . .”
  • Bass is posi­tioned to main­tain “mas­sive asym­me­try” to down turns in Hong Kong and Chi­na, in oth­er words, he will ben­e­fit if they go down. ” . . . . Bass has become a vocal advo­cate for an aggres­sive U.S. pol­i­cy toward Chi­na. On Twit­ter and on cable busi­ness chan­nels he’s denounced every­thing from the country’s Com­mu­nist Par­ty gov­ern­ment to its busi­ness prac­tices. Secu­ri­ties fil­ings show Bass raised $143 mil­lion from about 81 investors in two funds — invest­ments that would ben­e­fit if China’s cur­ren­cy were deval­ued or the coun­try faced cred­it or bank­ing crises. In April, in a let­ter to his investors, Bass wrote that his com­pa­ny, Hay­man Cap­i­tal Man­age­ment, was posi­tioned for com­ing prob­lems in Hong Kong and was set up to ‘main­tain a mas­sive asym­me­try to a neg­a­tive out­come in Hong Kong and/or Chi­na.’ . . . ”
  • Hicks has net­worked with Wilbur Ross, who has open­ly cel­e­brat­ed the coro­n­avirus out­break. Ross is deeply involved with the 5G maneu­ver­ing.” . . . . Hicks’ work on the 5G ini­tia­tive was exten­sive. . . . .  he was part of an infor­mal group led by then NSC offi­cial Spald­ing, that advo­cat­ed for a strat­e­gy in which the fed­er­al gov­ern­ment would plan out a nation­al pol­i­cy for 5G. . . . That same month Hicks attend­ed a 5G meet­ing that he’d arranged with Com­merce Sec­re­tary Wilbur Ross. Com­merce plays a key role in the future of 5G since a divi­sion with­in the agency man­ages gov­ern­ment spec­trum and anoth­er main­tains a list of com­pa­nies the gov­ern­ment believes are, or will become, nation­al secu­ri­ty threats. Com­pa­nies that end up on that list can be effec­tive­ly shut out from glob­al deal-mak­ing. The meet­ing with Ross focused heav­i­ly on the threat of Chi­na, said Ira Green­stein, who served as a White House aide and was part of Spalding’s 5G crew. . . .”
  • Hicks is net­work­ing with ele­ments in Tai­wan with regard to the 5G devel­op­ments. ” . . . . It isn’t clear what influ­ence, if any, Hicks had in those deci­sions. But his pro­file is only ris­ing. In April, he led a Repub­li­can del­e­ga­tion to Tai­wan along­side a U.S. gov­ern­ment del­e­ga­tion. Hicks met with the country’s pres­i­dent, Tsai Ing-wen, who has late­ly been posi­tion­ing her country’s cor­po­ra­tions as safer providers of 5G equip­ment than those in Chi­na. Tsai thanked the U.S. for sell­ing arms to Tai­wan. She asked Hicks to con­vey her regards to the Trumps. . . .”

“Want to Meet With the Trump Admin­is­tra­tion? Don­ald Trump Jr.’s Hunt­ing Bud­dy Can Help” by Jake Pear­son; ProP­ub­li­ca; 07/22/2019

Over the past two years, the Trump admin­is­tra­tion has been grap­pling with how to han­dle the tran­si­tion to the next gen­er­a­tion of mobile broad­band tech­nol­o­gy. With spend­ing expect­ed to run into hun­dreds of bil­lions of dol­lars, the admin­is­tra­tion views it as an ultra-high-stakes com­pe­ti­tion between U.S. and Chi­nese com­pa­nies, with enor­mous impli­ca­tions both for tech­nol­o­gy and for nation­al secu­ri­ty. Top offi­cials from a raft of depart­ments have been meet­ing to hash out the best approach.

But there’s been one per­son at some of the dis­cus­sions who has a dif­fer­ent back­ground: He’s Don­ald Trump Jr.’s hunt­ing bud­dy. Over the past two decades, the two have trained their sights on duck, pheas­ant and white-tailed deer on mul­ti­ple con­ti­nents. (An email from anoth­er Trump Jr. pal char­ac­ter­ized one of their joint duck-hunt­ing trips to Mex­i­co years ago as “muy aggre­si­vo.”)

Tom­my Hicks Jr., 41, isn’t a gov­ern­ment offi­cial; he’s a wealthy pri­vate investor. And he has been a part of dis­cus­sions relat­ed to Chi­na and tech­nol­o­gy with top offi­cials from the Trea­sury Depart­ment, Nation­al Secu­ri­ty Coun­cil, Com­merce Depart­ment and oth­ers, accord­ing to emails and doc­u­ments obtained by ProP­ub­li­ca. In one email, Hicks refers to a meet­ing at “Lan­g­ley,” an appar­ent ref­er­ence to the CIA’s head­quar­ters.

Hicks’ finan­cial inter­ests, if any, in the mat­ters he has dis­cussed aren’t clear. The inter­ests are much more appar­ent when it comes to at least one of his asso­ciates. Hicks used his con­nec­tions to arrange for a hedge fund man­ag­er friend, Kyle Bass — who has $143 mil­lion in invest­ments that will pay off if China’s econ­o­my tanks — to present his views on the Chi­nese econ­o­my to high-lev­el gov­ern­ment offi­cials at an inter­a­gency meet­ing at the Trea­sury Depart­ment, accord­ing to the doc­u­ments.

Hicks is hard­ly the first pri­vate-sec­tor pow­er bro­ker to emerge in a pres­i­den­tial admin­is­tra­tion, but he may rep­re­sent a new sub­species: The Friend of the President’s Kid.

In fact, Hicks’ influ­ence and career over­whelm­ing­ly hinge on two peo­ple: Trump Jr., his friend of about two decades, and, first and fore­most, Hicks’ father. In a rough­ly 20-year career, Hicks has spent 17 of them work­ing for invest­ment funds and sports teams owned by his wealthy financier dad, Thomas Hicks Sr., and the oth­er three work­ing for a client of his father.

The gen­er­al­ly priv­i­leged life of the younger Hicks has been speck­led with occa­sion­al instances of mis­be­hav­ior, one of them seri­ous. At age 18, he plead­ed no con­test to mis­de­meanor assault, reduced from an orig­i­nal charge of felony aggra­vat­ed assault, after he and two oth­ers were arrest­ed in the beat­ing of a fel­low high school stu­dent at a par­ty. (The vic­tim was also kicked in the face dur­ing the assault, accord­ing to peo­ple famil­iar with the case. He told police that one of the three assailants — he didn’t say which — asked him, “What is your name, fag­got?”) The crim­i­nal con­vic­tion did not pre­vent Hicks from being admit­ted to the Uni­ver­si­ty of Texas, where his father was an alum­nus, a mem­ber of the Board of Regents and soon there­after the first chair­man of the Uni­ver­si­ty of Texas Invest­ment Man­age­ment Com­pa­ny, which man­ages the school’s endow­ment and oth­er assets.

As an adult, friends say, Hicks’ carous­ing ways and occa­sion­al bel­liger­ent out­bursts led some in his cir­cle to bestow a heav­i­ly iron­ic nick­name: “Sen­a­tor Hicks.” His tenure as a direc­tor of the soc­cer team his father owned in Liv­er­pool, Eng­land, a decade ago end­ed right after an email he sent to a heck­ling fan — “Blow me fuc kface. Go to Hell. I’m sick of you.” — sur­faced pub­licly.

Friends say Hicks has matured, par­tic­u­lar­ly since he mar­ried and had three daugh­ters. He has risen quick­ly in recent years. Hicks lever­aged his Dal­las finan­cial net­work to become a top Trump cam­paign fundrais­er in 2016 and a vice chair­man of the inau­gur­al finance com­mit­tee; in Jan­u­ary, he was named co-chair­man of the Repub­li­can Nation­al Com­mit­tee. His friends say he is moti­vat­ed by patri­o­tism.

Hicks also played a behind-the-scenes role, accord­ing to two peo­ple famil­iar with the mat­ter and an account by a Turk­ish jour­nal­ist, in the free­ing last year of Andrew Brun­son, an Amer­i­can pas­tor who was detained for two years by the Turk­ish gov­ern­ment on what the U.S. gov­ern­ment viewed as pho­ny charges of spy­ing and help­ing ter­ror­ists.

Even before becom­ing the sec­ond high­est-rank­ing GOP offi­cial, Hicks was a fre­quent White House guest. He liked to have lunch in the White House mess with his half sis­ter, who worked for a time in the com­mu­ni­ca­tions oper­a­tion. (The fam­i­ly is not relat­ed to Hope Hicks, the for­mer White House com­mu­ni­ca­tions direc­tor.) Hicks would then stroll the halls, accord­ing to a for­mer senior admin­is­tra­tion offi­cial, drop­ping in to offices for impromp­tu chats with var­i­ous offi­cials, includ­ing Jared Kush­n­er.

Those sorts of con­nec­tions have giv­en Hicks a con­ven­ing pow­er, the abil­i­ty to call togeth­er mul­ti­ple offi­cials. “He basi­cal­ly opened the door for hav­ing a con­ver­sa­tion with peo­ple who I didn’t know but need­ed to know,” said Robert Spald­ing, a for­mer senior direc­tor for strate­gic plan­ning at the Nation­al Secu­ri­ty Coun­cil dur­ing the Trump admin­is­tra­tion.

The efforts, detailed in hun­dreds of pages of gov­ern­ment emails and oth­er doc­u­ments obtained under the Free­dom of Infor­ma­tion Act, show that Hicks had access to the high­est lev­els of gov­ern­ment to influ­ence pol­i­cy­mak­ing in ways that could lead to painful eco­nom­ic out­comes for the Chi­nese — and a poten­tial­ly lucra­tive result for Hicks’ hedge fund friend, Bass.

“When some­body comes in like this, a hedge fund man­ag­er who has an inter­est in the via­bil­i­ty of China’s econ­o­my, you’re giv­ing them an oppor­tu­ni­ty to influ­ence pol­i­cy,” said Vir­ginia Can­ter, a for­mer ethics lawyer at the Trea­sury Depart­ment who now serves as chief ethics coun­sel for Cit­i­zens for Respon­si­bil­i­ty and Ethics in Wash­ing­ton, a watch­dog group. (CREW has sued Don­ald Trump for accept­ing emol­u­ments from for­eign gov­ern­ments.) “The ques­tion is why?”

Hicks’ unusu­al role as a non­govern­ment employ­ee who opened doors on behalf of both indus­try and oth­ers, Can­ter said, put him in a gray zone of ethics and lob­by­ing reg­u­la­tions. “He’s act­ing in a lob­by­ist role when he may fall out­side the lob­by­ist dis­clo­sure rules, and it’s not clear how he ben­e­fits finan­cial­ly,” she said. “So the ques­tion is: What’s he get­ting out of it? What are his friends get­ting out of it? And is the gov­ern­ment pro­cess­ing it in a way that ensures the pub­lic ben­e­fits?”

Bass pre­sent­ed his views on China’s bank­ing sys­tem in the office of Heath Tar­bert, an assis­tant sec­re­tary at Trea­sury in charge of inter­na­tion­al mar­kets and invest­ment pol­i­cy and a pow­er­ful inter­gov­ern­men­tal com­mit­tee that reviews for­eign invest­ments in the U.S. for nation­al secu­ri­ty con­cerns. Among the offi­cials at the meet­ing with Tar­bert were Bill Hin­man, the direc­tor of the divi­sion of cor­po­ra­tion finance at the Secu­ri­ties and Exchange Com­mis­sion, and Ray Wash­burne, a wealthy Dal­las restau­rant own­er and fam­i­ly friend of Hicks’ who was nom­i­nat­ed by Trump to head the Over­seas Pri­vate Invest­ment Cor­po­ra­tion.

Hicks and Bass, both Dal­las res­i­dents and long­time denizens of the finan­cial com­mu­ni­ty there, have invest­ed togeth­er since at least 2011, accord­ing to secu­ri­ties fil­ings and court records. They’ve owned shares of a pub­licly trad­ed com­mu­ni­ca­tions-tech­nol­o­gy man­u­fac­tur­er. And they were among the biggest cred­i­tors to the bank­rupt law enforce­ment con­tract­ing com­pa­ny run by Chris Kyle, the ex-Navy SEAL por­trayed by Bradley Coop­er in “Amer­i­can Sniper.” The man­ag­ing direc­tor of a new invest­ment fund start­ed by Hicks had pre­vi­ous­ly advised Bass on the suc­cess­ful stock-short­ing of a Texas real estate lender, accord­ing to cor­po­rate fil­ings and court papers from a law­suit in state court in Dal­las.

But it’s not clear if Hicks or his fam­i­ly have an invest­ment in Bass’ Chi­na-relat­ed funds. Reached twice on his cell­phone, Hicks declined to be inter­viewed by ProP­ub­li­ca. In the sec­ond call, in June, Hicks didn’t dis­pute that he and his fam­i­ly have invest­ed in Bass’ funds. But when asked to detail their busi­ness rela­tion­ship, he cut the con­ver­sa­tion short. “I’ve got to run. Let me see if I can get back to you,” Hicks said before hang­ing up. He didn’t call back.

Weeks lat­er, after ProP­ub­li­ca fol­lowed up with ques­tions to the RNC, a spokesman respond­ed by email­ing a “state­ment attrib­uted to Tom­my Hicks.” It read: “As a busi­ness­man, I pas­sion­ate­ly sup­port­ed caus­es I believed in and, if appro­pri­ate, would some­times meet with gov­ern­ment offi­cials to pro­mote them. There is noth­ing wrong with that. I have tak­en every pre­cau­tion dur­ing my time as Co-Chair of the RNC to ensure there is no con­flict of inter­est between my job here and any per­son­al busi­ness­es.” (The spokesper­son also emailed a state­ment on behalf of the RNC: “Tom­my has done an out­stand­ing job work­ing on behalf of Pres­i­dent Trump and his agen­da.”)

Bass, who made his name and for­tune by bet­ting against sub­prime mort­gages before the crash and is known for large bets that economies or cer­tain macro trends will turn down­ward, declined to com­ment. “I’m not inter­est­ed in talk­ing with you about my friends or any meet­ings I have or haven’t had pri­vate­ly with any­one,” he wrote in an email. In a sub­se­quent mes­sage, Bass wrote that any sug­ges­tion “that we had cor­rupt inten­tions in meet­ing with Trea­sury offi­cials… is cat­e­gor­i­cal­ly false and defam­a­to­ry and could neg­a­tive­ly affect our busi­ness.”

An admin­is­tra­tion offi­cial briefed on the Bass meet­ing at the Trea­sury down­played it as “strict­ly a lis­ten­ing ses­sion.” He said Bass did not ask the atten­dees to take any actions, nor did the atten­dees divulge any­thing about U.S.-China pol­i­cy. Gov­ern­ment ethics offi­cers vet­ted the fed­er­al employ­ees for any con­flicts and found none, the offi­cial said. He acknowl­edged that the review didn’t include an exam­i­na­tion of any finan­cial rela­tion­ship between Hicks and Bass.

Spald­ing said the con­ver­sa­tion cen­tered pri­mar­i­ly on Bass’ analy­sis of pub­licly avail­able records on the Chi­nese finan­cial sys­tem. “I think the thing that I’ve dis­cov­ered over the past years is that the infor­ma­tion in the pri­vate sec­tor is bet­ter than any­thing we have in gov­ern­ment,” Spald­ing said of Bass’ pre­sen­ta­tion. “You have to reach out to where the exper­tise is. In our coun­try, that’s where the tal­ent is.”

Bass has become a vocal advo­cate for an aggres­sive U.S. pol­i­cy toward Chi­na. On Twit­ter and on cable busi­ness chan­nels he’s denounced every­thing from the country’s Com­mu­nist Par­ty gov­ern­ment to its busi­ness prac­tices. Secu­ri­ties fil­ings show Bass raised $143 mil­lion from about 81 investors in two funds — invest­ments that would ben­e­fit if China’s cur­ren­cy were deval­ued or the coun­try faced cred­it or bank­ing crises. In April, in a let­ter to his investors, Bass wrote that his com­pa­ny, Hay­man Cap­i­tal Man­age­ment, was posi­tioned for com­ing prob­lems in Hong Kong and was set up to “main­tain a mas­sive asym­me­try to a neg­a­tive out­come in Hong Kong and/or Chi­na.”

Hicks’ work on the 5G ini­tia­tive was exten­sive.

Over just a few months in late 2017 and 2018, records show, he was part of an infor­mal group led by then NSC offi­cial Spald­ing, that advo­cat­ed for a strat­e­gy in which the fed­er­al gov­ern­ment would plan out a nation­al pol­i­cy for 5G. One memo described their goal as the “equiv­a­lent of the Eisen­how­er Nation­al High­way Sys­tem — a sin­gle, inher­ent­ly pro­tect­ed, infor­ma­tion trans­porta­tion super­high­way.”

The group con­duct­ed mul­ti­ple meet­ings and brief­in­gs. For exam­ple, Hicks, Spald­ing and oth­ers trav­eled to Sam­sung Elec­tron­ics’ Dal­las-area offices for one meet­ing in Jan­u­ary 2018.

That same month Hicks attend­ed a 5G meet­ing that he’d arranged with Com­merce Sec­re­tary Wilbur Ross. Com­merce plays a key role in the future of 5G since a divi­sion with­in the agency man­ages gov­ern­ment spec­trum and anoth­er main­tains a list of com­pa­nies the gov­ern­ment believes are, or will become, nation­al secu­ri­ty threats. Com­pa­nies that end up on that list can be effec­tive­ly shut out from glob­al deal-mak­ing. The meet­ing with Ross focused heav­i­ly on the threat of Chi­na, said Ira Green­stein, who served as a White House aide and was part of Spalding’s 5G crew.

Hicks was one of a dozen non­govern­ment employ­ees, includ­ing exec­u­tives from Wells Far­go, Nokia, Eric­s­son and Google, that Spald­ing sent read­ing mate­ri­als to ahead of a 5G dis­cus­sion in the Eisen­how­er Exec­u­tive Office Build­ing. Copied on the email were top Com­merce Depart­ment offi­cials, a Booz Allen Hamil­ton con­trac­tor and a senior advis­er for cyber­se­cu­ri­ty and IT mod­ern­iza­tion at the White House Office of Sci­ence and Tech­nol­o­gy. On the agen­da? “Mid Band vs High Band” spec­trum, “secu­ri­ty,” “sup­ply chain,” “financ­ing” and oth­er crit­i­cal issues.

Hicks wasn’t just a pas­sive observ­er. On Jan. 2, 2018, the man­ag­ing direc­tor of OPIC, which pro­vides finan­cial back­ing to Amer­i­can com­pa­nies expand­ing into for­eign mar­kets, emailed Spald­ing and oth­ers to say that the CEO of a satel­lite com­pa­ny called OneWeb had a plan to pro­vide world­wide 5G cov­er­age by 2027. Hicks fired back a note from his iPhone. “2027 is too late,” he wrote. “Let’s dis­cuss as a small­er group tomor­row.”

Spald­ing was forced out of the West Wing in ear­ly 2018 after a draft 20-page brief­ing memo he authored propos­ing a gov­ern­ment-orga­nized nation­al 5G net­work was leaked, then panned as an attempt to nation­al­ize the wire­less broad­band indus­try. Trump has not pur­sued such an ini­tia­tive, ulti­mate­ly defer­ring to wire­less car­ri­ers to bid on pub­licly main­tained spec­trum and devel­op their own net­works as has tra­di­tion­al­ly been the case.

Still, the admin­is­tra­tion has made sig­nif­i­cant efforts to counter Chi­nese influ­ence in 5G and relat­ed tech­nolo­gies, which are said to be crit­i­cal for indus­tries such as dri­ver­less cars, arti­fi­cial intel­li­gence, machine learn­ing and much more. In May the Com­merce Depart­ment barred Chi­nese tele­com equip­ment man­u­fac­tur­er Huawei from doing busi­ness in the U.S. for nation­al secu­ri­ty rea­sons. And the top Depart­ment of Defense offi­cial in charge of acqui­si­tions also recent­ly announced the cre­ation of a gov­ern­ment-approved pri­vate mar­ket­place to pair Amer­i­can pri­vate equi­ty firms with U.S. tech­nol­o­gy com­pa­nies pro­duc­ing prod­ucts with nation­al secu­ri­ty appli­ca­tions to keep Chi­nese mon­ey out of 5G.

It isn’t clear what influ­ence, if any, Hicks had in those deci­sions. But his pro­file is only ris­ing. In April, he led a Repub­li­can del­e­ga­tion to Tai­wan along­side a U.S. gov­ern­ment del­e­ga­tion. Hicks met with the country’s pres­i­dent, Tsai Ing-wen, who has late­ly been posi­tion­ing her country’s cor­po­ra­tions as safer providers of 5G equip­ment than those in Chi­na. Tsai thanked the U.S. for sell­ing arms to Tai­wan. She asked Hicks to con­vey her regards to the Trumps.

4a. Next, we turn to dis­cus­sion of the pos­si­ble manip­u­la­tion of the virus to make it com­mu­ni­ca­ble through air­borne trans­mis­sion, sim­i­lar to the trans­mis­sion of influen­za.

Researchers found that lev­els of the virus increased soon after symp­toms first appeared, with high­er amounts in the nose than in the throats–more con­sis­tent with influen­za than SARS. Of the 18 patients they exam­ined, one had mod­er­ate lev­els in their nose and throat but no symp­toms. Peo­ple who are asymp­to­matic can still spread the virus. It’s this com­bi­na­tion of air­borne trans­mis­sion and asymp­to­matic patients who are still shed­ding the virus that makes this a par­tic­u­lar­ly infec­tious dis­ease.

This sud­den anom­alous (for SARS-like coro­n­avirus­es) new abil­i­ty to infect the upper res­pi­ra­to­ry tract, of course, brings up chill­ing exper­i­ments in which researchers mod­i­fied the H5N1 bird flu virus to become capa­ble of air­borne trans­mis­sions between fer­rets. That research was banned by the NIH fol­low­ing pub­lic out­cry but resumed in ear­ly 2019. The orig­i­nal 2012 study specif­i­cal­ly found that it was the genet­i­cal­ly engi­neered muta­tions that gave the virus the abil­i­ty to infect the upper res­pi­ra­to­ry tracts of the fer­rets. We have yet to hear if the SAR-CoV­‑2 virus had the same or sim­i­lar muta­tions to those that were induced in the H5N1 bird flu virus exper­i­ment but it seems like­ly.

Thus, the infec­tious­ness of the SARS-CoV­‑2 coro­n­avirus is unprece­dent­ed based on this new study. As one immu­nol­o­gist put it, “This virus is clear­ly much more capa­ble of spread­ing between humans than any oth­er nov­el coro­n­avirus we’ve ever seen. This is more akin to the spread of flu”.

“New coro­n­avirus spreads more like flu than SARS: Chi­nese study” by Julie Steen­huy­sen; Reuters; 02/19/2020

Sci­en­tists in Chi­na who stud­ied nose and throat swabs from 18 patients infect­ed with the new coro­n­avirus say it behaves much more like influen­za than oth­er close­ly relat­ed virus­es, sug­gest­ing it may spread even more eas­i­ly than pre­vi­ous­ly believed.

In at least in one case, the virus was present even though the patient had no symp­toms, con­firm­ing con­cerns that asymp­to­matic patients could also spread the dis­ease.

Although pre­lim­i­nary, the find­ings pub­lished on Wednes­day in the New Eng­land Jour­nal of Med­i­cine, offer new evi­dence that this nov­el coro­n­avirus, which has killed more than 2,000 peo­ple most­ly in Chi­na, is not like its close­ly-relat­ed coro­n­avirus cousins.

“If con­firmed, this is very impor­tant,” said Dr. Gre­go­ry Poland, a virol­o­gist and vac­cine researcher with the Mayo Clin­ic in Rochester, Min­neso­ta, who was not involved with the study.

Unlike Severe Acute Res­pi­ra­to­ry Syn­drome (SARS), which caus­es infec­tions deep in the low­er res­pi­ra­to­ry tract that can result in pneu­mo­nia, COVID-19 appears to inhab­it both the upper and low­er res­pi­ra­to­ry tracts. That would make it not only capa­ble of caus­ing severe pneu­mo­nia, but of spread­ing eas­i­ly like flu or the com­mon cold.

Researchers in Guang­dong province mon­i­tored the amount of coro­n­avirus in the 18 patients. One of them, who had mod­er­ate lev­els of the virus in their nose and throat, nev­er had any dis­ease symp­toms.

Among the 17 symp­to­matic patients, the team found lev­els of the virus increased soon after symp­toms first appeared, with high­er amounts of virus present in the nose than in the throats, a pat­tern more sim­i­lar to influen­za than SARS.

The lev­el of virus in the asymp­to­matic patient was sim­i­lar to what was present in patients with symp­toms, such as fever.

“What this says is clear­ly this virus can be shed out of the upper res­pi­ra­to­ry tract and that peo­ple are shed­ding it asymp­to­mati­cal­ly,” Poland said.

The find­ings add to evi­dence that this new virus, though genet­i­cal­ly sim­i­lar, is not behav­ing like SARS, said Kris­t­ian Ander­sen, an immu­nol­o­gist at Scripps Research in La Jol­la who uses gene sequenc­ing tools to track dis­ease out­breaks.

“This virus is clear­ly much more capa­ble of spread­ing between humans than any oth­er nov­el coro­n­avirus we’ve ever seen. This is more akin to the spread of flu,” said Ander­sen, who was not involved with the study. . . .

5. The virus has also been found in human feces, much like the norovirus, mak­ing food-borne trans­mis­sion an option. As researchers found with the SARS virus, the Covid-19 virus also spreads from aerosolized droplets of con­t­a­m­i­nat­ed feces, which is an exam­ple of how virus­es that haven’t yet devel­oped the abil­i­ty to spread through the air like the flu (or like this new coro­n­avirus) can still be spread through the air if the droplets or feces that the virus is con­tained in some­how becomes air­borne. And for all we know at this point it might be aerosolized droplets that are caus­ing most of the infec­tions. As one research put it, “both of these state­ments can coex­ist: Asymp­to­matic shed­ders could spread the virus, but it prob­a­bly is not the main dri­ver of this epi­dem­ic”:

“How does the new coro­n­avirus spread? These new stud­ies offer clues.” by Julia Bel­luz; Vox; 02/21/2020

How does the new coro­n­avirus dis­ease, Covid-19, spread? That’s just one of many basic, unan­swered ques­tions about this lat­est pan­dem­ic threat.

The virus that caus­es Covid-19 — known as SARS-CoV­‑2 — has already infect­ed more than 75,000 peo­ple in two months. (Of them, 2,130 have died.) And the best expla­na­tion for this rapid spread is that it’s being passed through droplets from cough­ing or sneez­ing. When these virus-laden droplets from an infect­ed per­son reach the nose, eyes, or mouth of anoth­er, they can trans­mit the dis­ease.

But are there oth­er ways SARS-CoV­‑2 moves between peo­ple? And what do they tell us about why this dis­ease seems to be even more con­ta­gious than SARS and MERS? The lat­est sci­ence on the virus offers pos­si­ble answers to these ques­tions — and why Covid-19 might be par­tic­u­lar­ly dif­fi­cult to stop. Here’s what we know so far.

Peo­ple have lots of virus in their bod­ies ear­ly on in ill­ness — or even when they have no symp­toms

Res­pi­ra­to­ry ill­ness­es gen­er­al­ly fall into two cat­e­gories: upper res­pi­ra­to­ry — infec­tions in the nose, phar­ynx, or lar­ynx, like the com­mon cold and sea­son­al influen­za; and low­er res­pi­ra­to­ry ill­ness­es, like pneu­mo­nia, which infect the lungs.

The orig­i­nal SARS virus that spread around the world in 2003 was thought to be a low­er res­pi­ra­to­ry infec­tion: It repli­cat­ed in the cells deep with­in the lungs and caused the pneu­mo­nia. Peo­ple also seemed to only spread the virus days into their ill­ness, when it was already clear they were sick. This made SARS more dif­fi­cult to pass on to oth­ers and the job of con­tain­ing it rel­a­tive­ly easy.

The new virus that caus­es Covid-19 dis­ease appears to be a dif­fer­ent beast: While it also can even­tu­al­ly lead to pneu­mo­nia, the virus does a great job of repli­cat­ing in the upper res­pi­ra­to­ry tract, even when peo­ple don’t have any symp­toms or just begin to feel sick.

Check out this new New Eng­land Jour­nal of Med­i­cine paper. Chi­nese researchers mon­i­tored how much virus could be found in the upper res­pi­ra­to­ry tracts — noses and throats — of 18 patients in Guang­dong, Chi­na. One of the 18 nev­er had any symp­toms.

The big find­ing? The way peo­ple shed this virus, poten­tial­ly expos­ing oth­ers, looked a lot more like the flu than the first SARS, which might help explain why Covid-19 appears to be more infec­tious. You can see why in this chart from the study, focused on the patients who expe­ri­enced symp­toms: Just as they were start­ing to feel ill, they had the high­est con­cen­tra­tions of virus in their noses:

[See plot of viral counts from nasal swabs after days of the onset of symp­toms]

In a sep­a­rate, new­ly pub­lished New Eng­land Jour­nal of Med­i­cine paper, researchers in Ger­many were also able to iso­late the virus from patients’ upper res­pi­ra­to­ry tract even before they showed any symp­toms or were very mild­ly symp­to­matic — more evi­dence of the poten­tial for spread of the virus from the nose and throat when peo­ple bare­ly know they’re sick.

So what does this imply about the con­ta­gious­ness of Covid-19 and stop­ping the out­break? “For a virus pret­ty close­ly relat­ed to SARS, it shows very effec­tive per­son-to-per­son trans­mis­sion, some­thing nobody real­ly expect­ed,” Stephen Morse, a pro­fes­sor of epi­demi­ol­o­gy at Colum­bia Uni­ver­si­ty Mail­man School of Pub­lic Health, told Vox. Researchers cur­rent­ly believe one infect­ed per­son gen­er­al­ly infects two to more than three oth­ers, which would make the new coro­n­avirus more con­ta­gious than sea­son­al flu, SARS and MERS.

[See plot com­par­ing trans­mis­sion rates of the Covid-19 (coro­n­avirus) to oth­er virus­es]

Sec­ond, it means stop­ping the out­break might be more dif­fi­cult, since peo­ple start to become infec­tious ear­ly on in their dis­ease or may even spread the virus when they’re asymp­to­matic.

But to con­firm these two find­ings, we’ll need more sci­ence, said Jen­nifer Nuz­zo, an infec­tious dis­ease expert and senior schol­ar at the Johns Hop­kins Cen­ter for Health Secu­ri­ty. “We still don’t know to what extent peo­ple with­out symp­toms can infect,” she point­ed out.

It’s also pos­si­ble that trans­mis­sion ear­ly in the ill­ness or from asymp­to­matic peo­ple won’t end up being impor­tant con­trib­u­tors to the out­break, said Mar­i­on Koop­mans, who stud­ies emerg­ing infec­tious dis­eases and heads the depart­ment of virol­o­gy at the Eras­mus Med­ical Cen­ter in Rot­ter­dam, Nether­lands. In most parts of the world where trav­el­ers with Covid-19 turned up, she added, the spread of the dis­ease has been con­tained by only test­ing peo­ple with symp­toms. But, she added, “both of these state­ments can coex­ist: Asymp­to­matic shed­ders could spread the virus, but it prob­a­bly is not the main dri­ver of this epi­dem­ic.”

The virus might spread through feces

Anoth­er way virus­es can spread is through poop. Think of the norovirus, the extreme­ly con­ta­gious bug that can be passed along by ingest­ing the stool of an infect­ed per­son, often through food or touch­ing a con­t­a­m­i­nat­ed sur­face. This is known as the “fecal-oral” route of dis­ease trans­mis­sion.

Now there’s some sug­ges­tion in the emerg­ing lit­er­a­ture that Covid-19 could be passed through expo­sure to virus-laden feces, too.

In this new paper from the Chi­nese Cen­ter for Dis­ease Con­trol and Pre­ven­tion, researchers man­aged to iso­late live virus from stool sam­ples of Covid-19 patients. And they’re not the first to find the virus in stool.

As with norovirus, this means the dis­ease could be passed around when there’s less than opti­mal hygiene. “If true, it would not be sur­pris­ing,” Morse said. “A num­ber of oth­er coro­n­avirus are excret­ed from the intestines, and infec­tious virus can be found in stool.”

That’s why the Chi­na CDC rec­om­mend­ed tak­ing mea­sures to stop the spread of the virus this way, includ­ing:

main­tain­ing envi­ron­men­tal health and per­son­al hygiene; drink­ing boiled water, avoid­ing raw food con­sump­tion, and imple­ment­ing sep­a­rate meal sys­tems in epi­dem­ic areas; fre­quent­ly wash­ing hands and dis­in­fect­ing of sur­faces of objects in house­holds, toi­lets, pub­lic places, and trans­porta­tion vehi­cles; and dis­in­fect­ing the exc­re­ta and envi­ron­ment of patients in med­ical facil­i­ties to pre­vent water and food con­t­a­m­i­na­tion from patients’ stool sam­ples.

But just because the virus is found in stool doesn’t mean that’s how it’s trans­mit­ting. And, again, more research is need­ed to fig­ure out how impor­tant the fecal-oral route is in the spread of this dis­ease.

Air­borne trans­mis­sion: One more thing to watch out for

Poop was also impli­cat­ed in the first SARS out­break, when a large hous­ing estate in Hong Kong called Amoy Gar­dens became ground zero of a pub­lic health night­mare. More than 300 peo­ple were infect­ed with the dis­ease through yet anoth­er viral trans­mis­sion route: air­borne trans­mis­sion of virus-rid­den feces aerosols.

Air­borne spread hap­pens when the residue from evap­o­rat­ed, infect­ed droplets gets sus­pend­ed in the air and indi­rect­ly infects those who breathe it in. It’s dif­fer­ent from droplet trans­mis­sion, since droplets are too large to float through the air and need to get sprayed direct­ly on someone’s eye, nose, or mouth in order to infect them.

In the case of Amoy Gar­dens, researchers learned SARS was capa­ble of going air­borne, spread­ing through the building’s faulty plumb­ing and ven­ti­la­tion sys­tems to the peo­ple who lived on the estate. “The infec­tions [were] offi­cial­ly attrib­uted to faulty toi­let traps which were thought to have aerosolized patients’ virus when the toi­let was flushed, allow­ing dis­per­sal of the virus to oth­er res­i­dents,” Morse explained. “This has been demon­strat­ed with SARS and MERS and oth­ers, and there­fore is plau­si­ble, although we cur­rent­ly lack good evi­dence.”

So researchers and doc­tors are look­ing into whether the news SARS virus spreads this way — and tak­ing pre­cau­tions in case it can. Vito Iacoviel­lo, chief of the divi­sion of infec­tious dis­eases at Mount Auburn Hos­pi­tal in Cam­bridge, Mass­a­chu­setts, and an edi­tor at Dynamed, not­ed that the US Cen­ters for Dis­ease Con­trol and Pre­ven­tion is rec­om­mend­ing peo­ple admit­ted to hos­pi­tals with Covid-19 be put in an air­borne iso­la­tion room. “That’s the pre­cau­tion we use for TB, measles, and chick­en­pox,” he said, and it sug­gests health offi­cials are prepar­ing for the pos­si­bil­i­ty that this virus is capa­ble of air­borne spread.

But again, for now, there’s no good evi­dence of Covid-19’s air­borne trans­mis­sion. It’s just anoth­er thing to watch out for as our under­stand­ing of this virus, and how it moves through pop­u­la­tions, evolves.

Mr Lee Man-hee and Kim Nam-hee, pho­tographed with Mr Pak Bo-hi (sec­ond from the left) attend­ing a Uni­fi­ca­tion Church Lit­tle Angels event. Mrs Pak is stand­ing next to Mr Lee.

6a. Yet anoth­er spec­u­la­tive ele­ment of dis­cus­sion con­cerns a cult/church in South Korea which is the epi­cen­ter of a burst of cas­es in that coun­try. A reput­ed pres­ence of a branch of the orga­ni­za­tion is in Wuhan, which has direct­ed dis­cus­sion in the direc­tion of the virus hav­ing migrat­ed from Hubei province to South Korea.

Against the back­ground of Uni­fi­ca­tion Church activ­i­ty dur­ing the Cold War, in con­nec­tion with CIA, in con­nec­tion with the fas­cist pow­er elite in Japan that is con­tin­u­ous with that coun­try’s activ­i­ties dur­ing World War II, we won­der about the pos­si­bil­i­ty of the use of this cult as a vec­tor­ing agent.

Might it be pos­si­ble that it was used to intro­duce the virus into Chi­na in the first place?

As will be high­light­ed in future pro­grams, there appear to be operational/networking links between the Shin­cheon­ji and the Uni­fi­ca­tion Church, as well as doc­tri­nal sim­i­lar­i­ties.

“Shad­owy Church is at Cen­ter of Coro­n­avirus Out­break in South Korea” by Choe Sang-Hun; The New York Times; 2/21/2020.

. . . . Now, health offi­cials are zero­ing in on the church’s prac­tices as they seek to con­tain South Korea’s alarm­ing coro­n­avirus out­break, in which mem­bers of Shin­cheon­ji and their rel­a­tives account for more than two-thirds of the con­firmed infec­tions. On Fri­day, the num­ber of cas­es in the coun­try soared above 200 — sec­ond only to main­land Chi­na, if the out­break on the Dia­mond Princess cruise ship is exclud­ed from Japan’s count. . . .

. . . . As of Fri­day, more than 340 mem­bers of Shin­cheon­ji, which main­stream South Kore­an church­es con­sid­er a cult, still could not be reached, accord­ing to health offi­cials, who were fran­ti­cal­ly hop­ing to screen them for signs of infec­tion. . . .

. . . . Jung Eun-kyeong, direc­tor of the Korea Cen­ters for Dis­ease Con­trol and Pre­ven­tion, said the author­i­ties were inves­ti­gat­ing reports that Shin­cheon­ji had oper­a­tions in Hubei, the Chi­nese province that includes Wuhan, where the virus emerged. The South Kore­an news agency New­sis report­ed on Fri­day that Shin­cheon­ji had opened a church in Wuhan last year, and that ref­er­ences to it had been removed from the church’s web­site. Church offi­cials could not imme­di­ate­ly be reached for com­ment. . . .

 

Discussion

2 comments for “FTR #1116 Update on The Chinese Winter and the Coronavirus “Bio-Psy-Op””

  1. Here’s a pair of arti­cles that high­light how prof­itable treat­ing the COVID-19 dis­ease could for Gilead and, in turn, Robert Mer­cer’s Renais­sance Tech­nolo­gies. Things are look­ing up for Gilead­’s stock. Way up. Assum­ing obscene price goug­ing:

    First, here’s an Insid­er Mon­key arti­cle from the end of Decem­ber that com­pares the per­for­mance of Gilead to the stocks most favored by hedge funds. The arti­cle notes that Gilead had actu­al­ly unper­formed the stock mar­ket in 2019, ris­ing only 10% com­pared to over 40% for the top 20 hedge fund stocks. It’s the kind of sit­u­a­tion that points towards even greater upside poten­tial for the stock in the cur­rent envi­ron­ment when almost all of the rest of the mar­ket is in a melt­down

    The arti­cle points out that Robert Mer­cer’s Renais­sance Tech­nol­o­gy was the largest hedge fund investor in Gilead as of the end of the third quar­ter of 2019, with a report­ed hold­ing $933.9 mil­lion worth of stock at the end of Sep­tem­ber 2019. To put these stakes in terms of the total own­er­ship of Gilead, the com­pa­ny had a mar­ket cap­i­tal­iza­tion of $80.60 Bil­lion at the end of Octo­ber 2019. The stock price at the end of Octo­ber was almost the same as the stock price at the end of Sep­tem­ber (63.38 vs 63.71). So if we assume an ~$80 bil­lion mar­ket cap­i­tal­iza­tion at the end of Sep­tem­ber that would give Renais­sance Tech­nol­o­gy just over 1% of the own­er­ship of Gilead:

    Insid­er Mon­key

    2019 Review: Most Favored Hedge Fund Stocks vs. Gilead Sci­ences, Inc. (GILD)

    by Asma UL Hus­na in Hedge Funds,News
    Pub­lished on Decem­ber 29, 2019 at 12:04 pm

    It has been a fan­tas­tic year for equi­ty investors as Don­ald Trump pres­sured Fed­er­al Reserve to reduce inter­est rates and final­ized the first leg of a trade deal with Chi­na. If you were a pas­sive index fund investor, you had seen gains of 31% in your equi­ty port­fo­lio in 2019. How­ev­er, if you were an active investor putting your mon­ey into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this arti­cle we are going to take a look at how hedge funds feel about a stock like Gilead Sci­ences, Inc. (NASDAQ:GILD) and com­pare its per­for­mance against hedge funds’ favorite stocks.

    Gilead Sci­ences, Inc. (NASDAQ:GILD) was in 58 hedge funds’ port­fo­lios at the end of the third quar­ter of 2019. GILD has seen an increase in hedge fund inter­est recent­ly. There were 57 hedge funds in our data­base with GILD hold­ings at the end of the pre­vi­ous quar­ter. Our cal­cu­la­tions also showed that GILD isn’t among the 30 most pop­u­lar stocks among hedge funds (click for Q3 rank­ings and see the video at the end of this arti­cle for Q2 rank­ings).

    Hedge funds’ rep­u­ta­tion as shrewd investors has been tar­nished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the mar­ket indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the mar­ket between 1999 and 2016. How­ev­er, we were able to iden­ti­fy in advance a select group of hedge fund hold­ings that out­per­formed the Rus­sell 2000 ETFs by 40 per­cent­age points since May 2014 (see the details here). We were also able to iden­ti­fy in advance a select group of hedge fund hold­ings that’ll sig­nif­i­cant­ly under­per­form the mar­ket. We have been track­ing and shar­ing the list of these stocks since Feb­ru­ary 2017 and they lost 27.8% through Novem­ber 21, 2019. That’s why we believe hedge fund sen­ti­ment is an extreme­ly use­ful indi­ca­tor that investors should pay atten­tion to.

    ...

    Hedge fund activ­i­ty in Gilead Sci­ences, Inc. (NASDAQ:GILD)

    Head­ing into the fourth quar­ter of 2019, a total of 58 of the hedge funds tracked by Insid­er Mon­key held long posi­tions in this stock, a change of 2% from the sec­ond quar­ter of 2019. On the oth­er hand, there were a total of 56 hedge funds with a bull­ish posi­tion in GILD a year ago. So, let’s exam­ine which hedge funds were among the top hold­ers of the stock and which hedge funds were mak­ing big moves.

    The largest stake in Gilead Sci­ences, Inc. (NASDAQ:GILD) was held by Renais­sance Tech­nolo­gies, which report­ed hold­ing $933.9 mil­lion worth of stock at the end of Sep­tem­ber. It was fol­lowed by D E Shaw with a $349.9 mil­lion posi­tion. Oth­er investors bull­ish on the com­pa­ny includ­ed Two Sig­ma Advi­sors, AQR Cap­i­tal Man­age­ment, and GLG Part­ners. In terms of the port­fo­lio weights assigned to each posi­tion Coper­ni­cus Cap­i­tal Man­age­ment allo­cat­ed the biggest weight to Gilead Sci­ences, Inc. (NASDAQ:GILD), around 11.67% of its 13F port­fo­lio. Health­care Val­ue Cap­i­tal is also rel­a­tive­ly very bull­ish on the stock, ear­mark­ing 8.01 per­cent of its 13F equi­ty port­fo­lio to GILD.

    As aggre­gate inter­est increased, key hedge funds were break­ing ground them­selves. Perel­la Wein­berg Part­ners, assem­bled the most out­sized posi­tion in Gilead Sci­ences, Inc. (NASDAQ:GILD). Perel­la Wein­berg Part­ners had $3.2 mil­lion invest­ed in the com­pa­ny at the end of the quar­ter. Ben Levine, Andrew Manuel and Ste­fan Renold’s LMR Part­ners also ini­ti­at­ed a $3 mil­lion posi­tion dur­ing the quar­ter. The fol­low­ing funds were also among the new GILD investors: Jef­frey Talpins’s Ele­ment Cap­i­tal Man­age­ment, Lee Ainslie’s Mav­er­ick Cap­i­tal, and Min­hua Zhang’s Weld Cap­i­tal Man­age­ment.

    Let’s now review hedge fund activ­i­ty in oth­er stocks sim­i­lar to Gilead Sci­ences, Inc. (NASDAQ:GILD). These stocks are Mon­delez Inter­na­tion­al Inc (NASDAQ:MDLZ), Gen­er­al Elec­tric Com­pa­ny (NYSE:GE), Altria Group Inc (NYSE:MO), and CME Group Inc (NASDAQ:CME). All of these stocks’ mar­ket caps resem­ble GILD’s mar­ket cap.

    [see chart]

    As you can see these stocks had an aver­age of 49 hedge funds with bull­ish posi­tions and the aver­age amount invest­ed in these stocks was $2720 mil­lion. That fig­ure was $3263 mil­lion in GILD’s case. Mon­delez Inter­na­tion­al Inc (NASDAQ:MDLZ) is the most pop­u­lar stock in this table. On the oth­er hand CME Group Inc (NASDAQ:CME) is the least pop­u­lar one with only 46 bull­ish hedge fund posi­tions. Com­pared to these stocks Gilead Sci­ences, Inc. (NASDAQ:GILD) is more pop­u­lar among hedge funds. Our cal­cu­la­tions showed that top 20 most pop­u­lar stocks among hedge funds returned 41.1% in 2019 through Decem­ber 23rd and out­per­formed the S&P 500 ETF (SPY) by 10.1 per­cent­age points. Unfor­tu­nate­ly GILD wasn’t near­ly as pop­u­lar as these 20 stocks and hedge funds that were bet­ting on GILD were dis­ap­point­ed as the stock returned 10.8% so far in 2019 (through 12/23) and trailed the mar­ket. If you are inter­est­ed in invest­ing in large cap stocks with huge upside poten­tial, you should check out the top 20 most pop­u­lar stocks among hedge funds as 65 per­cent of these stocks already out­per­formed the mar­ket in 2019.

    ———-

    “2019 Review: Most Favored Hedge Fund Stocks vs. Gilead Sci­ences, Inc. (GILD)” by Asma UL Hus­na in Hedge Funds; Insid­er Mon­key; 12/29/2019

    The largest stake in Gilead Sci­ences, Inc. (NASDAQ:GILD) was held by Renais­sance Tech­nolo­gies, which report­ed hold­ing $933.9 mil­lion worth of stock at the end of Sep­tem­ber. It was fol­lowed by D E Shaw with a $349.9 mil­lion posi­tion. Oth­er investors bull­ish on the com­pa­ny includ­ed Two Sig­ma Advi­sors, AQR Cap­i­tal Man­age­ment, and GLG Part­ners. In terms of the port­fo­lio weights assigned to each posi­tion Coper­ni­cus Cap­i­tal Man­age­ment allo­cat­ed the biggest weight to Gilead Sci­ences, Inc. (NASDAQ:GILD), around 11.67% of its 13F port­fo­lio. Health­care Val­ue Cap­i­tal is also rel­a­tive­ly very bull­ish on the stock, ear­mark­ing 8.01 per­cent of its 13F equi­ty port­fo­lio to GILD.”

    Of the 58 hedge funds with Gilead in the port­fo­lio, it’s Robert Mer­cer’s Renais­sance Tech­nolo­gies that made the biggest invest­ments. Although it did­n’t per­formed so well, with a 10% rise that under­per­formed the broad­er mar­kets in 2019:

    ...
    As you can see these stocks had an aver­age of 49 hedge funds with bull­ish posi­tions and the aver­age amount invest­ed in these stocks was $2720 mil­lion. That fig­ure was $3263 mil­lion in GILD’s case. Mon­delez Inter­na­tion­al Inc (NASDAQ:MDLZ) is the most pop­u­lar stock in this table. On the oth­er hand CME Group Inc (NASDAQ:CME) is the least pop­u­lar one with only 46 bull­ish hedge fund posi­tions. Com­pared to these stocks Gilead Sci­ences, Inc. (NASDAQ:GILD) is more pop­u­lar among hedge funds. Our cal­cu­la­tions showed that top 20 most pop­u­lar stocks among hedge funds returned 41.1% in 2019 through Decem­ber 23rd and out­per­formed the S&P 500 ETF (SPY) by 10.1 per­cent­age points. Unfor­tu­nate­ly GILD wasn’t near­ly as pop­u­lar as these 20 stocks and hedge funds that were bet­ting on GILD were dis­ap­point­ed as the stock returned 10.8% so far in 2019 (through 12/23) and trailed the mar­ket. If you are inter­est­ed in invest­ing in large cap stocks with huge upside poten­tial, you should check out the top 20 most pop­u­lar stocks among hedge funds as 65 per­cent of these stocks already out­per­formed the mar­ket in 2019.
    ...

    So Gildead was an under­per­form­ing stock in 2019 and is now one of the poten­tial­ly hottest stocks out there with the out­break of the COVID-19 coro­n­avirus. It’s the kind of dynam­ic that could lead to some sig­nif­i­cant gains in com­ing months and like­ly con­tributed to its sig­nif­i­cant gains already real­ized.

    Note Renais­sance Tech­nol­o­gy isn’t the largest over­all share­hold­er over­all. It’s just the largest hedge fund investor. Accord­ing to CNN Mon­ey, insti­tu­tion­al shared­hold­er have larg­er stakes (The Van­guard Group, Inc, is the top share­hold­er with ~8% of the shares as of today) and 83.40% of the over­all own­er­ship of Gilead is held by insti­tu­tion­al investors which is high­er than almost any oth­er com­pa­ny in the biotech indus­try. But Renais­sance Tech­nol­o­gy did increase its hold­ings by 15% over the last quar­ter of 2019 (to 1.34% of total shares), so it dou­bled down on its Gilead bet in the last quar­ter of 2019 despite the poor per­for­mance of Gilead stock that year. It would be inter­est­ing to know if Renais­sance pur­chased those addi­tion­al shares in the last quar­ter. Keep in mind that the coro­n­avirus was­n’t real­ly in the news until the end of Decem­ber.

    Next, here’s an arti­cle that describes how mar­ket ana­lysts see the poten­tial upside to Gilead­’s stock from the spike in demand for remde­sivir. Accord­ing to Oppen­heimer ana­lyst Har­taj Singh, a world­wide release of remde­sivir could lead to $500 mil­lion in year­ly “pan­dem­ic sales stock­ing”. The ana­lyst assumes the remde­sivir pills would cost $50 to $100 per patient. That’s com­pared to $16 a pill for Tam­i­flu which is used to treat the flu. As Singh puts it, ““Assum­ing such a con­ser­v­a­tive mod­el, suc­cess­ful Phase 3 out­comes in the mod­er­ate patients are worth 5% to 10% to Gilead. If both Phase 3’s are suc­cess­ful, we fore­see greater pric­ing lever­age in devel­oped mar­kets and high­er stock­ing; lead­ing to a 10% to 20% val­u­a­tion bump. Clear­ly a pan­dem­ic stock­pil­ing of remde­sivir (like Tam­i­flu) is where Gilead stock ben­e­fits most. Acute treat­ment for mil­lions of patients would be more a har­bin­ger of a Street melt­down.” Greater pric­ing lever­ag­ing in the devel­oped mar­kets, i.e. charg­ing as much as pos­si­ble for the drug. That’s the dream sce­nario for Gilead­’s share­hold­ers.

    Singh’s esti­mates are that Gilead, with a cur­rent mar­ket cap­i­tal­iza­tion ~$94 bil­lion (up from ~$80 bil­lion at the end of Sep­tem­ber), could approach $115 bil­lion on the high end of his esti­mates. As the arti­cle notes, Gilead­’s stock has already shot 10% high­er over the past month in the midst of a glob­al mar­ket melt­down:

    Yahoo Finance

    Coro­n­avirus vac­cine could add bil­lions in val­ue to this one stock

    Bri­an Sozzi
    March 4, 2020

    Gilead could be sit­ting on close to $20 bil­lion in untapped stock mar­ket val­ue, pro­vid­ed it has suc­cess with a poten­tial new coro­n­avirus vac­cine.

    Oppen­heimer ana­lyst Har­taj Singh esti­mates that a world­wide release of remde­sivir — cur­rent­ly in Phase 3 tri­al for Gilead —could lead to $500 mil­lion in year­ly “pan­dem­ic sales stock­ing.” The ana­lyst assumes the coro­n­avirus pill would cost $50 to $100 per patient com­pared to $16 a pill for flu treat­ment Tam­i­flu in the U.S. Singh sees the pill reach­ing 5 mil­lion to 10 mil­lion peo­ple in terms of pan­dem­ic stock-pil­ing.

    Gilead’s tri­als of remde­sivir include one tar­get­ing patients with severe man­i­fes­ta­tions of coro­n­avirus. The oth­er focus­es on patients with more mod­er­ate affects from COVID-19.

    “Assum­ing such a con­ser­v­a­tive mod­el, suc­cess­ful Phase 3 out­comes in the mod­er­ate patients are worth 5% to 10% to Gilead. If both Phase 3’s are suc­cess­ful, we fore­see greater pric­ing lever­age in devel­oped mar­kets and high­er stock­ing; lead­ing to a 10% to 20% val­u­a­tion bump. Clear­ly a pan­dem­ic stock­pil­ing of remde­sivir (like Tam­i­flu) is where Gilead stock ben­e­fits most. Acute treat­ment for mil­lions of patients would be more a har­bin­ger of a Street melt­down,” Singh writes.

    Using the aggres­sive side of Singh’s esti­mates for remde­sivir, Gilead’s mar­ket cap could approach $115 bil­lion ver­sus $94 bil­lion today.

    ...

    Shares of Gilead has rock­et­ed 10% high­er over the past month while the broad­er stock mar­ket has gone in the tank on fears of a glob­al eco­nom­ic slow­down. On the oth­er hand, Mod­er­na — which has a coro­n­avirus vac­cine in Phase 1 — has seen its stock sky­rock­et 31% in the past month.

    ————

    “Coro­n­avirus vac­cine could add bil­lions in val­ue to this one stock” by Bri­an Sozzi; Yahoo Finance; 03/04/2020

    “Oppen­heimer ana­lyst Har­taj Singh esti­mates that a world­wide release of remde­sivir — cur­rent­ly in Phase 3 tri­al for Gilead —could lead to $500 mil­lion in year­ly “pan­dem­ic sales stock­ing.” The ana­lyst assumes the coro­n­avirus pill would cost $50 to $100 per patient com­pared to $16 a pill for flu treat­ment Tam­i­flu in the U.S. Singh sees the pill reach­ing 5 mil­lion to 10 mil­lion peo­ple in terms of pan­dem­ic stock-pil­ing.

    $50 to $100 per pill. That’s the goal. Or as ana­lysts put it, “If both Phase 3’s are suc­cess­ful, we fore­see greater pric­ing lever­age in devel­oped mar­kets and high­er stock­ing; lead­ing to a 10% to 20% val­u­a­tion bump””

    ...
    “Assum­ing such a con­ser­v­a­tive mod­el, suc­cess­ful Phase 3 out­comes in the mod­er­ate patients are worth 5% to 10% to Gilead. If both Phase 3’s are suc­cess­ful, we fore­see greater pric­ing lever­age in devel­oped mar­kets and high­er stock­ing; lead­ing to a 10% to 20% val­u­a­tion bump. Clear­ly a pan­dem­ic stock­pil­ing of remde­sivir (like Tam­i­flu) is where Gilead stock ben­e­fits most. Acute treat­ment for mil­lions of patients would be more a har­bin­ger of a Street melt­down,” Singh writes.
    ...

    And it’s those hopes of pill price goug­ing that’s helped Gilead rise anoth­er 10% over the past month at the same time the rest of the mar­ket is col­laps­ing:

    ...
    Shares of Gilead has rock­et­ed 10% high­er over the past month while the broad­er stock mar­ket has gone in the tank on fears of a glob­al eco­nom­ic slow­down. On the oth­er hand, Mod­er­na — which has a coro­n­avirus vac­cine in Phase 1 — has seen its stock sky­rock­et 31% in the past month.

    ...

    So it sounds like we should expect Gilead to charge quite a pre­mi­um on remde­sivir once it final­ly gets approved for COVID-19. It rais­es the ques­tion of how many pills peo­ple are going to have to take to get over the dis­ease.

    It would also be inter­est­ing to com­pare that expect­ed cost of remde­sivir treat­ment to the cost of the “Thai cock­tail” of Tam­i­flu (the brand name for oseltamivir) and HIV anti­retro­vi­rals lopinavir + riton­avir (sold togeth­er as Kale­tra). Are the costs com­pa­ra­ble? Either way, it’s worth not­ing who owns the patent on Tam­i­flu: Gilead.

    Posted by Pterrafractyl | March 6, 2020, 1:05 pm
  2. Here’s an arti­cle that relates to sto­ries about the finan­cial ana­lysts who are up to $20 bil­lion in gains for Gilead­’s stock price based on the assump­tion that the com­pa­ny will be able to charge $50–100 for each pill of remde­sivir to treat COVID-19: Con­gress just passed an $8.3 bil­lion emer­gency coro­n­avirus spend­ing pack­age last week. Democ­rats attempt­ed to add var­i­ous pro­vi­sions that would pre­vent price goug­ing by drug mak­ers for drugs found to treat the virus but the phar­ma­ceu­ti­cal indus­try and Repub­li­cans suc­cess­ful­ly killed those pro­vi­sions. One killed pro­vi­sion, pushed by Demo­c­rat Jan Shakowsky, would have ensured that coro­n­avirus treat­ments devel­oped with emer­gency fed­er­al fund­ing would be priced fair­ly and be made wide­ly avail­able. The emer­gency spend­ing pack­age includes $3.1 bil­lion to devel­op drugs and vac­cines and expand man­u­fac­tur­ing capa­bil­i­ties. So the fed­er­al gov­ern­ment is sub­si­diz­ing the devel­op­ment of some of these drugs and vac­cine and help­ing the indus­try get ready to mass pro­duce the drugs, but even in that case there will be no guar­an­tee the drugs are afford­able and avail­able even in the midst of this out­break.

    Now, there are pro­vi­sions in the bar that any prod­ucts pur­chased in the emer­gency mea­sure must meet fed­er­al acqui­si­tion guid­ance “on fair and rea­son­able pric­ing” and also empow­ers the Health and Human Ser­vices (HHS) sec­re­tary to ensure that vac­cines, drugs or diag­nos­tic tests devel­oped with the emer­gency fund­ing “will be afford­able in the com­mer­cial mar­ket”. But as crit­ics point­ed out, there’s noth­ing in the bill spec­i­fy­ing how the gov­ern­ment would deter­mine a fair price. More impor­tant­ly, the bill con­tains a sep­a­rate pro­vi­sion stat­ing that HHS can’t delay the devel­op­ment of vac­cines and treat­ments in an effort to main­tain afford­able prices. And since the drug indus­try argues that any price con­trols effec­tive­ly delay the devel­op­ment of drugs and vac­cines that means there can be no real price con­trols. As one crit­ic put it, com­pa­nies will be able to “claim that any­thing that reduces the price reduces incen­tives to invest in more rapid devel­op­ment, and lit­i­gate that issue.” So it’s look­ing like any upcom­ing coro­n­avirus treat­ments are going to be extra pricey — and there­fore not wide­ly avail­able — thanks to the Big Phar­ma and their Repub­li­can min­ions in Con­gress

    Politi­co

    How the drug indus­try got its way on the coro­n­avirus

    Com­pa­nies are fight­ing off Democ­rats’ push to include drug-pric­ing pro­vi­sions in an emer­gency spend­ing pack­age.

    By SARAH KARLIN-SMITH

    03/05/2020 05:28 PM EST

    The drug indus­try is show­ing that even in a cri­sis, it can use its influ­ence in Wash­ing­ton to fight off efforts to cut into its prof­its.

    Indus­try lob­by­ists suc­cess­ful­ly blocked attempts this week to include lan­guage in the $8.3 bil­lion emer­gency coro­n­avirus spend­ing bill that would have threat­ened intel­lec­tu­al prop­er­ty rights for any vac­cines and treat­ments the gov­ern­ment decides are priced unfair­ly.

    Drug com­pa­nies’ pow­er to dic­tate terms as Con­gress strug­gles to address the grow­ing U.S. out­break is anoth­er sign of the uphill bat­tle that like­ly awaits any broad­er bipar­ti­san drug-pric­ing leg­is­la­tion. Both Democ­rats and Repub­li­cans have tried and failed in recent months to advance bills that would crack down on costs.

    The phar­ma­ceu­ti­cal indus­try not only killed the intel­lec­tu­al prop­er­ty pro­vi­sion in the coro­n­avirus pack­age, but it got lan­guage added into the bill that pre­vents the gov­ern­ment from delay­ing a medicine’s devel­op­ment over con­cerns about its afford­abil­i­ty.

    “The idea that drug com­pa­nies should have free reign to set prices dur­ing an inter­na­tion­al pan­dem­ic is immoral and dan­ger­ous,” said Rep. Jan Schakowsky (D‑Ill.), who led an unsuc­cess­ful push to ensure that coro­n­avirus treat­ments devel­oped with fed­er­al emer­gency fund­ing would be priced fair­ly and avail­able wide­ly, in a state­ment to POLITICO.

    The pro­vi­sion to bar the gov­ern­ment from inter­ven­ing when afford­abil­i­ty con­cerns arise “blows up” exist­ing legal mea­sures to ensure fair drug pric­ing, said Jamie Love, exec­u­tive direc­tor at Knowl­edge Ecol­o­gy Inter­na­tion­al, which has been lob­by­ing for new drug devel­op­ment and pric­ing approach­es to low­er the costs of med­i­cines.

    The coro­n­avirus pack­age — which passed the House Wednes­day and the Sen­ate Thurs­day — includes about $3.1 bil­lion to devel­op drugs and vac­cines and expand man­u­fac­tur­ing capac­i­ty. It would also cov­er pur­chas­es of med­ical sup­plies for state and local health depart­ments to beef up the Strate­gic Nation­al Stock­pile, the largest nation­al repos­i­to­ry of emer­gency treat­ments. Anoth­er $300 mil­lion would help the gov­ern­ment buy vac­cines and treat­ments once they are approved. Much of this mon­ey would direct­ly ben­e­fit the drug indus­try.

    The bill spec­i­fies that any prod­ucts pur­chased must meet fed­er­al acqui­si­tion guid­ance “on fair and rea­son­able pric­ing.” It also empow­ers the HHS sec­re­tary to ensure that vac­cines, drugs or diag­nos­tic tests devel­oped with the emer­gency fund­ing “will be afford­able in the com­mer­cial mar­ket,” with­out spec­i­fy­ing how the gov­ern­ment would deter­mine a fair price.

    But the leg­is­la­tion also says that HHS can’t delay the devel­op­ment of vac­cines and treat­ments in an effort to main­tain afford­able prices — a win for the drug indus­try and Repub­li­cans, who argue that gov­ern­ment con­straints on pric­ing would lim­it pri­vate invest­ment in coro­n­avirus ther­a­pies. Repub­li­cans also told POLITICO they pushed back on Demo­c­ra­t­ic attempts to add lan­guage that would have allowed HHS to set a drug’s price and lim­it increas­es to the rate of infla­tion.

    Democ­rats ini­tial­ly pushed to give HHS the pow­er to strip intel­lec­tu­al prop­er­ty pro­tec­tions from any vac­cine or med­ica­tion whose price it deemed too high, mul­ti­ple sources famil­iar with the nego­ti­a­tion told POLITICO. Ver­sions of the leg­is­la­tion cir­cu­lat­ing late last week includ­ed this lan­guage. But push­back from the drug indus­try and Repub­li­cans prompt­ed law­mak­ers to strike it.

    Stephen Ubl, the head of the drug indus­try’s main lob­by­ing group, PhRMA, told reporters Wednes­day that phar­ma­ceu­ti­cal com­pa­nies won’t take the huge risks that come with drug and vac­cine devel­op­ment if the gov­ern­ment has the lever­age to strip them of their patents over pric­ing dis­agree­ments. The mon­ey in the spend­ing bill does not cov­er all of these risks, he added.

    “If col­lab­o­ra­tion with the gov­ern­ment even in a lim­it­ed way results in a loss of intel­lec­tu­al prop­er­ty or the gov­ern­ment set­ting the price, it is going to have a chill­ing effect on both invest­ment and col­lab­o­ra­tion at a time when we need more of both,” Ubl said, adding he had not seen the lan­guage in the final coro­n­avirus pack­age.

    ...

    Sen­ate Major­i­ty Leader Mitch McConnell said in a state­ment that he is glad the leg­is­la­tion moved for­ward with­out the “ide­o­log­i­cal strings” on drug pric­ing that House Democ­rats ini­tial­ly sought. “This is a moment where we need to empow­er and encour­age our nation’s inno­va­tors,” he said.

    House Speak­er Nan­cy Pelosi’s office said in a state­ment that the bill “pro­tects against price-goug­ing of these med­i­cines devel­oped with tax­pay­er dol­lars by ensur­ing that the fed­er­al gov­ern­ment will only pay a fair and rea­son­able price for coro­n­avirus vac­cines and drugs and pro­vid­ing HHS the author­i­ty to ensure that they are afford­able in the com­mer­cial mar­ket.”

    But advo­cates for low­er drug prices say that the drug indus­try got the bet­ter end of the deal, because the pro­vi­sion that bars the gov­ern­ment from delay­ing a product’s devel­op­ment over price con­cerns could negate the leg­isla­tive wins Pelosi tout­ed.

    The cur­rent afford­abil­i­ty lan­guage “is worse than weak — it actu­al­ly makes thing worse,” Love wrote in a blog post. He not­ed that the bill says only that the HHS sec­re­tary “may” take action to ensure prod­ucts are afford­able to the com­mer­cial mar­ket, while man­dat­ing that HHS Sec­re­tary “shall not” take actions to delay devel­op­ment of the prod­ucts.

    Now, Love wrote, com­pa­nies will be able to “claim that any­thing that reduces the price reduces incen­tives to invest in more rapid devel­op­ment, and lit­i­gate that issue.”

    A senior Demo­c­ra­t­ic aide pushed back on the idea that the pro­vi­sion is a vic­to­ry for Repub­li­cans and the drug indus­try. “That lan­guage is real­ly a fig leaf for Repub­li­cans to take home to Big Phar­ma,” the aide said, adding that lan­guage won’t be applic­a­ble because “if there’s an actu­al pur­chase price to assess, that means that a vac­cine has been suc­cess­ful­ly devel­oped.”

    But Rep. Lloyd Doggett (D‑Texas), who with Schakowsky sought stricter afford­abil­i­ty pro­vi­sions, took aim at “the will­ing­ness of the phar­ma­ceu­ti­cal indus­try to advance its monop­oly pow­er no mat­ter how seri­ous the cri­sis.”

    “A dan­ger remains that the fed­er­al gov­ern­ment will sim­ply write a blank check signed to big phar­ma as a result of this cri­sis,” he said. “I’m pleased that the emer­gency fund­ing lan­guage does refer to rea­son­able prices, but I would have liked it to be much stronger.”

    Oth­er drug pric­ing advo­cates char­ac­ter­ized the bill as an incre­men­tal step in the right direc­tion.

    “That we’re debat­ing the lan­guage is a loss” for the phar­ma­ceu­ti­cal indus­try, said Alex Law­son, exec­u­tive direc­tor of Social Secu­ri­ty Works. “And at some point, peo­ple are going to start won­der­ing why the fed­er­al gov­ern­ment pays unrea­son­able prices on any­thing to phar­ma­ceu­ti­cal com­pa­nies. And when that hap­pens, that’s when pharma’s whole house of cards starts falling down.”

    ————

    “How the drug indus­try got its way on the coro­n­avirus” by SARAH KARLIN-SMITH; Politi­co; 03/05/2020

    “The phar­ma­ceu­ti­cal indus­try not only killed the intel­lec­tu­al prop­er­ty pro­vi­sion in the coro­n­avirus pack­age, but it got lan­guage added into the bill that pre­vents the gov­ern­ment from delay­ing a medicine’s devel­op­ment over con­cerns about its afford­abil­i­ty.”

    Yep, it was quite a win for the phar­ma­ceu­ti­cal lob­by. Not only did it kill a pro­vi­sion that would have giv­en HHS the abil­i­ty strip com­pa­nies of their patent rights if the pric­ing for drugs isn’t deems to be afford­able but it also got lan­guage added to the bill that pre­vents the gov­ern­ment from delay­ing the roll out of drugs or vac­cines over afford­abil­i­ty con­cerns. And as crit­ics point out, the addi­tion of that lan­guage can effec­tive­ly neuter the exist­ing drug price con­trol rules because any price con­trols will be framed as a delay:

    ...
    “The idea that drug com­pa­nies should have free reign to set prices dur­ing an inter­na­tion­al pan­dem­ic is immoral and dan­ger­ous,” said Rep. Jan Schakowsky (D‑Ill.), who led an unsuc­cess­ful push to ensure that coro­n­avirus treat­ments devel­oped with fed­er­al emer­gency fund­ing would be priced fair­ly and avail­able wide­ly, in a state­ment to POLITICO.

    The pro­vi­sion to bar the gov­ern­ment from inter­ven­ing when afford­abil­i­ty con­cerns arise “blows up” exist­ing legal mea­sures to ensure fair drug pric­ing, said Jamie Love, exec­u­tive direc­tor at Knowl­edge Ecol­o­gy Inter­na­tion­al, which has been lob­by­ing for new drug devel­op­ment and pric­ing approach­es to low­er the costs of med­i­cines.

    ...

    The bill spec­i­fies that any prod­ucts pur­chased must meet fed­er­al acqui­si­tion guid­ance “on fair and rea­son­able pric­ing.” It also empow­ers the HHS sec­re­tary to ensure that vac­cines, drugs or diag­nos­tic tests devel­oped with the emer­gency fund­ing “will be afford­able in the com­mer­cial mar­ket,” with­out spec­i­fy­ing how the gov­ern­ment would deter­mine a fair price.

    But the leg­is­la­tion also says that HHS can’t delay the devel­op­ment of vac­cines and treat­ments in an effort to main­tain afford­able prices — a win for the drug indus­try and Repub­li­cans, who argue that gov­ern­ment con­straints on pric­ing would lim­it pri­vate invest­ment in coro­n­avirus ther­a­pies. Repub­li­cans also told POLITICO they pushed back on Demo­c­ra­t­ic attempts to add lan­guage that would have allowed HHS to set a drug’s price and lim­it increas­es to the rate of infla­tion.

    Democ­rats ini­tial­ly pushed to give HHS the pow­er to strip intel­lec­tu­al prop­er­ty pro­tec­tions from any vac­cine or med­ica­tion whose price it deemed too high, mul­ti­ple sources famil­iar with the nego­ti­a­tion told POLITICO. Ver­sions of the leg­is­la­tion cir­cu­lat­ing late last week includ­ed this lan­guage. But push­back from the drug indus­try and Repub­li­cans prompt­ed law­mak­ers to strike it.

    ...

    The cur­rent afford­abil­i­ty lan­guage “is worse than weak — it actu­al­ly makes thing worse,” Love wrote in a blog post. He not­ed that the bill says only that the HHS sec­re­tary “may” take action to ensure prod­ucts are afford­able to the com­mer­cial mar­ket, while man­dat­ing that HHS Sec­re­tary “shall not” take actions to delay devel­op­ment of the prod­ucts.

    Now, Love wrote, com­pa­nies will be able to “claim that any­thing that reduces the price reduces incen­tives to invest in more rapid devel­op­ment, and lit­i­gate that issue.”
    ...

    And this suc­cess­ful lob­by­ing push hap­pened in a bill that includ­ed $3.1 bil­lion to devel­op drugs and vac­cines and expand man­u­fac­tur­ing capac­i­ty. That’s basi­cal­ly free mon­ey for the indus­try. But accord­ing to the indus­try rep­re­sen­ta­tives, if there’s any restric­tions on their pric­ing pow­er the com­pa­nies sim­ply won’t have the incen­tive to devel­op new drugs. It’s basi­cal­ly prof­i­teer­ing black­mail and it worked:

    ...
    Indus­try lob­by­ists suc­cess­ful­ly blocked attempts this week to include lan­guage in the $8.3 bil­lion emer­gency coro­n­avirus spend­ing bill that would have threat­ened intel­lec­tu­al prop­er­ty rights for any vac­cines and treat­ments the gov­ern­ment decides are priced unfair­ly.

    ...

    The coro­n­avirus pack­age — which passed the House Wednes­day and the Sen­ate Thurs­day — includes about $3.1 bil­lion to devel­op drugs and vac­cines and expand man­u­fac­tur­ing capac­i­ty. It would also cov­er pur­chas­es of med­ical sup­plies for state and local health depart­ments to beef up the Strate­gic Nation­al Stock­pile, the largest nation­al repos­i­to­ry of emer­gency treat­ments. Anoth­er $300 mil­lion would help the gov­ern­ment buy vac­cines and treat­ments once they are approved. Much of this mon­ey would direct­ly ben­e­fit the drug indus­try.

    ...

    Stephen Ubl, the head of the drug indus­try’s main lob­by­ing group, PhRMA, told reporters Wednes­day that phar­ma­ceu­ti­cal com­pa­nies won’t take the huge risks that come with drug and vac­cine devel­op­ment if the gov­ern­ment has the lever­age to strip them of their patents over pric­ing dis­agree­ments. The mon­ey in the spend­ing bill does not cov­er all of these risks, he added.

    “If col­lab­o­ra­tion with the gov­ern­ment even in a lim­it­ed way results in a loss of intel­lec­tu­al prop­er­ty or the gov­ern­ment set­ting the price, it is going to have a chill­ing effect on both invest­ment and col­lab­o­ra­tion at a time when we need more of both,” Ubl said, adding he had not seen the lan­guage in the final coro­n­avirus pack­age.
    ...

    So giv­en that the indus­try as demon­strat­ed its intent on mak­ing as much mon­ey as it pos­si­bly can from this health cri­sis, it’s worth keep­ing in mind that one of the best way to ensure a high­ly con­ta­gious dis­ease like COVID-19 makes the indus­try as much mon­ey as pos­si­ble is to ensure it’s nev­er actu­al­ly con­tained and becomes a glob­al pan­dem­ic that revis­its human­i­ty year after year. And an obvi­ous way ensure COVID-19 becomes a per­ma­nent pan­dem­ic is to price the treat­ments high enough that large num­bers of peo­ple can’t pos­si­ble afford it. That’s what’s going to real­ly guar­an­tee the big prof­its and thus far the indus­try is on track for some very big prof­its.

    Posted by Pterrafractyl | March 9, 2020, 2:52 pm

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