The other three-quarters

The pandemic is still gathering pace in most of the world

But there is lots that countries can do to curb it

HOW TO PREVENT new surges in cases? How to reopen businesses in an era of social distancing? How to revive prone economies?

These are the questions preoccupying most of the rich world, where covid-19’s first wave, at least, is mercifully ebbing.

But elsewhere the pandemic remains far from any crest. Brazil is adding around 25,000 new confirmed cases a day, more than the United States. Russia and India are not far behind, with 8,000 or so apiece. All told, poorer countries account for some three-quarters of the 100,000 or so new cases detected around the world each day.

These numbers are alarming, especially because they are grave underestimates. Poorer countries tend to conduct fewer tests than richer ones, so even more infections and deaths are going uncounted in them. Random testing in the Pakistani city of Lahore suggests that the official count is catching only one case in 25. Many governments are reluctant to advertise how rapidly the virus is advancing on their watch.

Russia initially claimed that barely 600 Muscovites died of the disease in April, but the number of deaths in the city in excess of the average for the month was three times that. And some countries are too chaotic and violent to have much of a government. This week the UN sounded the alarm about Yemen, where the coronavirus seems to be rampaging across territory contested by the country’s two warring governments.

In the most worrying countries, many live hand-to-mouth. Their governments tend not to have much money, either. That has prompted the authorities to relax the restrictions they put in place to slow the spread of the disease, to save their citizens from ruin. India, for instance, ended its lockdown on June 1st, just as the number of daily infections hit a new record.

Mexico has declared that it will open for tourism on June 8th. And non-essential businesses have been allowed to reopen in Rio de Janeiro, Brazil’s second-largest city.

When outbreaks are big enough to overwhelm health-care systems, deaths soar, since even cases that might respond to treatment become deadly. Poor countries have fewer hospitals and doctors and less of the necessary kit, from ventilators to disposable gloves and gowns. This can lead to horrifying scenes like those witnessed in Guayaquil, Ecuador, in April, when coffins ran out and bodies were abandoned in the streets.

Even poor countries can still do much to avoid such an outcome. As many have discovered, long-lasting lockdowns, ordered from on high, tend to be both hard to enforce and to come at a calamitous cost to the economy and to people’s overall health. But basic public-health campaigns, ideally in the hands of village councils, primary health-care clinics and so on, can promote practices like washing hands, wearing face-masks and social distancing.

They can organise isolation for those with symptoms and press for amenities like clean water.

Even in places where it is hard to empty the streets altogether, governments can ban big gatherings in confined spaces, be it sports stadiums or churches. And—cold comfort—once it becomes clear in any given country how deadly an uncontrolled outbreak is, the instinct for self-preservation will prompt people to isolate themselves, slowing covid-19’s progress.

Richer countries can do much to help. Some stricken places will need donations of simple supplies like testing kits and protective gear. Others will need debt relief, to free money to fight the disease. Humanitarian aid for war-torn countries and the refugees they create is even more urgent than usual.

Better yet, the governments backing opposing sides in civil wars in places like Afghanistan and Yemen could urge their proxies to declare temporary truces, to bring a modicum of help to afflicted regions. Coronavirus outbreaks are deadly enough without the added misery of guns and bombs.

Deutsche Bank’s ties to Donald Trump

The US president defends his biggest creditor, but the relationship is under fresh scrutiny

Tom Braithwaite

 web_Trump and Deutsche bank
© Ingram Pinn/Financial Times

Donald Trump’s relationship with Deutsche Bank has lasted longer than any of his marriages and is cloaked in more secrecy.

Now the US Supreme Court is considering whether to shed light on the links between the American president and Germany’s largest bank. Manhattan prosecutors and Washington lawmakers want tax and financial records related to Mr Trump, his family and businesses. Mr Trump has sued to block them.

When the justices rule in the next few weeks, there will be understandable interest in the window this might provide into Mr Trump’s finances. Americans are still waiting to see the president’s tax returns, years after he promised to make them public.

In the absence of hard data, speculation swirls: is Mr Trump really a billionaire? Are his business dealings above board?

But if the Supreme Court orders Deutsche to produce the vast array of documents demanded by Congress — spanning records of the bank’s credit and reputational risk committees, to files on Mr Trump “related to any domestic or international transfer of funds in the amount of $10,000 or more” — it would also provide more insight into Deutsche itself. What risks did it take on? And after years in which there was reckless trading, allegations of false accounting and inept management, has it really changed?

Most global banks are preparing for a credit crash to follow the coronavirus pandemic. In its quarterly results last month, JPMorgan Chase took a whopping $8bn provision for future losses on bad loans, six times higher than in the same period last year and higher than any other quarter in the bank’s history. At Deutsche, however, the equivalent figure was just €506m with no sort of record: only the bank’s eighth highest provision since Lehman Brothers collapsed.

To justify this thin cushion, Deutsche had to change the way it estimated future losses — switching from a short-term view focused on the current economic disaster to a three-year forecast incorporating a V-shaped recovery.

It is not just the rosy forecast. Deutsche says it will fare better than rivals thanks to its relatively conservative balance sheet, with fewer credit-card customers and plenty of solid German companies. Any time Deutsche takes small provisions, remember that the bank paid $55m to settle US allegations that it issued false accounts during the last crisis by underestimating potential losses.

And any time it boasts of responsible lending, remember Donald Trump. Deutsche backed Mr Trump in 1998 despite his history of defaults, and continued to finance his companies even after 2008 when he refused to pay back a loan and sued the bank.

Today, Mr Trump’s empire is reeling from the impact of coronavirus. His golf courses in Scotland remain closed by government order. The Trump Hotel in Hawaii is deprived of tourists after the state imposed a 14-day quarantine on arrivals. Even resorts that have re­opened, such as in Los Angeles and Miami, face a hard slog to tempt back customers. This has only compounded festering problems.

While Mr Trump’s election brought a new stream of income from sympathetic trade associations, Republican lobby groups and secret service accommodation, the net effect has been negative. Pleading for relief on local taxes, Trump representatives have noted that occupancy rates are lower than those of nearby competitors, such is the “negative connotation that is associated with the brand”.

The Trump Organization went cap in hand to Deutsche asking for forbearance on some loan payments. Nonetheless, people close to Deutsche say they have not lost money on loans to Mr Trump.

Past squabbles forgotten, Mr Trump defends his biggest creditor as “badly written about and maligned”. “That was the Rolls-Royce bank! That was Germany you were dealing with! That was the strongest, the biggest, that was one of the great banks of the world! They were the AAA standard!” he said last year.

We do not know how this tempestuous relationship affects Deutsche Bank’s standing in the US.

On a day-to-day basis, it continues to be regarded by the Federal Reserve as a badly managed lender with weak money-laundering controls. But somehow the bank has escaped serious sanctions over offences that it has admitted.

Three years ago it accepted guilt over a “mirror trading” scheme, which allowed clients to move $10bn from Russia while circumventing anti-money laundering rules. It seemed an open-and-shut case for the US Department of Justice, which has levied swingeing fines on other foreign banks for illegal cross-border transactions. Investigators interviewed Deutsche staff in a criminal probe. Then: nothing.

One theory is that the justice department is busy bundling together charges, including over Deutsche’s role in the €200bn Danske Bank money-laundering scandal, into one mega-settlement. If so, that augurs ill for the bank’s beleaguered shareholders, who might face another large fine.

A more convincing scenario is that a department where the president has steadily increased his grip is unlikely to punish his main creditor, especially over any Russian offences. In that view, Deutsche Bank’s unfathomable loyalty to Mr Trump is finally paying off.

Too Much Cross Talk. Too Little Creativity. How to Fix the Worst Parts of a Virtual Meeting.

Six tools from an unlikely place—improv comedy—to use on your next Zoom call.

By Robyn L. Scott

meeting participants improv

A few years ago, we kicked off a management course on using creativity as a business tool in an unusual way: instead of hearing a standard lecture, students were led through a workshop on improvisation by a pair of actors.

The goal was not just to have fun. Rather, it was to build a toolset that students could use to find inspiration in the ordinary and camaraderie among team members—and ultimately to pave the way toward risk-taking and innovative thinking in their business pursuits.

We mention this because, now that most business leaders are involved in back-to-back virtual meetings, many of them feel that something is missing: that feeling of inspiration, the desire to take risks or innovate, their connection to each other. In short, virtual meetings often suffer from a lack of improvisation and natural “collisions,” or unplanned, high-energy encounters with others.

This shouldn’t come as a surprise. Research suggests that people interacting online are more task-focused, or more likely to get down to business.

But this doesn’t need to be the case. With a little effort, there are ways to bring spontaneity, cohesion, and even fun into virtual gatherings—whether we are presenting data to the CEO, leading a discussion, or just looking to connect with colleagues.

As a social-organizational psychologist (Thompson) and an improvisor, actor, and communications coach (Scott), we have teamed up to offer six “devices” borrowed from the world of improv that allow business leaders to inject this needed element into virtual meetings.

Here, we describe them—and why they can be so effective.

1. Cueing

One of the most awkward aspects of virtual meetings is conversational turn-taking.

In a physical face-to-face meeting, people primarily rely on a combination of nonverbal cues, including bodily and facial movements, and paralinguistic vocal cues such as throat-clearing, to know when to interject. When people communicate virtually, many of these important cues are missing, which can be disorienting.

In face-to-face meetings, there is often an exchange of pleasantries, or a “politeness ritual,” before the facilitator launches into the meeting’s substance... This ritualized pleasantry is harder to replicate in virtual meetings.

This can lead to “virtual logorrhea”—people talking way too long—or people interrupting each other. In either case, the result is that others either opt out of the conversation or become passive.

This conversational awkwardness can be overcome through cueing, which is related to a key principle of improv: “one voice at a time.” In cueing, signals are established to keep the conversation moving from one person to another in an orderly way. For virtual meetings, specific pictures, sounds, or words can function like a baton being passed among participants.

For example, Marla, the facilitator of a weekly 10-person virtual meeting, realized that turn-taking remained a struggle, so she decided to create a cue.

Earlier, she had assigned a fun, personal theme, “Favorite Vacations,” to the meeting, and each week a different team member would kick things off by sharing pictures from a destination and telling a memorable story. It made for a nice high-energy start to the virtual gathering.

In one meeting, when team members were starting to lose focus, she asked people to pause and reset by free-associating a word based on that week’s theme: a trip to Paris. Each member typed into the chat box a word that became their “cue.” From that point on, when someone spoke, they had to conclude their statement with their word: “beret” for Larry, “Riviera” for Nell, and “croissant” for Fatima.

Using the cues like CB handles, Marla turned her group into a set of truckers in a convoy.

When Larry finished, saying “beret,” Marla said, “Thank you, beret. Croissant?” Picking up on her cue, Fatima shared her insights, closing with her “handle” and sending the cue back to Marla.

With those cues in place to signal turn-taking, the group spoke more concisely, paid better attention, and had fun.

2. Beats

On the improv stage, actors play “the beats of a scene.” Practically, what this means is that every effective scene needs a clear beginning, middle, and end.

So why should we expect effective virtual meetings to be any different?

In face-to-face meetings, there is often an exchange of pleasantries, or a “politeness ritual,” before the facilitator launches into the meeting’s substance. While on the surface these rituals seem to serve no purpose, they are the glue that binds the members together.

This ritualized pleasantry is harder to replicate in virtual meetings, however, with people joining in haphazardly and the one-at-a-time audio restrictions of meeting applications.

So leaders can impose an improv device to separate the “beats of a meeting,” keeping meetings on track while creating space for humor and creativity.

For example, as a warm-up to a virtual group coaching session, the facilitator can introduce the rapid-fire three-line improv game, “Set, Twist, Fix.”

In “Set, Twist, Fix,” participants are placed into a sequence and the first person announces a setting such as, “We’re at the beach.” The next person states a problem that could occur there: “We’re getting sunburns.” The next provides a solution: “Let’s apply sunscreen.” The fourth person wraps it up by saying, “And, scene!” The game is repeated until everyone has had a turn playing the roles of “Setter,” “Twister,” “Fixer,” and the director who closes the scene.

The game prepares people to be present and to focus on the task at hand by “playing the scene they’re in.” It also encourages people to be concise, solution oriented, and playful.

The structure of the game has the added bonus of getting the whole team used to creating internal boundaries: it prevents people from introducing problems before a new idea has even been fully introduced, and it allows people to more deeply consider an issue before getting into “fix it” mode.

3. Object work

When team members don’t share the same physical environment, they have to contend with the loss of mutual connection associated with “same-time/different-place.”

In improv, actors commonly use a device—mime—in order to create a shared reality on the spot. They virtually create something out of nothing by miming most of the objects and ideas in their scenes. This “object work,” as it is known, can also be very useful in virtual meetings, allowing members of the virtual team to enter each other’s environments, thereby building empathy and increasing perspective-taking.

For example, you may have one team member bring a large, heavy, beautifully wrapped imaginary box with a huge red bow and a present inside to your virtual meeting. Naturally, there is no box, bow, or present, but by carrying the imaginary box in—arms flexed and outstretched—and carefully setting it on the table for all to see and admire, it offers the rest of the group the opportunity to invent and share what they think is in the box, essentially innovating in the absence of actual objects.

During virtual meetings, team members need to work doubly hard to ensure that their own intentions are made clear. This can be achieved in part by sharing agendas and talking points with others in advance.

This object work doesn’t have to be imaginary, either. Team members can be prop comics! For example, virtual meeting participants can be challenged to combine a bit of “show and tell” into a storytelling activity.

In one instance, a member showed the group an object and described it—a lovely hair comb she kept by her monitor to freshen up before video calls. Each team member affirmed the object, then offered a different use for it. Comments ranged from “Cool comb. It could be a tiny ladder for a spider,” to “Thanks for telling us about your comb. It could also be a fake mustache,” to “I really like your comb. It could also be a diving board for a chipmunk.”

Another perk: object work offers an opportunity for people to reveal a part of themselves that they otherwise might not feel comfortable sharing. While some people have good internal boundaries and know how to bring their whole, authentic selves to each aspect of their lives, others have a very difficult time integrating who they are at home and who they are at work.

4. Patterns

The human brain is hardwired to look for, and lock onto, patterns. Improv actors use this to their advantage, with the devices of pattern-finding and pattern-breaking being key to the success of many scenes.

Virtual teams can do the same by incorporating patterns into their agenda.

For instance, a team of software developers meets virtually every Friday to present status updates to their director, Colleen. A pattern of reporting has organically developed over time: Terry kicks off with high-level findings, Will breaks down the coding errors they have discovered as he screen-shares a graph, and Tom closes by discussing how the bugs were fixed.

In essence, it harkens back to the “Set, Twist, Fix” exercise described earlier: provide a setup, insert a turning point, and present a resolution.

The consistency of this reporting pattern reduces stress for all parties involved. It provides predictability in the midst of uncertainty, and increases everyone’s focus, as the presenters know their batting order and Colleen can process new data through a familiar format.

And to make sure Colleen doesn’t get bored, the team will occasionally break the engrained pattern: either by switching presentation roles or tossing in an unexpected element like a video. This curve ball keeps everyone on their toes and turns data dumps into engaging conversations.

5. Intentions

Improv, by definition, tosses away the script and asks its actors to respond in the moment to the intentions of their fellow actors, all while making their own intentions for the scene clear.

For example, suppose that the intent of one scene actor is to “scold” their scene partner. To communicate this intent, their vocal tone would drop, their shoulders hunch, their eyebrows furrow, and their mouth droop into a frown. If their intent was to “encourage”, they would lighten their voice, straighten their posture, lift their eyebrows, and crack a smile.

Communicating intention is a particular challenge for virtual teams. Indeed, virtual team members are susceptible to “irony poisoning,” which means they are often more confused and less able to tell, for example, whether someone is being sarcastic or sincere. This makes virtual teams more likely to misunderstand, misinterpret, and assume negative intentions than face-to-face teams. This, combined with online disinhibition effects, can lead people in virtual teams to lash out in ways that they might not do in person.

During virtual meetings, team members need to work doubly hard to ensure that their own intentions are made clear. This can be achieved in part by sharing agendas and talking points with others in advance of meetings.

Before each meeting, virtual team members should also ask themselves: Is my message to inspire or to inform? To share or to prove? To welcome or to introduce? A keen focus on their own intentions will help everyone stay on point.

Just don’t put so much effort into accurately communicating your own message that you fail to glean what others are communicating. One CEO we know confessed that she spends most of the virtual meeting looking at her own image. This is not because she is a narcissist, but because she wants to ensure she is communicating positive body language in a time of radical downsizing and furloughing.

So yes, share your own talking points—but also pay attention to everyone else’s.

6. Runners

Improv actors bring continuity and connection to unrelated scenes by linking them together using an underlying theme: a device known as a “runner.”

Virtual team meetings can create runners too.

In a recent virtual meeting, a team was discussing how to create both a live online version and a recorded version of a course. In the absence of any shared visuals, confusion was mounting about just which of the two courses was being discussed.

One member of the team then took an improv risk by referring to the live version as “LOL” for “live-online.” The group laughed, and then later in the meeting, “LOL” reemerged and served as an important clarifying tie-back to the earlier conversation.

LOL became the meeting’s runner—not because people were laughing out loud, but because it was memorable and livened up dull material. When people typed replies in the chat box, they used the laughing emojis 馃槅 馃槀 馃ぃ. When people were sent to retrieve examples from other projects, their screen share started with a LOL gif.

One group in the meeting changed their virtual backgrounds to the stage at a comedy Open Mic night. It turned what could have been a tedious discussion into a chance to bond while getting the job done.

Runners help people stay connected to the content and make meetings more of a shared experience. They also remind us that even though we take what we do seriously, we don’t need to take ourselves seriously.


Virtual team leaders feel pressure to hit the ground running. But most of the managers we have spoken to are preoccupied with their “technical skills”: knowing where the chat function is or how to set up a virtual white board.

To be sure, technical skills are important, but the real challenge for effective virtual meetings is about building the human connection. By adopting the improv devices we have outlined here, the virtual team leader can hold effective, productive, and rewarding meetings.


Economic View

The Law of Supply and Demand Isn’t Fair

In a crisis, consumers think it is outrageous to jack up prices of essential items, yet that social norm predictably leads to shortages.

By Richard Thaler

A Walmart during the early stages of the U.S. coronavirus outbreak in March.Credit...Al Bello/Getty Images

For an economist, one of the most jarring sights during the early weeks of the coronavirus crisis in the United States was the spectacle of bare shelves in sections of the supermarket.

There was no toilet paper or hand sanitizer. Pasta, flour and even yeast could be hard to find in the early weeks of social distancing, as many people decided to take up baking. Of far greater concern, hospitals could not buy enough of the masks, gowns and ventilators required to safely treat Covid-19 patients.

What happened to the laws of supply and demand? Why didn’t prices rise enough to clear the market, as economic models predict?

A paper that I wrote with my friends Daniel Kahneman, a psychologist, and Jack Knetsch, an economist, explored this problem. We found that the answer may be summed up with a single word, one you won’t find in the standard supply-and-demand models: fairness. Basically, it just isn’t socially acceptable to raise prices in an emergency.

We asked people questions about the actions of hypothetical firms. For example: “A hardware store has been selling snow shovels for $15. The morning after a blizzard the store raises the price of snow shovels to $20.”

Fully 82 percent of our respondents judged this to be unfair. The respondents were Canadians, known for their politeness, but the general findings have now been replicated and confirmed in studies around the world.

Most companies implicitly understand that abiding by the social norms of fairness should be part of their business model. In the current crisis, large retail chains have responded to the shortages of toilet paper not by raising the price but by limiting the amount each customer can buy. And Amazon and eBay prohibited what was viewed as price gouging on their sites.

We have seen similar behavior after hurricanes. As soon as a storm ends, there is typically enormous demand for goods like bottled water and plywood. Big retailers like Home Depot and Walmart anticipate this, sending trucks loaded with supplies to regions just outside the danger zone, ready to be deployed. Then, when it is safe, the stores provide water for free and sell the plywood at the list price or lower.

At the same time, some “entrepreneurs” are likely to behave differently. They see a disaster as an opportunity and so will fill up trucks with plywood near their homes, drive to the storm site and sell their goods for whatever price they can get.

It is not that large retailers are intrinsically more ethical than the entrepreneurs; it is simply that they have different time horizons. The large companies are playing a long game, and by behaving “fairly” they are hoping to retain customer loyalty after the emergency. The entrepreneurs are just interested in a quick buck.

Fairness norms help explain the breakdown of supply chains of medical equipment in the coronavirus crisis. Hospitals normally use buying associations that make long-term deals with wholesalers to provide essential supplies. The wholesalers generally want to preserve these relationships and realize that now would not be a good time to raise prices. Often, they are contractually obligated to supply items at prices negotiated before a spike in demand.

Hospital contracts for N95 masks, like this one hanging in a car, created problems in the supply chain.Credit...Demetrius Freeman for The New York Times

One current example is the N95 face mask. At the onset of the pandemic, hospitals had long-term contracts to buy them for about 35 cents each, an executive at a New York hospital told me. When the need for the masks surged, these suppliers were not allowed to raise the price, even if inclined to do so.

But others along the supply chain could make big profits by diverting masks to anyone willing to pay top dollar. That left hospitals in a bind. As the coronavirus spread in New York, the executive’s hospital searched frantically for masks, eventually paying an overseas supplier $6 each, for hundreds of thousands of them, when the regular stock was desperately short.

When anyone tries to reap big profits in an emergency like this, it can look ugly. Consider the case of two brothers who began buying hand sanitizer, masks and other scarce commodities on March 1, the day of the first announcement of a Covid-19 death in the United States. After they sold some of their merchandise at big markups on Amazon and eBay, these outlets cut them off. Eventually, after considerable adverse publicity, the brothers decided to donate their supplies.

Notice that the brothers were making markets more “efficient,” by buying low and selling high. If instead of arbitraging coronavirus supplies they had sold shares of airline and hotel companies and bought shares of Netflix and Zoom, they would simply have been considered smart traders. But while smart trading may be fine for investments, it is not considered fair when it involves essential goods during a pandemic.

One can argue that this social norm is harmful in that it prevents markets from doing their magic. For example, Tyler Cowen, the George Mason University economist, has said he wishes it were OK to raise prices for coronavirus essentials.

“Higher prices discourage panic buying and increase the chance that the people who truly need particular goods and services have a greater chance of getting them,” he wrote.

But which people “truly need” N95 masks? What is the right allocation of masks among well-endowed research hospitals, poorly funded municipal facilities, nursing homes and food processing plants? Supply and demand would tell us that the masks should simply go to the buyer who was willing and able to pay the most for them. But fairness tells us this can’t be the only consideration.

As a practical matter for businesses, big and small, that want to keep operating for the long haul, it makes good sense to obey the law of fairness. If the next shortage is meat and a store owner realizes that there is only one package of pork chops left, it would be unwise sell it at auction to the highest bidder.

Richard H. Thaler is a professor of economics and behavioral science at the Booth School of Business at the University of Chicago.

Russia’s Choice: Its Buffer Zone or Its Economy

By: Ekaterina Zolotova

Low natural gas prices are straining Russia’s gas diplomacy. In the Netherlands, the European Union’s largest gas hub, prices are down to $52 per thousand cubic meters, which is a third what they were a year ago. However, for countries like Russia whose economies depend on energy exports and that employ fixed-price contracts, persistently low prices – a product of fluctuating oil prices, growing liquefied natural gas consumption, a dearth of storage facilities and plummeting demand due to the coronavirus pandemic – are pressuring energy companies to revise prices downward.

Belarusian President Alexander Lukashenko recently said that his country pays $127 for Russian gas, while Europe pays less than $70. Armenian officials have also called on Russia to reduce prices. Even Kyrgyzstan, which does not consume much gas, asked Russia to adjust due to the difficult economic situation caused by the pandemic.

This puts Moscow in a tough spot. On the one hand, it needs stable and higher prices to keep its own economy afloat at this difficult time. On the other hand, it needs to satisfy the allied republics that make up its buffer zone and are part of its ambitious economic integration project, the Eurasian Economic Uni贸n.

Russia's Falling Natural Gas Price

The formation of a single gas market is an important strategic step forward for the post-Soviet countries that constitute the EEU. Gas is a basic resource for most of them. For example, at 62 percent, it is the largest source of energy consumed in Belarus. It is 55 percent of the energy consumed in Armenia, and 53 percent in Russia.

But there are only two counties in the bloc that produce gas: Russia – by far the largest supplier – and Kazakhstan. The other three member states, Armenia, Belarus and Kyrgyzstan, do not produce gas domestically, and thus not only do they depend on foreign supplies – they depend on Russian supplies.

In a single gas market, the general formula for the formation of a gas tariff within the EEU would need to be implemented, and a system of free gas flow among members would be created. Most important, import-dependent countries would be able to buy gas at a lower price. At the moment, Russia’s average gas price is $55. Belarus, however, pays $127, and Armenia and Kyrgyzstan pay $165, according to their contracts for 2020. Even Kazakhstan is considering purchasing Russian gas for domestic consumption and exporting its own gas to China.

Moscow understands that it needs to ensure that EEU membership provides economic benefits to its members. And Russia itself benefits from the union – a common energy market would likely cement and strengthen Russia’s near-monopoly position as an energy supplier to its closest partners, but even more fundamentally, the EEU restores to Russia much of the regional influence that it has lost since the Soviet Union's collapse.

But from Moscow’s perspective, the other EEU member states should be satisfied with stable access to Russian gas, whereas Russia’s partners want preferential prices as well. (In fact, they argue the price they pay for Russian gas should be similar to what Russian domestic consumers pay.)

Sooner or later, Russia will have to make some concessions and unify gas tariffs within the bloc. And Moscow admits as much: The country’s long-term energy strategy indicates that it plans to align prices, but only by 2025. This has not yet been agreed among the EEU countries; Russia will discuss projects and sign joint statements, but it has abstained from making tangible proposals on price regulation until the rest of the union accepts deeper integration (for instance, a single budget and tax system, according to comments made by Russian President Vladimir Putin on Tuesday).

And on the subject of EEU integration, the lynchpin for Russia is Belarus. Minsk for years has balanced between Russia and the West, and Belarusian attempts to diversify its oil supplies have upset the Kremlin. If Belarus starts to think about greater market diversification and deeper cooperation with the West at the expense of ties with Russia and the EEU, the Kremlin risks losing the buffer zone that separates NATO troops in Poland from Russia’s borders. In addition, with construction of the Nord Stream 2 gas pipeline to Germany delayed, Belarus remains an important hub for the transit of Russian gas to Western Europe and Kaliningrad.

This is why Russia is in no hurry to offer lower gas prices until Belarus agrees to closer integration. The Kremlin said the price will be determined after the development of roadmaps toward implementation of the Russia-Belarus Union State. Until the Kremlin gets what it wants from Minsk, it will not accelerate moves toward a common gas market or provide more favorable conditions to other EEU countries, lest Belarus demand similar conditions.

Russia’s need to strengthen and solidify its influence in post-Soviet countries is not always consistent with state-owned company Gazprom’s pursuit of profits. Gazprom is Russia’s largest gas supply company and has a monopoly on gas exports. The Kremlin wants to ensure the stability of Gazprom and expand the firm’s trading operations and projects. And Belarus, Armenia and Kyrgyzstan are important customers and/or links in the distribution network for Gazprom.

Russia's Gas Trade in the EEU, 2018

But Gazprom wants to be equally profitable selling gas at home and in the EEU, especially as the economy is shrinking. After Rosneft, Gazprom is the second-largest contributor to Russia's budget. In 2018, its tax payments reached 2.7 trillion rubles ($37 billion), which was almost 15 percent of the budget's total tax revenue.

Because of the drop in demand resulting from the pandemic-induced economic slowdown and a relatively mild winter, Gazprom’s revenue and tax payments may shrink. At such low prices, delivering gas to the domestic market is more profitable than exporting it, because it avoids transit fees and related costs.

Though Gazprom is protected by take-or-pay clauses and fixed-price contracts, it ideally wants an export price close to $100 per thousand cubic meters. Current prices are significantly lower than Gazprom’s profitability point, which starts from $63 through Nord Stream 1, the cheapest route.

And there is another reason Russia does not want to move ahead with the establishment of a single gas market just yet. Doing so would entail setting common gas tariffs in the EEU. This would likely lead to lower prices for Armenia and Belarus but higher prices in the Russian market. A sudden, significant hike in domestic gas prices in a country where 53 percent of the energy consumed comes from gas, the economy is slowing and companies are struggling to stay afloat would lead to significant social dissatisfaction.

The Kremlin thought that it would have more time before 2025 to adapt internal gas prices to the external environment and create the basis for further integration within the EEU. But the economic slowdown and uncertainty is forcing Russia to work with a shorter timeline. Russia has some external circumstances working in its favor.

For instance, Belarus may temper its demands for gas price reductions once its Astravets nuclear power plant comes online. The plant, which was built by a Russian contractor and with Russian credit, is expected to significantly reduce Belarus’ gas consumption.

For its part, Kyrgyzstan uses alternative energy sources such as coal and oil and thus can afford to be patient. Armenia has no cheaper sources of gas than Russia; Iranian gas is much more expensive, at $220. Altogether, Russia believes it can delay the discussion on gas tariffs to a more favorable time, but the economic fallout from the pandemic may force the Kremlin to make strategic choices earlier than it had expected.

At the very least, it will have to walk a thin line between its strategic needs and the needs of its economy.

domingo, junio 07, 2020



Gold: Look Out Below

by: Equity Management Academy
- Gold is becoming a currency, separating itself from the US dollar. The stock market also broke away from Main Street.

- Now the market is having a problem making higher highs, right where the VC PMI is telling you to expect sellers to come into the market.

I- t is a question of leadership, whether the gold mining shares are catching up to the price of gold or are they leading the way to a new bull market.

- Gold appears to be consolidating in the area of $1,700 to $1,800. If gold can’t reach new highs, it indicates that the buying pressure is weak and there will be pressure to the downside.

We use the proprietary Variable Changing Price Momentum Indicator (VC PMI) to analyze markets.
The VC PMI is based on artificial intelligence and an advanced algorithm. It can be used to trade stocks, ETFs, futures or options. We specialize in the precious metals and the E-mini, looking for day, swing and long-term trades.

Gold: Weekly Data and Triggers

The weekly trend momentum of $1,727 is bullish.
The weekly VC PMI of $1,736 is bullish.
A close below $1,736 stop negates this bullishness to neutral.
If long, take profits $1,772-$1,791.
The weekly trend momentum is bullish. The weekly VC PMI of $1,736 is also bullish because the market closed above that. A close below $1,736 stop negates this bullishness, so that is the first level of protection you can use. If the market comes down below $1,736, it would activate a weekly bearish price momentum.
The market is trading around $1,745, which is an area of resistance. It did not reach the weekly target of $1,772. Take profits at $1,772 to $1,791, if you are long. It is still in the bullish bias until that $1,772 is activated.

The market closing above the 9-day moving average of $1,727 means that the trend is bullish. A close below that level would negate that bullish trend. The Sell 1 level is $1,772 to the Sell 2 level of $1,791.
If the market closes below $1,736, it negates the bullishness to neutral. Another close below activates the Buy 1 level of $1,717 to the Buy 2 of $1,681.
Gold: Monthly Data and Triggers
The monthly trend momentum of $1,587 is bullish.
The monthly VC PMI of $1,741 is bullish.
A close below $1,741 stop negates this bullishness to neutral.
If long, take profits $1,799-$1,846.
The monthly trend momentum of $1,587 is bullish. This is the 9-month moving average. The monthly VC PMI or average price is $1,741, which is bullish. You can use $1,741 as a stop level.
If the market closes below $1,741, it would negate the bullishness to neutral. If you are long, begin to take profits at the monthly Sell 1 level of $1,799 to the Sell 2 level of $1,846.
Gold: Annual Data and Triggers
We published an annual report in September, when the market was at about $1,505. The report said that the Sell 1 level for the year is at $1,655 and the Sell 2 is at $1,803. We completed the initial target of $1,655 on February 21, 2020.
The market then met resistance. At that level, supply or sellers began to come into the market.
Around March 9 the market reached $1,694 and then the coronavirus hit and gold dropped to $1,454 based on the August contract.
In late March, buying came into the market on the basis of tight physical supplies. The spread between the spot and paper market spread, with a premium of about $80 for the spot market.
Gold then started its trend to trading as a currency. It almost reached the Sell 2 target of $1,803 reaching $1,788. The artificial intelligence of the VC PMI tells you that the higher a price goes, the higher the probability that supplies or sellers will come into the market.
The Sell 1 monthly target of $1,799 fits right into the monthly target of $1,803. When the monthly and annual targets align, it is a very powerful sign that the market will revert to the mean from that level.
Even if the market breaks into the higher levels, it is very likely to reach a ceiling right above those levels. You do not want to buy at those high levels, since you are likely to be buying into an overbought market. The best time to enter the market long is when the market is trading at an extreme below the mean, such as at $1,465 on March 20 after gold collapsed.
The VC PMI is contrarian, so when the market collapses, it advises to buy. When the market races up, it advises to sell. Now the market is having a problem making higher highs, right where the VC PMI is telling you to expect sellers to come into the market.
Gold is becoming a currency, separating itself from the US dollar. The stock market also broke away from the US dollar.
It made a bottom at about the same time as gold. It is almost as if the market discounted any economic damage from the coronavirus very early.
The GDX (VanEck Vectors Gold Miners ETF) is up 53, while the gold market is down and most gold mining shares are trading higher. This is a bit of an anomaly.
It is a question of leadership, whether the gold mining shares are catching up to the price of gold or are they leading the way to a new bull market. This will happen in metals, where the paper market is the leading indicator depending on the availability of physical gold.
The paper market and physical market appear to have become disconnected, which is why the physical market went up about $80 over the futures because people could not get physical gold on the physical market. For a long time, institutions have sold short on the paper market, driving the physical price down and then they have closed out the short selling and made billions. They can no longer do that as demand for physical gold has greatly increased.
The stock market also appears to have been separated from the real economy. Even as the economy has collapsed, stocks have risen back to almost where they were before the pandemic.
Main Street is reeling and is in a depression, yet stocks are trading as if nothing has changed.
Even the protests and looting triggered by the horrible George Floyd incident have not caused the stock market to fall significantly. We have a pandemic on top of a broken system, yet the stock market continues to go up.
Stock prices do not appear to be correlated with the true state of the economy. Earnings reports are going to show declines of 50% or 60%, which should cause stocks to fall precipitously.
When investors realize the true state of the economy, money will flow into the precious metals.
That is why we are bullish on precious metals long term.
Gold appears to be consolidating in the area of $1,700 to $1,800. If gold can’t reach new highs, it indicates that the buying pressure is weak and there will be pressure to the downside. If we get down below $1,736, it will activate new short triggers. If you have profits, take them or protect them.
We use the 15-minute close for the daily, weekly, monthly or annual data to execute the signals.
Silver is very much in the same area as gold, making a high of $18.95. It completed the weekly Sell 1 target of $18.86. Gold and silver are trading in areas where it is likely that sellers or supply will come into the market.