Economic implications of a SARS/Coronavirus outbreak

[Smurf1976]

It's not just money right?

Agreed it's not just about money, for the record there's a member of my own family I have a lot of concern about in the event they become infected since they seemingly tick the boxes so far as being high risk of death is concerned, but practical reality is there's stuff all any of us can do about the pandemic beyond basic hygiene.

That being so, may as well focus on what else can be done under the circumstances and realistically that's personal preparations in a physical sense and the financial aspects.

 

[sptrawler]

Absolutely spot on smurf, if at all possible avoid getting it, if you can't avoid getting it help those older by not giving it to them.
Also if you have elderly parents, as I do, start and get some things in place so they don't have to leave the house while it blows over.
Better to be safe than sorry.

 

[MrChow]

https://www.globalresearch.ca/flu-bigger-concern-wuhan-virus-grabs-headlines/5701932

Did get my numbers slightly wrong not 1m, but 650k flu deaths worldwide per annum.

(Your quote about 61k was for US only 5% of the worlds population)

https://www.scmp.com/lifestyle/heal...g-flu-struck-without-warning-50-years-ago-and

The last major virus similar to coronavirus was in 1968 where an estimated 1m people died.

And a bit of editorialising - Watched Trump's presser this morning and they've a total of 1 case that has been spread from person to person within the country and he expects total cases of Coronavirus in the US to fall to 0 in the coming days.

 

[ducati916]

All sorts of ramifications emerging:

https://www.wsj.com/articles/nestle...ps-11582741050?mod=searchresults&page=1&pos=7

https://www.wsj.com/articles/out-of...rs-11582713005?mod=searchresults&page=1&pos=1

https://www.wsj.com/articles/can-su...china-the-u-s-and-germany-are-key-11582712810

Virus is now present on 6 continents.

jog on
duc

 

[qldfrog]

https://www.globalresearch.ca/flu-bigger-concern-wuhan-virus-grabs-headlines/5701932

Did get my numbers slightly wrong not 1m, but 650k flu deaths worldwide per annum.

(Your quote about 61k was for US only 5% of the worlds population)

https://www.scmp.com/lifestyle/heal...g-flu-struck-without-warning-50-years-ago-and

The last major virus similar to coronavirus was in 1968 where an estimated 1m people died.

And a bit of editorialising - Watched Trump's presser this morning and they've a total of 1 case that has been spread from person to person within the country and he expects total cases of Coronavirus in the US to fall to 0 in the coming days.

Point taken, my mistake as my source was an American study who seems to think the USA is the world.
My error, does not change the fact that whatever figure you play with, this virus is far more deadly, has no vaccine and is more contagious.so we will all get it at some stage and the overall figures with this new virus will be much higher than the seasonal glu at least in the first couple of years
And the economic effect even if sorted tomorrow..which it will not..are massive

 

[rederob]

https://www.globalresearch.ca/flu-bigger-concern-wuhan-virus-grabs-headlines/5701932

Did get my numbers slightly wrong not 1m, but 650k flu deaths worldwide per annum.

(Your quote about 61k was for US only 5% of the worlds population)

https://www.scmp.com/lifestyle/heal...g-flu-struck-without-warning-50-years-ago-and

The last major virus similar to coronavirus was in 1968 where an estimated 1m people died.

And a bit of editorialising - Watched Trump's presser this morning and they've a total of 1 case that has been spread from person to person within the country and he expects total cases of Coronavirus in the US to fall to 0 in the coming days.

The concern with COVID-19 is that mortality is so far estimated around 2.3% of those contracting it, versus about 0.1% for the common flu.
COVID-19 is no where near as deadly as SARS or MERS, but spreads more easily. This concern may have a basis in that it is possible some people may carry the virus and spread it without showing typical symptoms.
At time of writing the previous linked article has 12 organisations/companies with potential vaccines.
Having watched markets for the past few weeks it's difficult to determine why some OZ stocks which appear not to be particularly exposed, have fallen considerably, like property funds such as Dexus which has declined almost 8% during the week, or ASX itself which has declined over 11% in a fortnight.
So if you can work out which companies appear to be oversold on "fear" rather than "risk", I reckon there will be dozens of good buying opportunities.
The other interesting tid bit of disease commentary is that regulatory authorities seem to be indicating that the rigorous testing of a vaccine that is normally required might be put to one side for COVID-19. Assuming one of the many potential vaccines is successful, that could put something into the western market within 6 months. However, the Chinese may not feel so constrained and their partnership with GSK could have something out sooner.

 

[SirRumpole]

S what are the sharemarket strategies of those here in view of the fact that Wall St was down 4% overnight ?

Buy , sell or hold ?

 

[Porper]

S what are the sharemarket strategies of those here in view of the fact that Wall St was down 4% overnight ?

Buy , sell or hold ?

In my view stops on open positions should have been tightened already. We'll get a bounce for sure but I won't be buying it. The next opportunities could be to the short side, albeit not now.

 

[MrChow]

Simple rule of thumb for me:

Recession -20% minimum
No Recession -20% maximum

So it depends on whether you forecast coronavirus to take hold en masse in the U.S which leads to a hit to consumer spending and companies cutting jobs etc...

I am not close to that outcome yet based on available information. So I would be confident if the drop gets closer to -20% (currently -12%) it'd be a good opportunity to ride the recovery.

Same scenarios as the commodity bust in 2015 and yield inversion in 2018 both pushed the -20% mark and recovered fast once worst case scenario failed to eventuate.

 

[qldfrog]

I feel our economy will hurt so will the aud
Out if that i i wou agree with the analysis of @MrChow but only for selected stocks, miners will be hit hard but fall in oil price and lower aud will allow them to recover.
Thinks like banks will be on gov live support, a lot of companies will die, the cleaning we missed during the gfc here in Australia will happen.good on the long term, a disaster for the short term and people involved
Food health etc should be relatively safe.far too late to panic Sell All, there was plenty of time to take protective measures a month ago for anyone willing to look.

 

[moXJO]

You have to allow for the media scare campaign on the unknown. Usually follows the same pattern
Massive drop on fear.
Stabilize on more information.

Drop when infections actually hit locally.

Jump up, once unknowns are known.

Its just a bad flu so I'd be looking for bargains when everyone is running. Same thing happened during the banking crisis, y2k, tech wreck, etc.

The market was overvalued imo though. And you have to factor in more then just the flu this time round. Supply chains, recession, etc.

 

[moXJO]

It should clear out the competition and leave those that do survive in prime position.

 

[againsthegrain]

You have to allow for the media scare campaign on the unknown. Usually follows the same pattern
Massive drop on fear.
Stabilize on more information.

Drop when infections actually hit locally.

Jump up, once unknowns are known.

Its just a bad flu so I'd be looking for bargains when everyone is running. Same thing happened during the banking crisis, y2k, tech wreck, etc.

The market was overvalued imo though. And you have to factor in more then just the flu this time round. Supply chains, recession, etc.

How does everybody think property will be affected? good time to buy, good time to sell?

My logic is:
Economy weakening, less spending less jobs. More jobs at risk even less spending, less profit for business and goes in a loop.

People avoiding bigger crowds (auctions, inspections) so less interested less buyers present.

Interested rates may go slightly lower but they are so low the difference is not so big, banks definitely not wanting to lend more in the fear of shaky jobs.

So basically from this point of view less people want to put their properties on the market (less stock) kind of want to wait it out

Less people willing to get into the market (less buyers)

Some will be desperate to sell because they may be forced to by
1. Income loss/partial loss due to economy slowdown
2. Income loss due to physical sickness from the virus, family members sick have to care for them

In the media property market is apparently still going strong but I can't really picture it going up.

I know 2 people one in Qld one in Vic

Qld decided to take theirs off the market after a few months of no success as they don't want constant unknowns walking through inspections possibly increasing the chance of getting the virus (paranoid I know)

Vic getting alot of low offers

 

[moXJO]

How does everybody think property will be affected? good time to buy, good time to sell?

My logic is:
Economy weakening, less spending less jobs. More jobs at risk even less spending, less profit for business and goes in a loop.

People avoiding bigger crowds (auctions, inspections) so less interested less buyers present.

Interested rates may go slightly lower but they are so low the difference is not so big, banks definitely not wanting to lend more in the fear of shaky jobs.

So basically from this point of view less people want to put their properties on the market (less stock) kind of want to wait it out

Less people willing to get into the market (less buyers)

Some will be desperate to sell because they may be forced to by
1. Income loss/partial loss due to economy slowdown
2. Income loss due to physical sickness from the virus, family members sick have to care for them

In the media property market is apparently still going strong but I can't really picture it going up.

I know 2 people one in Qld one in Vic

Qld decided to take theirs off the market after a few months of no success as they don't want constant unknowns walking through inspections possibly increasing the chance of getting the virus (paranoid I know)

Vic getting alot of low offers

NSW they started a lot of unit development in my area. A real lot. So they must have thought conditions will be ok, because they would be in the high tens of millions cost wise. Surely someone has done their homework.

Me personally, I'd have said we keep drifting down. Everyone is too stretched. No one is spending and there's bugger all money around.

But perhaps with a stock market crash, the old 'safe as houses comes into play.
I haven't checked immigration/ to houses built in a while either. Might be a shortfall. Generally if we are not building enough to cover, houses will hold up a lot better.

 

[brty]

A lot of people everywhere do not seem to understand what is going on with Coronavirus, as it is a true Black Swan that has hit a complacent world.

We could defeat it, and everything would go back to semi normal, with a recession the result of the damage already caused. That seems to be the thinking of most, the overpriced markets were due for a correction and we have had the needed catalyst to send them down into bargain territory.

Are we there yet?? I'm seeing the technical indicators way oversold, plus stocks that have reached support levels and in quite a few cases breached them.

This event is unlike the GFC, where some people in charge just decided to create a whole lot of money out of thin air to solve the problem. Also it is unlike Y2k, that was a non event, or the Asian currency crisis of the late 90's, etc, etc.

This time is different, because the problem cannot be solved by printing money, yet that is what many are expecting to happen.

What I'm feeling is that there is a possibility we are in the middle of an event like 1987, where markets crashed in a short period of time. There are also some uncanny resemblances market wise.
In 1986 the S&P500 low was ~229 points, with the '87 high being ~338 points, before the crash.
In very late 2018 the S&P500 low was ~2355 points, with the '20 high being 3393.

Back in '87 the markets were very overpriced, just like now, and after the initial sell off people bought the dip because all the indicators were way oversold. 1987 taught those of us involved in markets that anything can and will happen. Safety is always paramount in markets.

I've been 85% cash recently, been stopped out of BBOZ twice in the last 2 weeks (including last Thursday within 1c of the bottom), but went long BBUS which is well in the money. I've had these as a hedge against my long term stocks (small amount) that I still hold.

Just to lighten the mood, againsthegrain's comment ...

"I know 2 people one in Qld one in Vic" can I suggest you get out more, after the coronavirus.

 

[ducati916]

Delivery supply chains, which are just-in-time, are clearly disrupted. Which is a breach of contract. There are already 1600 Chinese firms litigating a 'Force Majeure' clause worth over $15B. The tip of the iceburg.

Secondarily, with supply chains disrupted, price inflation in certain areas of the economy where demand will now outstrip supply?

jog on
duc

 

[moXJO]

This time is different

I heard this every time.
We went through SARS and MERS. MERS nobody probably even remembers. I'm a little concerned this time but fairly confident it won't be to bad.

Quick trades on the bounce and let her drop.
Until a country reaches full infection, it's hard to tell where it will go.
But I'm looking at the boom when it goes through. Who's going to prosper when weak competition is gone. Or even locally sourced suppliers benefiting/manufacturing?

When all is said and done, humans are dead set like cockroaches, we bounce back every time.

 

[Smurf1976]

There are already 1600 Chinese firms litigating a 'Force Majeure' clause worth over $15B

My thinking there is company A can’t accept a delivery, company B then defaults on a debt to banking company C which had onsold that to hedge fund company D.

In other words same basic concept as the GFC just with different triggers but the same scenario of cascading defaults and nobody knows who’s solvent and who isn’t.

 

[Smurf1976]

But I'm looking at the boom when it goes through. Who's going to prosper when weak competition is gone. Or even locally sourced suppliers benefiting/manufacturing?

Globalisation was largely a 1990’s and 00’s thing in terms of trade volume and never really regained momentum after the GFC. More recently it has been visibly on the ropes - Trump, Brexit, trade wars, broader concern about the economic effects in Western countries and so on.

If there’s one outcome of all this that I’m expecting it’s a greater diversification of the supply chain. All of a sudden even those who couldn’t see the obvious risks previously will be well aware of them now.

Wherever sees strong growth in manufacturing over the coming years it won’t be China.

 

[Sdajii]

How does everybody think property will be affected? good time to buy, good time to sell?

My logic is:
Economy weakening, less spending less jobs. More jobs at risk even less spending, less profit for business and goes in a loop.

People avoiding bigger crowds (auctions, inspections) so less interested less buyers present.

Interested rates may go slightly lower but they are so low the difference is not so big, banks definitely not wanting to lend more in the fear of shaky jobs.

So basically from this point of view less people want to put their properties on the market (less stock) kind of want to wait it out

Less people willing to get into the market (less buyers)

Some will be desperate to sell because they may be forced to by
1. Income loss/partial loss due to economy slowdown
2. Income loss due to physical sickness from the virus, family members sick have to care for them

In the media property market is apparently still going strong but I can't really picture it going up.

I know 2 people one in Qld one in Vic

Qld decided to take theirs off the market after a few months of no success as they don't want constant unknowns walking through inspections possibly increasing the chance of getting the virus (paranoid I know)

Vic getting alot of low offers

I expect property prices will be hit hard during the course of this year. A big reason property prices in Australia are high is foreign investment, notably from China. This is going to smash China's economy, which can surely only hurt property prices. And of course, the world's economy will be hit pretty hard by this. You don't shut down half of China and a good chunk of the rest of Asia without causing economic harm, even if the cause is nothing. Global tourism is going to be smashed this year, which reduces the demand for accommodation (when people are on holiday they occupy twice as much accommodation as usual). People aren't going to be as keen to go out to a movie or restaurant or sport event (Olympics will probably be cancelled, they're still reluctant to say it but c'mon, it's pretty obvious), plus all the other economic hits I could list. A lot of them are specific to housing. And if a percentage of the world does get knocked off by this virus, that's whatever number less people needing housing, and housing demand is relatively inelastic relative to population, while houses aren't going to be destroyed by the virus.

I'm not sure how bad it will get, but I think it'll make 2008 look like dropping a $20 into a drain, and housing will be significantly hit.