5/11/2020

Good day,

I hope everyone had a solid week and celebrated all the mothers out there. Without moms there would be no people. #facts. #science. After watching The Last Dance, I also have come to believe there would be no NBA if not for MJ. The NBA needs to return ASAP because I am starting to forget who even plays in the league now. RUSS is omnipresent, obviously, and sometimes I think I hear a faint roar in the distance that makes me believe that RUSS just dunked on someone, somewhere, and all is right in the world in that moment. Then occasionally I feel the ground shake underneath me and I am fairly confident that it was just Harden falling to the floor trying to sell a flop again. Speaking of flopping, the LA Clippers during the "lob city" era that featured CP3, Griffin, and DeAndre Jordan were the absolute worst team in the league when it came to complaining 100% of the time and flopping whenever a ball boy threw a towel near them when they were sitting on the bench. I don't know if the towel thing happened for sure or not but it's believable enough. However, we can no longer speak ill of the great, wise, forever young CP3 as his wizardry had OKC maximizing every bit of its roster before Covid-19 decided that it didn't want to see the Thunder finally win a championship. The last virus that cost OKC a title, patrick beverly, is still around so here is to hoping that Covid-19 can be fully vanquished unlike the knee killer himself. Not that I actually want anything bad to happen to pat-bev, I just wouldn't mind if he had to go back to playing in Russia for forever. Daryl Morey (Houston Rockets GM) is one of the sharpest dudes in the NBA but I don't see how anyone can forgive him for importing the pat-bev virus. That's on him. Anyways, some European soccer leagues are starting to return and the MLB might be back in July. Surely this bodes well for the NBA finishing out this season somehow. It needs to happen. In this week's #bucketsblog, Nike grows stronger, there is a second Serge / surge coming, President Trump kind of disbands the covid-19 task force, and Saudi's price war "strategy" may be backfiring.

May 11, 2020

Nike swoosh vanquishes the letter V

• The Nike swoosh finally defeated the letter V after a back and forth affair over the past couple of months. Many fans were cheering for a V-shaped economic recovery but the Nike swoosh displayed its power by defeating all hope of a V-shaped recovery in what was pretty much a road game for the swoosh. The hope of a V-shaped economic recovery is basically gone. The next step in the economic recovery outlook is called a U-shaped recovery but corporate execs and policy makers just flat out skipped THE U and went straight to THE SWOOSH, according to the Wall Street Journal (WSJ). Thankfully, the WSJ provided a handy dandy "Recovery Alphabet" chart for all of us non-economists:

• Who knew that the back end of the alphabet meant so much to economists? Then the letter L is awkwardly hanging out with the smart kids but it's pretty obvious the other letters don't really want to include the letter L in anything so they just put it at the end of the graph. Hopefully western economies react to being attached with Nike the same way that MJ did after signing with them and the economy just absolutely takes flight. Any chance the economy gets its own shoe line if that happens? Surely so. It worked out really well with MJ and Nike. Can't see why it wouldn't work the same in this scenario since they are the exact same, right? Large drivers behind the swoosh recovery are the fact that re-openings are occurring at a slower rate than anticipated, and even when local or state economies open, nothing is really back at full tilt. Restaurants are restricted to being half-full, at best, concerts and pro sports either won't be around for a long time or will be performed in front of no fans, and retailers are limited in the number of customers who are allowed to be in the building at one time. None of this is projected to change until there is a medicine or vaccine ready and both do not seem likely to be ready and mass produced until 2021 at the earliest. Most importantly, consumer habits are not likely to return to what they were pre-pandemic anytime soon. According to a poll conducted by market research group Coresight Research:

• You know things are bad when consumers are already planning to spend less on Christmas things. Most economies across the globe are projecting GDPs to contract in 2020 and then rise in 2021, but not enough to offset the decline that will be realized in 2020. Economic recovery back to pre-covid-19 levels are not expected to be realized until 2022, thus, the swoosh is now the expectation.

A second surge could be coming, and we're not talking about Ibaka

• The great Serge I-block-ya is the only player with a championship from OKC's original big 4 that included RUSS, Harden, Ibaka, and snake. I am not counting snake's two titles since they weren't really earned. I don't make the rules. I just abide by them. Somehow none of those players wear a Thunder uniform any more. Everyone thought after they lost in the 2012 Finals that they would be back for many years to come, but that never happened. The 30 for 30 on this is going to be really depressing. Maybe if Serge does come back to OKC, then the rest will follow and a second contender surge could happen in OKC. In the meantime, a second surge could actually be happening across America when it comes to COVID-19. Many states have started the re-opening process as new virus cases have began to plateau or even decline across most of America. There has been steady progress on the virus front but much of that is likely due to pretty much the entire country being in some type of lockdown over the past couple of months. Obviously a major upside to locking down are the better results on the virus front. On the downside though, local, state, and national economies have been wrecked for the most part and job losses keep increasing. Political and business leaders everywhere have been in an unenviable position of balancing the health and well-being of citizens and the economy. May has signaled the beginning of the re-opening process for America for the most part. With the re-opening comes a risk of a second wave hitting America. The University of Washington's Institute for Health Metrics and Evaluation released a report that estimated how the death toll from COVID-19 could reach 135k by early August. As of May 5th, America had ~69k deaths from the virus. The Institute doubled its previous death toll projections based on social distancing guidelines being relaxed to various degrees and the increasing movement of people that will occur when states re-open. Dr. Anthony Fauci, the top US infectious-disease official, backed this up as he said last Monday (4th) that relaxing social distancing rules could spark a rebound in virus cases since it has "phenomenal capabilities of spreading like wildfire." Hopefully these are all worst case scenarios and people will generally keep healthy habits intact. There needs to be a vaccine or recovery medicine developed for this asap. Maybe there is a DeLorean out there somewhere with a flux capacitor that Michael J. Fox can travel to the future in, grab the vaccine, and then travel back to maybe December 2019 and then we'll be good. While he is at it, maybe he can go back to 2012 and convince Presti to never trade Harden away. Let's do the Harden thing first just in case the capacitor runs out of plutonium. Just kidding. Virus thing first. Maybe. Actually, maybe if the Harden trade never happens then COVID-19 never happens. Could be a like a weird butterfly effect thing. Anyways, lesson learned: be the fire hose of sanitizer to the wildfire of COVID-19.

Re-opening of states and a dire death toll forecast seems like the perfect time to disband the COVID-19 task force

• Sometimes RUSS's "why not" slogan can be taken too far. President Trump is planning to begin disbanding the task force that was headed up by VP Mike Pence that was put in charge of the federal government's handling of the pandemic. While this sounds like terrible news, it is not as bad as it looks. Mr. Trump will be setting up a new group to focus on the "safety and opening" of the country. The direct handling of pandemic things will transition to individual departments such as the Federal Emergency Management Agency (FEMA). Mr. Trump will continue to meet with doctors and public health officials in his administration as well. The disbanding of the pandemic task force will be complete by late May or sometime in June, according to Mr. Pence. Democrats are, unsurprisingly, opposed to this move as House Majority Leader Steny Hoyer (D., Md.) said in a statement:

• This appears to be a shifting of responsibility away from a centralized, narrowly controlled decision making process to more of a decentralized decision making and execution process. It kind of just depends on how you view centralized versus decentralized organizational setups. If the peak of the crisis is indeed behind America, then maybe the transition to decentralize everything makes sense. Dr. Deborah Birx, the White House's coronavirus response coordinator, and Dr. Anthony Fauci, the government's top infectious disease expert and director of the National Institute of Allergy and Infectious Diseases, will remain in close contact with Mr. Trump and the White House moving forward. Both were an integral part of the pandemic task force. The gradual disbanding of the task force is not meant to signal a "declaration of victory" according to a senior White House official. In summary, the Trump administration is planning to transition from crisis management mode to a re-opening mode. If all fails, then it's likely the pandemic task force could just re-form in a day or two anyways. It would still be interesting to see how decision making would change if this were not an election year though.

Saudi Arabia's price war strategy may end up backfiring

• Crown Prince Mohammed bin Salman (MBS) has been working to diversify the Saudi Kingdom away from being so dependent on oil revenue to fund pretty much everything since he took over the day-to-day operations of the country in mid-2017. His ideas have ranged from just creating new green spaces in the capital city of Riyadh to building an entire new city and calling it Neom. All of these things still require quite a bit of money though and oil revenue is still needed, and with that, high oil prices are needed in order to balance Saudi Arabia's budget and fund its expansion and diversification programs. The International Monetary Fund estimates the kingdom needs $76/bbl to do just that and current prices are currently not even close to that level. Two major reasons for the terrible crude price is the demand destruction that has been caused by COVID-19 and the price war that MBS irrationally entered into with Russia in early March. In my own opinion, which is probably dead wrong, it seemed like Russia was able to trigger MBS to engage in a price war in order to take out a massive amount of US shale producers while MBS thought he was destroying Russia's oil industry. A massive amount of supply came online from Saudi Arabia, and Russia to some degree, while demand was being decimated worldwide. MBS may have ultimately doomed himself and the royal family due to what seems like a pride fueled decision to flex Saudi's oil production muscle. Now the kingdom is facing a reckoning. Moody's Investors Service downgraded Saudi's credit rating to negative on May 1st citing oil demand destruction due to the pandemic. MBS has since backed off his price war and was able to corral OPEC+ into cutting production and most of the world has also decreased production in various ways, including the US. That still has not helped prop up oil prices that much and a massive over-supply is still out there and will be for a while. The longer the severe over-supply drags on, the worse things will become for MBS and Saudi Arabia. From the Wall Street Journal (WSJ):

• And then Karen Young, a resident scholar focusing on the Middle East at the American Enterprise Institute, a Washington think tank, added this:

• Young people not realizing the same lifestyle their parents had probably does not end well. It's always the youngins that start the shenanigans of a rebellion. It seems like it is anyways. Something that MBS does have going for him with the young kids is that he has been on the forefront of relaxing long-standing social rules and enabling Saudi's citizens to westernize a bit in how they are allowed to dress and interact with one another. Any type of rebellion against the royal family seems far-fetched at the moment. At least it seems that way anyways. Oil demand could snap back quickly and prices could increase significantly if supply can't catch up to demand and then everything would be back to normal in the kingdom. If any country can dictate oil prices and help itself out by controlling supply, then it is certainly Saudi Arabia. The oil crash of 2014-15 has caused Saudi Arabia to be in a pattern of outspending its revenue since then. This is despite the fact that Saudi Arabia began curtailing production on its own while persuading OPEC+ to cut production as well around the time MBS took over. Graph of the re-occurring outspend situation:

Thoughts of the week:

• Elon Musk might end up being this decade's version of Aubrey McClendon. Genius innovator. Forward thinker. Impatient empire builder. One who may be ahead of his time and might eventually get his company taken from him by activist investors who have a better "vision" than Musk, but ultimately that vision is just to extract every bit of cash out of Tesla for the benefit of that investor and a couple other people. Founders are the best. Money managers..... maybe not as great.

• The video game NBA 2k just needs to live stream a simulated game that has LeBron at his peak and MJ at his peak play against each other with the exact same roster. Let's go with the 1995-96 Bulls roster. MJ keeps his spot on that roster for his team, but LBJ takes MJ's spot on LeBron's team. Instead of one game, NBA 2k could live stream a 7-game series. Who wouldn't watch the live stream of this series? It would settle the G.O.A.T. debate once and for all. Okay so I'll just see myself out the nerd door. Thanks guys.