Economic implications of a SARS/Coronavirus outbreak

[ducati916]

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.

Correct.

With (junk bonds) BBB rated at 3.4T, there is a lot of pain to go around.

Given that Hedge Funds tend to buy on margin, liquidity again becomes an issue (if and when) the shoe drops.

jog on
duc

 

[ducati916]

Pandemics do cause recessions:

Asian flu 1957/58
Cholera pandemic 1961
Hong Kong flu 1969

A 'mean reversion' means that you go through the 'mean'.

jog on
duc

 

[Sir Burr]

and Thailand is currently desperate enough to let just about anyone in (their economy is heavily reliant on tourism, and their tourism industry was severely down due to internal issues, and then Mr. Corona came

Yep, Thailand hasn’t imposed any bans on Chinese and besides the unashamedly double pricing there, it's no longer the cheap as chips destination for AUD.

 

[basilio]

I don't think "normal" financial analysis is any way appropriate to use when considering the economic consequences of this rapidly spreading virus. Why ?

1) It won't be dealt with by economic levers like interest rate cuts central bank intervention. You can't just restart economic activity if whole regions are closed down or more importantly industries can't operate because particular components are now unavailable
2) The inter connectivity between countries means financial problems in one economy will cascade into others very quickly. Smurfs post outlining the knock on effect of company A to B to C to D is will come into effect

3) The complexity of our societies could now become an Achilles heel. Banking systems are now largely electronic. I wouldn't be confident of these systems holding up if illnesses, shortages , breakdowns spread.

4) On a similar note I wouldn't be betting on the security of these systems to protect personal wealth. Put simply I don't trust the organisations and /or their owners who are managing other peoples assets to put their clients interest ahead of theirs. Can anyone remember how the banks operated in the US when the GFC was in full roar ? Yep they made out like bandits.

5) I think traditional economic activity, just making and promoting and selling things to make a profit, will need to take a back seat to survival mode until this crisis is sorted out. In fact it should be very much like a war crisis situation with substantial government intervention to protect lives as far as possible, ensure resources are directed to that end and also trying to keep the economic and social framework intact until the crisis is over.

By the way have you heard that US conservatives reckons its all a plot to undermine the Trump administration ? Yep. It all comes back to Numero One

https://www.politico.com/news/2020/02/26/trump-backers-coronavirus-conspiracy-117781

https://www.theguardian.com/busines...ose-their-bearings-in-the-coronavirus-fallout

 

[Value Collector]

There is a bigger threat.

 

[qldfrog]

I don't think "normal" financial analysis is any way appropriate to use when considering the economic consequences of this rapidly spreading virus. Why ?

1) It won't be dealt with by economic levers like interest rate cuts central bank intervention. You can't just restart economic activity if whole regions are closed down or more importantly industries can't operate because particular components are now unavailable
2) The inter connectivity between countries means financial problems in one economy will cascade into others very quickly. Smurfs post outlining the knock on effect of company A to B to C to D is will come into effect

3) The complexity of our societies could now become an Achilles heel. Banking systems are now largely electronic. I wouldn't be confident of these systems holding up if illnesses, shortages , breakdowns spread.

4) On a similar note I wouldn't be betting on the security of these systems to protect personal wealth. Put simply I don't trust the organisations and /or their owners who are managing other peoples assets to put their clients interest ahead of theirs. Can anyone remember how the banks operated in the US when the GFC was in full roar ? Yep they made out like bandits.

5) I think traditional economic activity, just making and promoting and selling things to make a profit, will need to take a back seat to survival mode until this crisis is sorted out. In fact it should be very much like a war crisis situation with substantial government intervention to protect lives as far as possible, ensure resources are directed to that end and also trying to keep the economic and social framework intact until the crisis is over.

By the way have you heard that US conservatives reckons its all a plot to undermine the Trump administration ? Yep. It all comes back to Numero One

https://www.politico.com/news/2020/02/26/trump-backers-coronavirus-conspiracy-117781

https://www.theguardian.com/busines...ose-their-bearings-in-the-coronavirus-fallout

Agree about all numbered points, less about the mandatory trump bashing.i wonder how many billions has been saved in the US by Trump war on China. Lots of companies in the us had to redefine their supply route due to the trade war and must be very happy now
So i think Trump trade war was a very good timing in retrospect.
I obviously can not expect you to acknowledge this.
Part of a growing diversification hopefully
but i do not hold much hope as within 5y of gfc, the same mistakes were done again

 

[Smurf1976]

It won't be dealt with by economic levers like interest rate cuts central bank intervention. You can't just restart economic activity if whole regions are closed down or more importantly industries can't operate because particular components are now unavailable

Agreed and for the record I’ve come across similar scenarios personally when dealing with those who see literally everything as a political or at best financial problem and who take physical stuff for granted.

The idea that something is physically not available, at any price, is anathema to many.

If what you need is a bridge, a physical one to run cars or trains across, well that’s what you need. No amount or money will get the train across the valley without first constructing a bridge. If the bridge costs $50 million well then it costs $50 million but the money alone is useless, all it does is tick one of the boxes which, if they’ve all ticked, enable you to build the bridge which is what you need.

The concept of physical problems not fixed by money alone is one that seems to be often overlooked but in the real world, well finding the money is often the easiest bit.

 

[SirRumpole]

There is a bigger threat.

Yes, very scary.

Over use of antibiotics in animal husbandry, as well as treating infections in humans is a real problem.

I can see rationing these drugs to be one of the few ways of dealing with their abuse.

 

[MrChow]

Interesting read on China GDP:

https://www.aei.org/foreign-and-defense-policy/asia/observations-on-chinese-gdp-growth-and-covid-19/

 

[frugal.rock]

...
By the way have you heard that US conservatives reckons its all a plot to undermine the Trump administration ? Yep. It all comes back to Numero uno

Didn't Trump coin the t-shirt/ bumper sticker phrase;
"Admit nothing.
Deny everything.
Make counter accusations."?

Let's go back to the outbreak.
Known,
virus outbreak tracked to a Wuhan fish market.
Unknown,
The source, and whether released on purpose or accident.
The source is being made to look like it was from the nearby lab that had the virus, perhaps someone was lapse?
Perhaps it was released by a foreign
entity. Who knows.
Does any country stand to benefit from this situation? Time will tell.

F.Rock

 

[MrChow]

I'm not into conspiracy theories (especially ones that do more damage to the protagonist) but those Hong Kong protests really went away.

 

[frugal.rock]

The fact that the release is either accidental or not ain't a conspiracy.
Neither is the fact, that if it was released on purpose, the reasons behind it and who dunnit, are of public interest.
F.Rock

 

[qldfrog]

If you follow some of my post, i think it is nearly a given that it is a lab escapee with plenty of evidence.yes it could have been release but would make no sense.crazu suicidal at worst but much more probably just an accident.it does not really matter as once the box is open.....
Europe starts to be economically affected with professional meetings cancelled..and probably soon sport meetings with first school closures in France for example

 

[basilio]

Agree about all numbered points, less about the mandatory trump bashing.i

Not what the media is saying at all. The article refers to conservative Trump supporters who are screaming that deep state Democrats are over hyping the dangers of the virus to undermine their God. Check out the story.

Just Total Poisonous Insanity..

 

[basilio]

Very interesting story of Corona Virus infection and recovery from a person in Wuhan.
Check out the sophisticated medical interventions the guy received. I wonder how well other countries will replicate this level of medical attention ?

To hell and back’: my three weeks suffering from coronavirus
Tiger Ye, 21, lives in Wuhan and started showing symptoms in mid-January. Here he tells the story of his illness and recovery
https://www.theguardian.com/world/2...ack-my-three-weeks-suffering-from-coronavirus

 

[qldfrog]

Not what the media is saying at all. The article refers to conservative Trump supporters who are screaming that deep state Democrats are over hyping the dangers of the virus to undermine their God. Check out the story.

Just Total Poisonous Insanity..

Don't worry the leftists were saying it was a big pharma ramp up... interesting article on the recovered guy, notice he was prescribed both western and Chinese medecines, and it was pretty serious while he is 21!

 

[Muschu]

https://www.6pr.com.au/podcast/dont-panic-about-the-coronavirus/

 

[Smurf1976]

The one thing I think can be said with reasonable certainty is that this is a turning point event.

Sudden unexpected disasters tend to produce permanent change and this is in that category.

11 September 2001, Chernobyl, the Concorde crash, the dropping of atomic bombs on Japan at the end of WW2 and various others are all in that category. Sudden, completely unexpected by virtually everyone, some sort of permanent change resulted.

This is not the end of the world, nor were any of those other things, but it’s too big to be simply glossed over.

Some sort of effectively permanent impacts will arise, the question being what?

 

[MrChow]

Apple back to 100% operations in China according to Tim Cook.

Significant GDP bounce back expected there Q2 vs Q1.

90% decline in new cases in China 3 weeks after peaking, with just 4 new cases coming outside of the Hubei Province yesterday.

The U.S would need 6000 deaths within 4 months just to match 1/10th of the annual flu season.

There seems to be a mismatch of human reaction to numbers in my interpretation.

I still think we'll push the -20% mark on the markets just due to narrative and fear but would be very surprised if it's not fully recovered within 12 months.

 

[fergee]

Just heard from a friend who works for a large international foot wear brand in Tokyo that they have been asked not to come to work until the 15th March. Things are stepping up a couple of gears here now.

Although I find the reported numbers of infected in Japan as strangely low and not increasing with the same speed as we are seeing in South Korea and other parts of world which to me is a little suspect.