BLACK SWAN
Though mainstream media may be lacking the will to join the economic dots around the Covid-19, we don’t feel the same constraints.
Remember, no real financial reform on the back of the last “GFC” always meant the next one was going to be exponentially worse.
But before we go on, let’s acknowledge the “holy grail” of Trump’s great America: the stock market.
Since that GFC, over the last 10 years, ‘the market” knew the worse the economic news the more stimulus would be “injected” and the stock market kept rising. No matter what!
As we pointed out over our last two notes, before the Corona virus and specifically since September 17 2019, central banks have been bailing out markets with more liquidity than at any time during the GFC.
Now we have China Inc. approaching a 1 month anniversary of “shut down”!
Naturally, stock markets are now going up on the expectation of more stimulus, it’s a kind of magic that’s worked over the last 10 years.
However, THIS IS DIFFERENT. Even if Central Banks can keep markets “stable”, the economic reality will not be masked for long.
In fact, the Covid-19 is the Black Swan brand accelerant that Central banks fear so much.
Match the Chinese governments actions/reactions so far, against the infected numbers published and you’ll soon realise this is not “the flu” and the hissing sound you’re hearing from the bank ground is the air coming out of the great debt and derivative ponzi casino balloon.
We could go on. Let’s let some pictures do the talking.
Conveniently, Visual Capitalist published this just 3 weeks ago.
Did you know seven of the world’s top ten ports are in China?
The growing list of effected industry and businesses is exhaustive.
- Travel, airlines, airports,
- Tourism, hotels, tour operators, taxis, ubers, buses and bell boys.
- Hospitality.
- Auto makers
- Wine makers
- Ship builders
- Aircraft manufacturers (Boeing share price should be through the roof next week)
- Commodity producers.
On and on and on it goes, you get the picture.
However, there was a bright spot this week. Western Australia’s Housing Industry Association reporting house price growth as “accelerating” on the back of “recovery”. Hmmm, let’s keep an eye on that one.
To add the HIA prognosis, the effervescent Chris Joye, of Coolabah Capital, penned in the AFR an expectation of a 20% rise in property prices this cycle.
We really wonder how this scenario plays out for the China dependent lucky country.
How about steel demand, property sales, air traffic and car sales in China are all almost 0 over the last month?
China isn’t shutting down the country cause a few people have the sniffles.
Good time to travel, no road congestion.
Daily property sales (in 1000 units)
Most ominously perhaps, as the Chinese economy craters and internal supply chains fray, prices for everyday staples such as food are soaring as China faces not only economic collapse, but also surging prices for critical goods, such as food as shown in the wholesale food price index chart below…
Not a great mix for a country of 1.4bil.
Wonder how this will look in couple of years, hopefully, just a speed hump dip.
On a good news front, here’s a winner! For Climate Change “activists”, the chart below, courtesy of Visual Capitalist, is of global polluters.
Finally, can you imagine the amount of money is going to be “printed” to combat the fiscal ramifications of this mess?
Hard to say, how about a “shitload”.
What effects this will all have on inflation and the price of gold we’ll just have to wait and see.
