Economic implications of a SARS/Coronavirus outbreak

[Dona Ferentes]

I've no doubt the cost will end up very much higher but it's the concept I'm interested in.

These things take time, they don't happen overnight and I'm thinking in terms of a turning point of the kind Wethat to most will be apparent only many years after the event. I'm not expecting to see anything dramatic next week etc.

Much like Australian state politicians generally didn't acknowledge any decline of manufacturing until well into the 1990's. Prior to that, they were still going to elections talking up the prospects of someone building a factory - never mind that the sector had been declining for 20 years by that point, it took a very long time to sink in.

Or for a less serious example, Rock music peaked in 1983 and outright fell off the cliff after 1989. Factually correct from a commercial perspective as a % of music sales but I expect there'd be more than a few who took the next 20 years to realise that such a fundamental shift had taken place. Most would've been thinking in terms of individual bands having passed their peak, not grasping that the entire genre was headed to oblivion so far as the mainstream is concerned. That's US data but would be much the same in Australia.

I may well be wrong but I do get a definite impression that a turning point has occurred of that nature. Won't be noticeable for a while but the political language does seem to have shifted away from the whole 1970's - 2019 thinking of "free trade", "there is no such thing as society", "government debt is always bad" and so on and toward "need to make things here" and "need to focus on lifestyle not just money" and "government needs to invest" etc. That's a profound change that, if continued, will ripple through pretty much everything over time just as the changes in the 70's - 80's did.

The examples I've given are just to illustrate really, it's the sentiment I'm looking at and pondering where that leads more broadly?

One of the more obvious implications is inflation. Government borrows heavily and inflates it away meanwhile a shift of at least some production to developed countries with higher production costs. The ideas in the US of increasing tax rates are another one that goes against the paradigm of recent decades.

Individually each can be dismissed, but not if there's a pattern forming.

And, whatever happened to "Win Win"?

 

[over9k]

Until the young & fit (you know, the people who do all the physical work) are vaccinated and able to get back to work again.


Also:

 

[qldfrog]

And, whatever happened to "Win Win"?

Simple, 10 richer Chineses vs 1 richer western business boss paying taxes and interest on the debt used to provide universal income to 9 unemployed western workers.
10-10
Win win Reset style.

 

[over9k]

One thing I haven't seen anyone try to properly work out (and I haven't tried myself either) is exactly what the capacity of the world's oil fields is right now?

That is, if all the taps are fully opened, all the pumps are on and deducting normal routine outages for maintenance etc then what's the daily flow rate globally?

Almost certainly it's lower now than it was a year ago but by how much I wonder?

Point being that so long as consumption remains below capacity, OPEC can control the market but once consumption exceeds capacity, there's nothing anyone can do to avoid a price shock and with that price going to whatever level it takes to get production and consumption back in balance.

An oil shock, a proper one, is at least possible in my view. "Proper" as in it becomes mainstream news, not just financial news.

Got you an answer @Smurf1976

 

[over9k]

Microchips (or lack thereof) still a major problem everywhere:





But the economy at large is absolutely screaming, with estimates just being revised upwards constantly:



But the problem is that all the able-bodied people who actually produce everything are getting the vaccines last, so we're going to see a significant uptick in demand for, well, basically everything, until the supply side can catch up. Result?





However, vaccine rollouts are also way ahead of schedule, so it looks like the movement(s) are going to be much shorter lived than otherwise expected:



So a screaming economy and even inflation (which will drive interest rate increases) gives us absolutely screaming banks (which gain from both) and energy (which gains from reopening) and as a result, the s&p has been screaming lately on account of it being heavier on both:





(Disclosure: I hold all five)

Finally, because of the vaccine rollout(s) and countries' desperation to get the borders open/tourism money flowing again, france is now doing this:



So that's one to keep a VERY close eye on for any travel/aviation plays.

 

[over9k]

You can basically just pick your commodity with a dart at this point and you'll see it heading to the moon:



Lumber (timber), soybeans, metals, it doesn't matter, we're all still buying stuff and we're all still eating stuff, so until the able-bodied people of the world that actually produce all the stuff we need can get back to work (vaccinated) then this will continue.

Considering that these are the people that are last in line for the vaccines (on both an intra-country and inter-national basis) this is not going to turn the corner in the next five minutes.

Good for brazil (and anyone able-bodied that can produce commodities) though

 

[basilio]

I seriously wonder how long before India's economy/society totally cracks under the impact of COVID. The official figures are staggering but all other intelligence says the real figures are multiples higher. Brazil and other South American countries are also struggling to survive.

The new COVID variants which are significantly more infectious are spreading the disease far more rapidly than a year ago. At some stage the economic fallout of this situation will be profound.

New COVID-19 Cases Worldwide - Johns Hopkins Coronavirus Resource Center

Have countries flattened the curve? Daily confirmed new COVID-19 cases for the most affected countries over time.

coronavirus.jhu.edu

'Impossibly bad': Why India's coronavirus disaster may be far worse than anyone imagines

India's coronavirus surge has broken records, but the numbers reported are widely expected to be under representative of the actual figures.

www.abc.net.au

 

[over9k]

Yeah I just saw on the news that India's cracked 400k/day.

Meanwhile, AU's vaccine rollout is actually way behind schedule on account of being heavily reliant on the astrazeneca vaccine:

https://www.abc.net.au/news/2021-05..._news&utm_source=m.facebook.com&sf245515180=1



"At this pace, Australia's adult population will not be fully vaccinated until March 2024".

 

[Smurf1976]

"At this pace, Australia's adult population will not be fully vaccinated until March 2024".

I can see that blowing up one way or another.

Either medically with an outbreak or politically with whatever consequences that brings but if we take that date as correct, well that's almost 3 years away meaning we're only about 30% of the way through this whole saga.

 

[Smurf1976]

Got you an answer @Smurf1976

View attachment 123437

Interesting.

If there's 9 million barrels per day capacity sitting idle then that does provide a pretty substantial cushion between present consumption and capacity.

I was expecting it to be lower than that.

 

[over9k]

I can see that blowing up one way or another.

Either medically with an outbreak or politically with whatever consequences that brings but if we take that date as correct, well that's almost 3 years away meaning we're only about 30% of the way through this whole saga.

Oh yeah. There's been an awful lot of talking heads (in the right circles) being all "Don't get ahead of yourselves here, globally, we're not even halfway through this thing yet".

 

[over9k]

Alright guys looks like we might be in for round two of inflation fears pumping banks vs dumping tech.




Here's how things looked last time with some magnificent volatility and buy-sell divergences and I've marked them on the charts:



FAS has been a solid hold bet for weeks, BNKU a bit more volatile, and DPST the most volatile of the bank/finance etf's:



But with the S&P being banks heavy, if you're not confident you can time some of the divergences, SPXL has effectively been an arbitrage position lately:



So if you don't day trade etc like I do you can just buy the dips on SPXL and still make a killing

 

[basilio]

I seriously wonder how long before India's economy/society totally cracks under the impact of COVID. The official figures are staggering but all other intelligence says the real figures are multiples higher. Brazil and other South American countries are also struggling to survive.

The new COVID variants which are significantly more infectious are spreading the disease far more rapidly than a year ago. At some stage the economic fallout of this situation will be profound.

New COVID-19 Cases Worldwide - Johns Hopkins Coronavirus Resource Center

Have countries flattened the curve? Daily confirmed new COVID-19 cases for the most affected countries over time.

coronavirus.jhu.edu

'Impossibly bad': Why India's coronavirus disaster may be far worse than anyone imagines

India's coronavirus surge has broken records, but the numbers reported are widely expected to be under representative of the actual figures.

www.abc.net.au

View attachment 123614

An analysis in the Conversation drills deeper into the critical roles India plays in the world economy and why the West needs to ensure India stays functional if we are to avoid an international economic slowdown.

4 Reasons Why India's COVID Crisis Threatens the World Economy​

If leading powers fail to help India, the country's health crisis will become a global crisis.

https://www.usnews.com/news/best-countries/articles/2021-04-30/4-reasons-why-indias-covid-crisis-will-derail-the-world-economy

 

[basilio]

Further analysis of the impact of COVID on India and implications for the world economy.

https://www.usnews.com/news/world-report/articles/2021-05-03/indias-catastrophic-coronavirus-surge-highlights-global-vulnerabilities

 

[over9k]

aaaaand here we go:




Result:



Banks vs tech divergence back on the menu

 

[over9k]

Oh yeah. There's been an awful lot of talking heads (in the right circles) being all "Don't get ahead of yourselves here, globally, we're not even halfway through this thing yet".

Jay Powell's comments/views/decisions looking 200 iq points above everyone else at the moment.

 

[Tyler Durden]

Next pandemic I'm buying everything - shares, property, crypto, used cars, toilet paper...

 

[over9k]

Yes, those constraints are that ALL THE ABLE BODIED PEOPLE WHO MAKE EVERYTHING ARE LAST IN LINE FOR THE VACCINES.


This week's been mental. Same huge divergences as last time and it's only wednesday. I'll do a wrap-up at the end of the week but basically everything's busted support levels whilst banks & energy are screaming EXACTLY like last time.


Edit: CPI data now out, way higher than expected, even more talking heads banging on about it being a supply side problem (is this new or something?)



"Must address constraint on supply"


Exactly.


In the meantime, there's DPST

 

[over9k]

Here's some charting for everyone, check out how NRGU just kissed its previous high before coming off it, and how the previous resistance level seems to now be acting as the new support, giving us dual ranges/channels:



And you'll see the EXACT same energy & banks vs tech divergence that we saw last time over on the right hand side.


If NRGU is any indication, we'll be able to use our previous point(s) in our charting to pick our buy & sell points beautifully this time

 

[over9k]

Speaking of which:



I got NRGU right and was at about 20% cash after, so now I'm down to 10% as both FNGU and SOXL orders have filled.

Let's see if I get stung for it.