Economic implications of a SARS/Coronavirus outbreak

[sptrawler]

"While pursuing its unusual strategy, Sweden questioned other nations’ decisions to lock down. Its path to mandatory restrictions has left the Nordic country with more than three times more virus deaths per capita than Denmark, the closest regional peer in terms of fatalities".

The thing is the virus has cranked up a notch, so maybe it wasn't just a flu, who knows.
But it certainly seems to have put Sweden back to square one.

 

[over9k]

Result?

 

[over9k]

Cross-post:

TSMC's beat even the hugely inflated expectations:

 

[basilio]

COVID has destroyed the international student with huge consequences for Universities and the industries supporting/feeding off O/S students.
Latest causality is new student accommodation tower in Central Melbourne with 750 rooms and practically empty.

Check the story out but take closer look at the accommodation. The charge for these rooms is up to $600 a week. If that bed is 200cms long you can work out the size of the (only) room. Think I have seen bigger kennels..


International student accommodation almost empty as sector battles with COVID-19 quarantine and border restrictions
By Kristian Silva
Posted 9hhours ago, updated 5hhours ago

A room in the Scape Carlton, a large student accommodation tower set to open in Melbourne next month.(ABC News: Chris Le Page)

Scape

www.scape.com

This $100 million student block has a pool hall, cinema and rooftop city views. But it's empty

The Scape Carlton is a symbol of Australia's crippled international student industry, which is feeling the pain of a mass exodus from the country because of the pandemic. But experts say some green shoots are emerging.

www.abc.net.au

 

[over9k]

Yes, this country's reliance on the foreign student dollar etc is doing immeasurable damage.

 

[Knobby22]

Yes, this country's reliance on the foreign student dollar etc is doing immeasurable damage.

We will be alright long term.
Keep taking students (secondary school) from Vietnam and India, not as rich as the Chinese but less problematic. Australia should look at getting more Japanese and Thai students.

Our family rented out our spare room to Chinese and in one case a Vietnamese student. The Chinese students were extremely wealthy.
They were often forced to live here and study and were basically a potential escape route for their billionaire parents if something went wrong in China. Most of the girls we got didn't really want to be here.

 

[over9k]

 

[qldfrog]

We will be alright long term.
Keep taking students (secondary school) from Vietnam and India, not as rich as the Chinese but less problematic. Australia should look at getting more Japanese and Thai students.

Our family rented out our spare room to Chinese and in one case a Vietnamese student. The Chinese students were extremely wealthy.
They were often forced to live here and study and were basically a potential escape route for their billionaire parents if something went wrong in China. Most of the girls we got didn't really want to be here.

For any rich chinese kid coming from a top tier city, Australia is like a punition.
Really backward in term of connectivity, shopping, city attractions,etc
a bore.. only so much fun look8ng at waves or koalas for a teenager....

 

[over9k]

Microcaps still the place to be. A lot of stuff sold off HARD today after being deep into the green/rising all week. Markets are closed monday so profit taking friday was ratcheted up a notch:



Hospitalisations have flatlined... for now:

 

[over9k]

Ford's just halted production for a full month because of the microchip shortage:

Bloomberg - Are you a robot?

www.bloomberg.com

And IHS are predicting the shortage to continue until at least Q3:

Sharing insights elevates their impact

Automotive semiconductor supply constraints expected to resolve by second half of 2021

ihsmarkit.com

Apparently it's not just cars that have way more chips in them nowadays either - apparently all our new gadgets (phones, tv's etc) have far more chips in them than the old gadgets too.



So that now makes ford, toyota, honda, fiat-chrysler, and general motors all either reducing or outright suspending production. More will undoubtedly follow.

Semiconductor-based components are set to account for more than 50% of a car’s manufacturing cost by 2030, up from about 35% now too: https://www.bloomberg.com/news/arti...-in-ev-parts-competitiveness-think-tank-warns

So this problem is only going to get worse long-term as well.

 

[over9k]

Goldman (admittedly a market maker) has lifted its forecasts:



I actually tend to agree. The major curveball is the microchip shortage. Industrials simply cannot actually function without the chips, so if manufacturers of cars etc can't get the chips, they can't sell/make any cars.

Car etc production simply cannot get moving until the chip shortage is rectified, and that appears to be months off yet. Industrials will obviously rebound massively once they do, but trying to time that (and the pre-emptive pricing in of that expectation) seems impossible.

The only real data we have is that chips are on backorder until Q3, but that backorder data just keeps increasing further and further by the day. In other words, orders are coming in faster than the world can make the things.

Chips are a good bet either way (both short and long term) but timing when industrials will rebound seems impossible. Even the biggest stimulus package ever doesn't matter if consumers can't actually buy the product.

 

[over9k]

Audi can now be added to the list of carmakers having to suspend production:

Audi delays output, idles 10,000 staff on chip shortage

[FRANKFURT] A global semiconductor shortage is forcing Audi to delay the production of some high-end cars and furlough workers, its chief executive officer told the Financial Times. Read more at The Business Times.

www.businesstimes.com.sg

10,000 people out of work as a result.

“Some customers have ordered too late, which is why we are not keeping up with deliveries in some areas,” Dutch manufacturer NXP said. “It takes three months or more from the production of complex microchips to delivery,” a NXP spokesman said.

Automakers cut back microchip orders when factories were closed, and demand plunged during the first coronavirus lockdowns last year.

The industry is showing signs of recovery, but automakers and suppliers are competing with smartphone makers such as Apple and Samsung, which are raising their orders for microchips.

Supply for the auto sector in the near term is “very difficult,” in part because the semiconductor industry’s lengthy manufacturing process means clients are penalized for wrongly anticipating demand, said Mike Hogan, head of automotive business for Globalfoundries.

"Globalfoundries is running its factories at an unprecedented pace and is prioritizing chips for cars to satisfy demand", Hogan said".


Still holding SOXL. Still considering torching my UDOW position and pumping it into SOXL.

 

[over9k]

https://www.cnbc.com/2021/01/21/housing-starts-december-2020.html


Housing starts way better than expected. NAIL's soared as a result. Can also expect numbers to ruuuuun on biden's immigration policy (which I know has nothing to do with coronavirus, but still...)

 

[over9k]

Fangs/nasdaq & r2k still best & 2nd best. Chips somewhere in between the two. Hospitalisations appear to have finally turned the corner.

Lots of other sectors/holdings like TAN have gone nuts lately but they've had nothing to do with coronavirus. Lots of earnings getting reported next week. Industrials still can't recover until the chip shortage is sorted, which isn't going to be for quite some time yet.

 

[over9k]

Bloomberg - Are you a robot?

www.bloomberg.com

Taiwan starts a quarantine. Expect the chip shortage to get even worse if this thing isn't brought under control.

Good time to buy the competition.

 

[over9k]

You'd have to be pretty retarded not to think this was going to happen though.

It also tells you a lot of why the market is so reliant on stimulus/stimulus news is whipsawing markets every time we get any.

 

[over9k]

Haven't forgotten about this thread gang, the stuff with gamergate etc just kind of took everything offline for a bit.

Hopefully they'll return to normal next week, and we have good news on the virus front all round:



With the yanks now heading into summer, we've turned the corner. One more stimulus package and we should get through it. The next clock will be vaccine rollout rate(s).

 

[over9k]

Alright it looks like all the BS is largely behind us so let's get back to the data.


First, the semiconductor shortage is still causing MAJOR headaches as lockdowns are starting to effect the supply of chips:



Despite demand being higher than ever:



And so the chinese makers are having to get lines of credit to keep afloat as they literally cannot actually produce the cars that are in demand:



China's actually continuing to go absolute gangbusters in fact:



But the real story is how lockdowns everywhere are both increasing unemployment and choking supply of almost everything (people not being able to work = companies not being able to supply stuff):





And that's the real story/meat of what's going on now, which I'll get into in the next post.

 

[over9k]

Alright so the real story of this year is basically that the more things change, the more they stay the same.

Everyone are carrying on about now is both inflation and as an extension of that, stagflation. We've seen serious rises in the prices of almost everything lately - all foodstuffs, all electronics/tech, building supplies, you name it. A lot of this has been attributed to the massive quantitative easing program that the fed is undertaking but that is only a small part of the story. The real story is the fact that demand has remained stubbornly high for almost everything like this but supply has been choked off by coronavirus lockdowns. Ergo, we get demand either higher or at least steady, and supply choked off.

Jobs data everywhere has actually been far worse than expected, with the latest U.S data being about half what was anticipated:



So question is, what's changed now vs a month or two or six ago?

Well, it's actually almost nothing. Lockdowns are still in place, money continues to be printed, and the supply of everything continues to be unable to keep up with the demand for it due to suppliers not being able to work or choke points at the ports.

The result of this is that our previous barbell spread is actually even more pronounced now than it was previously. Everything's beating estimates, but it's the mega and especially microcaps that are smoking everything else:



The result is that a results matrix that long term looks like this:



Is now put on steroids:





In short, with interest rates controlling the balance between growth & value and interest rates at zero, growth massacres value until the P/E yields get somewhere near matching the capital cost (interest) rates.

Combine that with the fact that the tech companies are absolutely cleaning up and the previously tiny microcaps in areas like work/operate/live/etc from home get more demand every time we get lockdowns or stimulus (and we've had both) and industrials literally unable to operate even ignoring lockdowns because of the microchip shortage that is caused by everyone buying stuff precisely to keep them at home, and we end up with a full on feedback loop where more staying at home = more demand for chips = more industrials unable to operate = more people staying at home.

There's a lot of talking heads banging on about inflation & stagflation and saying that gold's due for another run, but I think they've missed the point entirely. Whilst it's true that the money printing is pumping everything, people seem to be forgetting that there's a massive supply-side restriction going on at the moment. The second people are able to get back in the workforce (due to being vaccinated, lockdowns being lifted, or both) supply can increase again.


The good news is that it's all tailwinds & downhill from here. We've well & truly turned the corner of hospitalisations being over the hill of winter, so the warmer things get the less contagious the environment becomes:



And the vaccine deployments, whilst being slower than anticipated, are well & truly underway with an estimated 9 months until everyone's had their jabs in the U.S:


However, there's more vaccines in development/in the approval pipeline so we're very likely to see several more vaccines being deployed simultaneously. With that in mind, it's not unreasonable to expect that the job might be done sooner than anticipated, but murphy's law says not to actually expect that.

If that timeline's correct, the yanks will all be immune just in time for winter to shut everything down again, so I'm expecting organic (not stimulus driven) economic activity to keep increasing to a certain point maybe around end of Q3/start of Q4 this year, flatline through winter, and then REALLY take off in the winter melt/first half of 2022.

 

[moXJO]

Alright so the real story of this year is basically that the more things change, the more they stay the same.

Everyone are carrying on about now is both inflation and as an extension of that, stagflation. We've seen serious rises in the prices of almost everything lately - all foodstuffs, all electronics/tech, building supplies, you name it. A lot of this has been attributed to the massive quantitative easing program that the fed is undertaking but that is only a small part of the story. The real story is the fact that demand has remained stubbornly high for almost everything like this but supply has been choked off by coronavirus lockdowns. Ergo, we get demand either higher or at least steady, and supply choked off.

Jobs data everywhere has actually been far worse than expected, with the latest U.S data being about half what was anticipated:

View attachment 119834View attachment 119830

So question is, what's changed now vs a month or two or six ago?

Well, it's actually almost nothing. Lockdowns are still in place, money continues to be printed, and the supply of everything continues to be unable to keep up with the demand for it due to suppliers not being able to work or choke points at the ports.

The result of this is that our previous barbell spread is actually even more pronounced now than it was previously. Everything's beating estimates, but it's the mega and especially microcaps that are smoking everything else:

View attachment 119833View attachment 119831View attachment 119832

The result is that a results matrix that long term looks like this:

View attachment 119829

Is now put on steroids:

View attachment 119837



In short, with interest rates controlling the balance between growth & value and interest rates at zero, growth massacres value until the P/E yields get somewhere near matching the capital cost (interest) rates.

Combine that with the fact that the tech companies are absolutely cleaning up and the previously tiny microcaps in areas like work/operate/live/etc from home get more demand every time we get lockdowns or stimulus (and we've had both) and industrials literally unable to operate even ignoring lockdowns because of the microchip shortage that is caused by everyone buying stuff precisely to keep them at home, and we end up with a full on feedback loop where more staying at home = more demand for chips = more industrials unable to operate = more people staying at home.

There's a lot of talking heads banging on about inflation & stagflation and saying that gold's due for another run, but I think they've missed the point entirely. Whilst it's true that the money printing is pumping everything, people seem to be forgetting that there's a massive supply-side restriction going on at the moment. The second people are able to get back in the workforce (due to being vaccinated, lockdowns being lifted, or both) supply can increase again.


The good news is that it's all tailwinds & downhill from here. We've well & truly turned the corner of hospitalisations being over the hill of winter, so the warmer things get the less contagious the environment becomes:

View attachment 119838

And the vaccine deployments, whilst being slower than anticipated, are well & truly underway with an estimated 9 months until everyone's had their jabs in the U.S:

View attachment 119839
However, there's more vaccines in development/in the approval pipeline so we're very likely to see several more vaccines being deployed simultaneously. With that in mind, it's not unreasonable to expect that the job might be done sooner than anticipated, but murphy's law says not to actually expect that.

If that timeline's correct, the yanks will all be immune just in time for winter to shut everything down again, so I'm expecting organic (not stimulus driven) economic activity to keep increasing to a certain point maybe around end of Q3/start of Q4 this year, flatline through winter, and then REALLY take off in the winter melt/first half of 2022.

Really great analysis. Appreciate the effort you always put in.