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Welcome back! I spent my Presidents Day hiking Phoenix's Camelback Mountain in sandals and writing this newsletter you're reading. Tell me what you did — dion@axios.com or on Twitter @DionRabouin.

Situational awareness:

  • Michael Bloomberg revealed a Wall Street reform proposal that is remarkably similar to Rep. Alexandria Ocasio-Cortez's. (NYT)
  • HSBC plans to cut 35,000 jobs and $100 billion in assets over the next three years. (WSJ)

Was this email forwarded to you? Sign up here. (Today's Smart Brevity count: 1,288 words, 5 minutes.)

1 big thing: Mispricing the coronavirus risk
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Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's NHC; Note: China refers to mainland China and the Diamond Princess is the cruise ship offshore Yokohama, Japan. Map: Danielle Alberti/Axios

Worries are growing that the economic impact from the novel coronavirus outbreak will be worse than expected and that markets are being too complacent in factoring it in as a risk.

What's happening: The number of confirmed cases has already far outpaced expectations and even those reports are being viewed through a lens of suspicion that the Chinese government is underreporting the figures.

  • Yet, U.S. stock indexes have continued to hit all-time highs, bond spreads remain compressed, and even some Asian bourses have recouped losses that followed the initial coronavirus headlines.

Driving the news: Of the 364 companies that have held Q4 earnings calls, 138 cited the term “coronavirus” during the call, and about 25% of those included some impact from the coronavirus or modified guidance due to the virus, according to FactSet.

  • Apple was the latest, saying Monday it would not meet quarterly revenue expectations due to limited iPhone production and Chinese demand.

What they're saying: "This will eventually end badly. I have never in my career seen anything as crazy as what’s going on right now," Scott Minerd, global CIO of Guggenheim Investments, writes in a note. "The cognitive dissonance in the credit market is stunning."

He's not alone: "The ramp up in China will take much longer than many expect because of the need to prevent a secondary flare up in contagion," Diane Swonk, chief economist at Grant Thornton, said on Twitter.

State of play: "By most estimates, if the Chinese extend the lunar new year by two weeks it would not meaningfully impact the global supply chain, but if it went beyond two weeks then we would start to see problems for materials and consumer goods outside of China," Minerd argues.

Between the lines: It's been about two weeks and things don't look great.

  • Hong Kong, already coping with the economic damage from its monthslong protests, now is facing wide-ranging shortages of basic household and cooking supplies.
  • High-tech industrial parks in Chinese manufacturing hubs like Shenzhen have just reopened but are facing a "severe" worker shortage, as many are stuck in their hometowns and factories remain idle.

Details: Minerd predicts that the "impact of all this on corporate profits and free cash flow will be dramatic," warning that China's first quarter GDP could fall as low as -6% annualized in the first quarter and oil could drop to $25 a barrel.

The bottom line: "We are either moving into a completely new paradigm, or the speculative energy in the market is incredibly out of control," Minerd says.

  • "I think it is the latter. I have said before that we have entered the silly season, but I stand corrected. We are in the ludicrous season."
2. Catch up quick

U.S. tariffs on Chinese imports "significantly dampened U.S. export growth" and cost American companies "$900 per worker overall and about $1,600 in the manufacturing sector." (Federal Reserve)

The U.S. is weighing new trade restrictions against China to cut off Huawei access to key semiconductor technology. (WSJ)

Multiple studies show that Uber and Lyft discouraged use of buses, subways and walking, and that the apps add to the overall amount of driving in the United States. (WSJ)

U.S. sales of print maps and road atlases have grown at a compound rate of 10% over the past five-year period. (USA Today)

3. U.S. industrial production stalls out again
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Data: Federal Reserve; Chart: Axios Visuals

U.S. industrial production fell by 0.3% in January, month over month, and the previous month was revised down to -0.4%.

  • The reading brings the annualized rate to -0.8% and is the fifth reading in a row below zero.

Why it matters: "The drop in factory output is particularly concerning as over the past 50 years, we've only seen one instance where IP slowed this much YoY without a commensurate recession," BMO Capital Markets rate strategist Jon Hill said in a Friday note to clients.

The big picture: Some of the weakness can be blamed on Boeing, which has all but shut down as its 737 MAX jet has been grounded worldwide after two plane crashes killed hundreds in 2018 and 2019.

  • The Fed's report showed industrial output was led lower by a 7.4% fall in aerospace production and a 0.1% decline in overall manufacturing output.
  • Utility production dropped 4%.
  • The numbers were also weakened by warmer weather, as electric and natural gas utilities fell 3.2% and 7.7%, respectively.
4. Biometrics invade banking and retail

Illustration: Eniola Odetunde/Axios

Axios' Jennifer Kingson writes: Banks have been quietly rolling out biometrics to identify customers — verifying them by their fingerprint, voice or eye scan — and retailers like Amazon are getting into the game.

Why it matters: These companies are amassing giant databases of our most personal information — including our gait, how we hold our cellphones, our typing patterns — that raise knotty questions about data security and privacy.

The intrigue: Banks — and, increasingly, retailers — have been working in overdrive to use biometrics both in back-end systems (where consumers won't see them) and public-facing ones:

  • Chase, Bank of America, Citi and Wells Fargo have introduced various biometric ID options, including voice, fingerprint, eye or facial recognition.
  • Mastercard and Visa are rolling out payment cards with embedded fingerprint ID.
  • BMO and Mastercard pioneered "selfie pay," which lets customers authenticate themselves for online shopping.

Banks say their systems are completely secure, but they are proceeding gingerly to avoid making their customers nervous. Several banks gave "no comments" to Axios when asked about their biometrics programs; Amazon did too.

There are already some horror stories:

  • Thumbprints have been spoofed with the type of gelatin used in Gummi Bears and a picture of someone else's thumb.
  • A pair of twins hacked HSBC's phone banking voice ID system — though it wasn't easy.
  • Facial recognition systems can be foiled by deepfakes, masks, and virtual reality — and they often show racial bias.

What they're saying: "A biometric is a very sensitive piece of personal information. If your password gets stolen, you create a new password. If your fingerprints get stolen, you can't create new fingerprints," Stephen Ritter, CTO of Mitek, an identity verification company, tells Axios.

Reality check: Banking and credit card companies say biometrics — which, so far, are usually optional — are invaluable in fighting fraud and that spoofing is rare.

  • They call the technology proven and safe, and say that many customers — particularly younger ones — welcome it.
  • "If it weren't for being able to use your thumbprint on your iPhone, I think biometrics would still be something on the fringe of authenticating," Trace Fooshee of Aite Group, a banking consultancy, tells Axios.

On the retail side: Amazon isn't the only company dabbling in biometrics.

  • The New York Mets have kiosks that will let you pay for snacks by fingerprint.
  • A handful of quick-serve restaurants like Caliburger and Malibu Poke are letting customers order via facial recognition at self-serve kiosks.
  • Mitek, which sells a face ID verification system, counts Airbnb, Instacart and Poshmark as customers.

Between the lines: What customers don't see is banks' and retailers' heavy use of "passive" or "behavioral biometrics" to thwart fraud.

  • "On a mobile phone, that could be the angle that you currently are handling the device, whether you are typing in the password with your thumbs," Chris Reid, EVP at Mastercard, tells Axios.
5. 800 rate cuts later

Mexico's central bank cut interest rates to 7% last week, marking the 800th interest rate cut by a central bank since the Lehman Brothers' bankruptcy in September 2008, Bank of America Global Research notes.

What's happening: The number of rate cuts from central banks have picked up steam since last year when the global economy's growth rate stumbled to its slowest since the financial crisis.

Why it matters: The recent rate cuts are fueling "twin bubbles" in investment grade corporate bonds and Big Tech stocks like Facebook, Amazon and Netflix, BofA analysts say.

Watch this space: Allocation to equities fell to 60.3% of private clients' portfolios, which is still slightly above the historical average but well below the March 2015 peak of 62.5%.

  • The analysts also pointed out that "clients are again selling equities (equivalent to 1.8% of [assets under management] annualized) & buying bonds (1.5%)."

Haile Selassie was the crown prince and later emperor of Ethiopia, who began his rule in 1930, was exiled during World War II after leading the resistance against the Italian invasion, and reinstated in 1941. A defining figure in the history of Ethiopia, he enacted myriad social, economic and educational reforms and made the country a charter member of the UN.

  • Selassie is also the namesake of the Rastafari religion. The term "Rastafari" comes from Selassie's name — "Ras," which means a duke or prince, while "Tafari Makonen" was his given name at birth.
  • Selassie is seen as the Rastafari messiah or God incarnate. Beginning in Jamaica in the 1930s, the Rastafari movement believes he will lead a future golden age of eternal peace, righteousness and prosperity.