Economic implications of a SARS/Coronavirus outbreak

[over9k]

Demand and supply.

Do you think a rational business would keep stock around during lockdown? Especially when the second hand market boomed (which it has)

Not that simple. External border closure but internal free movement has meant that tourism has actually increased in a lot of areas/states/countries.

Tourism is a net negative for a lot of places. Places like Fiji rely on it, but many first world countries experience a net negative. Closing the borders has actually increased the demand for a lot of rental places.

Combine that with the microchip shortage meaning there's no supply of new cars, and voila.


Mechanics are actually run off their feet maintaining older cars now. I posted how much auto parts sellers have seen a massive boom in response too.

 

[over9k]

Data in: U.S unemployment down to 5.8% vs 6.1% estimated. Payrolls up 559k vs 675k estimated.



So in other words, the participation rate has dropped.

edit:



And there you go.



Bonds have dumped as a result, so tech futures have run the most.

 

[over9k]

Lol. So (according to all the talking heads) the jobs etc numbers have hit a goldilocks zone of being good but not so/too good as to ignite inflation and thus interest rate rise fears:



I missed the screencap and can't be bothered fishing the data out directly but I don't need to to say that every sector except manufacturing was up, which is undoubtedly due to the aforementioned materials shortage.

As I keep saying, get the able bodied people vaccinated, supply can increase, so sales can increase. Inflation will actually drop/prices will then come down accordingly.

You can't make/build anything without materials.

 

[sptrawler]

There'd be regional differences there in who wins and loses.

I haven't looked into any figures but certainly some areas of Australia under normal circumstances are net winners from tourism, eg the Gold Coast would be one, and others are net losers from it since locals go to other places but the town itself isn't on the tourist map.

Yes, I'm not sure, obviously in W.A ATM everyone is heading North, so towns are limited therefore so is choice.
I just booked a driving holiday, Cairns, Mt Isa, Townsville, Cairns in August and Mt Isa is booked out so we have to stay in Cloncurry.
There seems to be plenty of accommodation in Mt Isa, but no vacancies.

 

[over9k]

Lol. So (according to all the talking heads) the jobs etc numbers have hit a goldilocks zone of being good but not so/too good as to ignite inflation and thus interest rate rise fears:

View attachment 125566

I missed the screencap and can't be bothered fishing the data out directly but I don't need to to say that every sector except manufacturing was up, which is undoubtedly due to the aforementioned materials shortage.

As I keep saying, get the able bodied people vaccinated, supply can increase, so sales can increase. Inflation will actually drop/prices will then come down accordingly.

You can't make/build anything without materials.

Ugh. Not every sector but manufacturing. Every sector but construction. Can't edit the post now

 

[over9k]

Job openings up a full million month-on-month:



Jobs which cannot be done remotely are obviously the hardest to fill, hence my previous post about covid proximity paranoia etc. We also know that most infections have actually been spread in the workplace, so it makes sense that in-person jobs are spreading the virus and thus the whole in-person workforce constantly has a lot of people off work sick or just flatly refusing to go to work because of just how likely it'll be that they do contract the virus.

So a no-win situation for the services sector.


Also worth noting that like basically all of last year whenever the economic data was far better than expected the mega and micro caps surged the most, the same is occurring at the moment too:



So it would appear that the barbell play is what to run if you think the economic data is going to beat expectations now too. Time does not appear to have changed the way the market is reacting to positive/better than expected data.

 

[frugal.rock]

There'd be regional differences there in who wins and loses.

Definitely. The regional area I live in is doing great guns from Sydneyites day and weekend tripping.
No vacancies at hotels etc
and their all travelling by car...

 

[sptrawler]

Interesting article for 'work from home' expenses able to be claimed at EFY.

Why 2020-21 could provide your biggest tax refund yet

Unprecedented working-from-home tax deductions plus tax cuts offered by the federal government mean more than half of taxpayers can expect their biggest tax refund this year.

www.smh.com.au

From the article:
The shortcut method – introduced in the wake of COVID-19 during the 2019-20 tax year – has been extended by the ATO to cover this financial year and is the simplest. You just keep a diary of how many hours you worked from home and multiply that number by 80 cents. This translates to about $1600 in deductions over the year if you worked a 40-hour week.
More complicated, older techniques include the fixed-rate method and the actual-costs method. They could result in bigger deductions but it is best to ask your accountant or tax agent if they are suited to your personal circumstances.
How you apportion your bills to work versus home is also highly important.
“If I was an ATO auditor and was looking at someone’s claims, an absolute red flag would be them claiming 100 per cent of internet or mobile [phone] bills, because there is a private portion for them – unless they have a second phone for purely personal purposes,” Raftery says.
With a disclaimer that each person and each profession is different, he estimates as a rough guide that the average percentages of bills claimed would be:

• 50-80 per cent for NBN “but it varies greatly if you have kids and also streaming services”.
• 60-80 per cent for mobile phone plans “but this one has a wide range. It could be as low as 5-10 per cent or as high as 90-95 per cent”
• 100 per cent for a new desk “unless used for home-schooling purposes”.
• 
  
• Similar proportions can be claimed for a new laptop, phone or desktop monitor but “if it costs more than $300 then you must depreciate it over the effective life” of the hardware, Raftery says.
  What else can you do now to make this your biggest tax return yet?
  Bring forward any work-related expenses by pre-paying them before June 30. These could include electronic hardware, stationery, annual subscriptions, income protection premiums, conference payments, charity donations and voluntary super contributions.
  
  
  For businesses, Rosenthal says “the instant asset write off now has no limit, meaning you can buy any size asset you want and get a full deduction upfront.” For small businesses, this also includes second-hand assets.”

 

[over9k]

Alright so we've had all manner of absolute BS - inflation fears, meme stock mania, snowstorms, canals getting blocked and you name it for the past few months, but what I want to focus on with this post is the inflation fears.

I (and many others) have been banging on ad nausea about inflation being transitory for quite some time now.

Now, the markets have basically just been choppy BS ever since their 16 feb plummet after the snowstorm, but what I want to focus on is the period starting on the 12th of May. We are now exactly one month from then and it's the first full month of a real bull market that we've seen for essentially the entire year since January.

Take a look at how the markets have moved since then:



As we can see, when the market is moving, it's the barbell spread that wins. This was true of last year and as we can see, with our first month of consistent, real, solid growth since January, it's the micro & megacaps that are head & shoulders ahead of everyone else.

Now, you might be forgiven for thinking that this is just economic growth winning the war against inflation fears and that has a lot of merit - most of the economic data has been consistently beating estimates of late. But, there's more to it.

Take a look at the U.S 10 year bond rates, the chief driver of inflation fears, since the 12th of May:



As we can see, it was at this point that the US10Y bond chop stopped and the decline truly began.

It is also either exactly or very close to the point at which commodities began to nosedive, again, no need to post 30 different graphs all showing the same thing:



So in short, the "transitory" inflation environment has been well & truly "transitioned".

However, the key difference now, the way we know that we're now out of the inflation-dictated environment, is that the banks haven't nosedived this time. We haven't seen them plummet while tech screamed, in fact, they've actually increased or at worst remained flat:



And this is how we know that the last month has been driven by macro conditions improving as well as inflation fears subsiding rather than just one or the other - markets are now getting tailwinds from both.

In short, the "transitory" inflation has been transitioned and the macro economy at large is improving way ahead of schedule.


So in summary, you should be feeling some deja-vu because it's full steam ahead from here and the barbell play is back on the menu

 

[frugal.rock]

I'm seeing the inflation "fears" that have receded to be of a temporary nature.

Fears that were pre-emptive, but the calls were early and not based off current reality, is what I'm thinking.

From all your postings, I would envisage lack of on time supply will inevitably show up in the data and was only just thinking the other day that we're likely to see a "spike" of sorts.

Cost of goods, shipping, commodities, labour etc etc have all gone up dramatically so I see that undersupply nature eventually rearing up inflation for a unknown period of time.

In my opinion it will be influenced by world recovery and vaccinations and to a lesser extent the fears of the whole pandemic thing, ie; people willing to travel externally again and many other factors.

"Rain, rain, go away, come again another day..."
Just change rain to inflation.

Thanks to your informative posts, we can all be well prepared.
Cheers.

PS, if the above scenario (an excessive temporary rise in actual inflation) does pan out, what are the implications of it?

I would think inflation fears will have a second wave soon enough, when is probably the question?

 

[basilio]

I think we should re focus on the main point of the thread - economic implications of COVID.

It seems to me that the development of new and far more dangerous strands of the Coronavirus is going to have even more of an impact than 2020. The Delta strand is far more infectious, creates more serious medical problems and is not totally stopped by the current vaccines.

It has quickly become the dominant strain in the UK, India and much of Europe is at risk.

COVID-19 Delta variant a growing worry in Europe, warn Spanish and U.K. health officials

The Delta variant now accounts for 90% of coronavirus cases in the U.K. and the World Health Organization has warned it could become prevalent in Europe.

www.marketwatch.com

Why the Delta variant is terrifying experts

It spreads more easily, it’s more severe, and is more resistant to vaccines.

www.news.com.au

How the Delta variant crushed a 'herd immunity' myth and ravaged the Indian capital

As Delta rampaged through India undetected, doctors were confounded by the sheer scale of the virus's spread. This is how the COVID-19 variant fuelled a calamitous surge in cases before slipping beyond the country's borders.

www.abc.net.au

 

[sptrawler]

It looks as though the free trade agreement with the U.K is a goer, when the international borders are open.
The recognition of professional qualifications, should help with joint R & D hopefully.

Scott Morrison and Boris Johnson strike Australia-Britain free trade deal over dinner

New free trade deal will pave the way for more Australians to live and work in Britain once international borders reopen.

www.theage.com.au

 

[sptrawler]

U.S company Global Foundries to make chip manufacturing plant in Singapore, the U.S won't be happy, Biden has been asking for 'chip manufacturing to return to the U.S.
https://www.cnbc.com/2021/06/22/globalfoundries-announces-new-singapore-plant.html
From the article:
Semiconductors are critical components that power all kinds of electronics, from smartphones to computers to the brake sensors in cars. Their production involve a complex network of firms that design the chips, companies that manufacture them as well as those that supply the technology, materials and machinery to do so.

GlobalFoundries is a so-called “pure” foundry, with factories in the U.S., Germany and Singapore. Foundries are companies that are contracted by semiconductor firms to build chips. GlobalFoundries manufactures semiconductors designed by the likes of AMD, Qualcomm and Broadcom.

The global chip shortage has highlighted the importance of foundries, which are investing billions in new production lines and upgraded equipment to meet the surge in demand.

Taiwan Semiconductor Manufacturing Company, or TSMC, is the world’s biggest foundry by market share and revenue, according to TrendForce. It has about 56% market share, followed by Samsung (18%), UMC (7%) and GlobalFoundries (7%).

Semiconductor designers and manufacturers are trying to make chips smaller and better. At the moment, only TSMC and Samsung have the ability to manufacture the most advanced chips.

 

[qldfrog]

I suspect we will see another hit on the market when people and so markets will become aware of Israel covid recent figures
40% of new contaminations are fully vaccinated.while some might have blamed AZ on the new wave among vaccinated in the UK, Israel is only using Pfizer..
So maybe time to push treatment and real prevention, and let the virus loose instead of extending its lifetime and so augmenting mutations.?
Another thread
Anyway, once realised vaccines are not working more than the flu shots,and with the next wave expected next autumn in the northern hemisphere, if wall street has not crashed before, we will then.so that put a deadline crash to february 2022, probably earlier as markets look ahead.
DYOR as posting any covid facts could cause issues to Joe and turn that thread into another ideological fight

 

[over9k]

Chip lead times now at record 18 weeks as the economic recovery continues whilst chip plants take several years to construct:

https://www.bloomberg.com/news/arti...-for-chips-stretch-further-deepening-shortage

So unlike lumber, soybeans, wheat etc that supply has been able to recover for as people get back to work, chips were already running flat out and so aren't going to change any time soon.


(for those concerned that we were off topic for the thread, inflation has been largely dictated by the virus, hence me talking about it so much)

 

[over9k]

Cross-post:

First:



But then:



Followed by



Result:

\


Whilst everyone lost their minds on the short term yields, shown here:



Note the date on the yield curve drop screencap: 17th of June.


You know, right where the market just took off like a gunshot.

 

[over9k]

Birth rates also dropped by 8% through the pandemic:

https://www.bloomberg.com/news/arti...kdowns-u-s-births-plummeted-by-8?srnd=premium



Which, unlike university enrollments, actually followed the historical trend of recession consequences (university enrollments usually go up in a recession but not this time).

I'm pretty sure that 2008-2009 and 1992 or so were very low birth years as well.


I suspect we might see the birth-death delta at near zero or even below it for quite some time yet.

 

[over9k]

Just in case anyone's in any kind of doubt, here's a quick visual of just how ON the move the megacaps now are that the inflation fears are gone:



You'll see that a beautiful resistance buy point (really wish I'd added more than I did but w/e) was found so it'll be interesting to see how hard it runs now. There's still another 30% to move to hit our previous feb peak but we're at the previous april peak now.

I am still holding.

 

[basilio]

I think we need to reconsider the economic impact of COVID on our local economy and internationally as well.

Sydney is now in a 2 week lockdown attempting to control the extremely infectious delta COVID version. This has already escaped to Melbourne and now a mine in the NT.

The vaccination rate is still far too low to protect the majority of the population from sickness or death. The experience of the spread of the delta and now delta plus variation in India and elsewhere says we won't be coming out of lockdowns until vaccinations reach 80% of the population. I wonder how willing and capable the Governments are to support business and workers like they did last year ?

Two-week lockdown for greater Sydney​

The New South Wales premier, Gladys Berejiklian, has announced a two-week lockdown.

From 6pm today, all of greater Sydney, the Blue Mountains, the Central Coast and Wollongong will go into lockdown until midnight on Friday 9 July.

Northern Territory mine worker tests positive to Covid​

The Northern Territory chief minister, Michael Gunner, has confirmed a Covid case at the Granites gold mine.

The case works as a miner, and travelled to the NT from Bendigo in Victoria, via Brisbane, where he did hotel quarantine. Officials consider the man was infectious from 18 June to 24 June.

.. Gunner says there are 754 people in isolation on the mine site, as well as approximately 900 people who have left the mine site in the days since the case arrived there.

Those workers have travelled on to Brisbane, Perth, Alice Springs and Darwin airports from the mine.

Commonwealth declares Sydney a hotspot to trigger disaster support – as it happened

Gladys Berejiklian flags help and says ‘nobody should feel stressed about their financial situation’. This blog is now closed

www.theguardian.com

 

[over9k]

The good news is that the vaccines are about 90% effective against it, so we're still back to the same vaccine rollout dictum - we don't need to start the whole development process all over again.