Author Topic: Economic impact of the COVID-19 coronavirus outbreak  (Read 7330 times)

Offline Mr. Bill

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Economic impact of the COVID-19 coronavirus outbreak
« on: February 20, 2020, 11:19:24 AM »
CarbonBrief, 2/19/20: Analysis: Coronavirus has temporarily reduced China’s CO2 emissions by a quarter

This article is centered around CO2 emissions, but ignore that for a moment.  The interesting stuff is all the supporting data about what has happened to China's economy in the past few weeks.

Quote
...Electricity demand and industrial output remain far below their usual levels across a range of indicators, many of which are at their lowest two-week average in several years. These include:

    Coal use at power stations reporting daily data at a four-year low.
    Oil refinery operating rates in Shandong province at the lowest level since 2015.
    Output of key steel product lines at the lowest level for five years.
    Levels of NO2 air pollution over China down 36% on the same period last year.
    Domestic flights are down up to 70% compared to last month.

All told, the measures to contain coronavirus have resulted in reductions of 15% to 40% in output across key industrial sectors. ...

However, the Chinese government’s coming stimulus measures in response to the disruption could outweigh these shorter-term impacts on energy and emissions, as it did after the global financial crisis and the 2015 domestic economic downturn.

Every winter, during Chinese new year, the country closes down for a week, with shops and construction sites closing and most industries winding down operations. The holiday has a significant short-term impact on energy demand, industrial output and emissions. ...

This year ... the usual fall in energy use has been prolonged by 10 days so far, with no sign of rebound. This is because the annual holiday was extended to give the government more time to get the epidemic under control – and demand has remained subdued, even after the official resumption of work on 10 February. ...

The short-term effect has been equally dramatic across a range of other industrial indicators...

Strikingly, all indicators of industrial capacity utilisation – coal power plants, blast furnaces, coking, steel products, refineries – deteriorated further in the week commencing 10 February, when business was officially expected to resume. ...

There is further confirmation of the reduction in fossil-fuel use in satellite measurements of NO2, an air pollutant closely associated with fossil-fuel burning. In the week after the 2020 Chinese new year holiday, average levels were 36% lower over China than in the same period in 2019...

See the article for graphs, satellite imagery, and lots of economic analysis.
« Last Edit: February 21, 2020, 11:55:17 AM by Mr. Bill »

Offline DDJ

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #1 on: February 21, 2020, 11:07:57 AM »
The Economics will trickle out to the rest of us.  It is not as visible yet as ships that left port in China are just now getting to harbor.  As expected deliveries are missed the world will demand more and faster.  When China gets back into full production, my sources is a lot of companies should be near full operation force this next week, There customers will be demanding that materials be Air freighted so that commitments will be met.  That will drive costs up or drive down availability.  Costs around the world will go up.

That all assumes that there is not an uptick in cases when people go back to work and they send people home.

I am not expecting early 2020 to be a good time economically.

Offline David in MN

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #2 on: February 21, 2020, 12:36:14 PM »
It's very hard to get a good read on the actual economic problems. Since the Chinese usually take the New Year off one would presume some inventory is built up. We also don't know for sure what the Chinese do for inventory with respect to complete 3rd party suppliers. That said, American industry that relies on the brilliant "just in time" model to avoid inventory at any cost can be hit hard by even a slight disruption.

I've read reports from cars to food (we sell a lot of food back and forth) could be in for a supply chain problem.

There is one glimmer of hope globally... Foreign companies have been trying to move out of China for years because of the very shady government there. So there might be some mitigation on the supply side as more production in India and Central America pick up for the production loss. I know of companies that have fallback contracts for this very event.

We're going to learn some hard lessons either way. I do think this long term effects China in a very bad way as the perception will be that the government is so corrupt it either tried a cover-up or is so inept it did nothing. Both signal a lack of stability that scares away business.

Online Morning Sunshine

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #3 on: February 21, 2020, 03:12:27 PM »
We're going to learn some hard lessons either way. I do think this long term effects China in a very bad way as the perception will be that the government is so corrupt it either tried a cover-up or is so inept it did nothing. Both signal a lack of stability that scares away business.

this

Offline FreeLancer

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #4 on: February 25, 2020, 11:07:52 PM »
WaPo:  White House struggles to contain public alarm over coronavirus

Quote
Top White House economic adviser Larry Kudlow told The Washington Post late Monday that investors should consider “buying these dips” in the stock market amid the coronavirus panic. The message was to take advantage of one-day slumps and “buy low.”

After all, the Dow Jones industrial average had just fallen 1,032 points. President Trump tweeted similar guidance thousands of miles away in India.

Less than 24 hours later, the Dow Jones industrial average would fall another 879 points, bringing Trump and Kudlow’s investment advice — at least in the short term — under greater scrutiny.

The rosy sheen that Trump, Kudlow and other White House officials have tried to express about the economic impact of the coronavirus outbreak has now collided with reality: The coronavirus is spreading, quickly, to more countries. The death toll is rising, and the outbreak is wreaking havoc on global supply chains.

And the White House’s efforts to contain and control government messaging on the disease have come under attack. Trump is highly concerned about the market and has encouraged aides not to give predictions that might cause further tremors. He is expected to talk to officials Wednesday, said aides, who spoke on the condition of anonymity to discuss private conversations.

Offline FreeLancer

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #5 on: February 27, 2020, 02:11:06 PM »
Another big down day for the markets.  We’re more than 10% below all time highs.

Offline David in MN

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #6 on: March 09, 2020, 08:32:41 AM »
The 10 year bond hit an all-time low overnight. According to CNBC it hit .318% which is downright pathetic.

As bad as a few investing benchmarks are there also humanitarian disasters. Syria and Turkey are in a dust-up and Greece is shutting down refugee travel. So we have a very unknown disease combined with migration issues that literally had EU leaders calling Greece the "shield of Europe" for halting immigration. Don't think it's a little thing. They mobilized the military. If Greece and Turkey go hot it's the EU vs. NATO.

This also sits on the current economic course where China has heavily invested in Africa, arguably the least prepared for a pandemic.

I think this is what is dragging down markets. We just don't know how bad this is and how it will effect things. It sound mundane but if Africa gets it hard small things like global coffee and chocolate prices could go haywire. Leta alone that semiconductor makers in China use elements mined globally. We don't know where the disruption will hit. While I don't think this is the "big one" price instability and supply chain disruption along with migration hostility can be brutal from an economic view.

Offline iam4liberty

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #7 on: March 09, 2020, 09:53:02 AM »
This is what is great about keeping core investments diversified in Harry Browne's permanent portfolio structure.  The rise in gold and treasury bonds more than compensates for decline in stocks.  So portfolio is actually growing.  that growth can  now be used to rebalance into stocks at much better prices.  It was interesting to see bond prices rise by over 6% in a day.  Congrats to those who diversified.

Offline bigbear

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #8 on: March 09, 2020, 10:44:57 AM »
I think this is what is dragging down markets.

Nah... Today's not about COVID.  It's about Russia.

Offline bigbear

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #9 on: March 09, 2020, 10:54:41 AM »
To clarify - It's directly related to COVID, but it's one of the many layers built in the jenga puzzle.  Russia pulled the wrong block out at the wrong time.  Whether intentionally or not is TBD...

Offline iam4liberty

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #10 on: March 09, 2020, 11:06:49 AM »
This is the discussion going on today in many boardrooms.


Offline bigbear

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #11 on: March 09, 2020, 11:11:23 AM »
Sorry, one more... 

https://foreignpolicy.com/2020/03/06/russias-defiance-sets-the-stage-for-oil-price-bloodbath/

Quote
While Russia had been reluctant to make production cuts at this week’s meeting, most observers expected that OPEC and Russia would reach a deal in the end, if only because of the sheer magnitude of the economic damage being wrought by the coronavirus. Moscow put those lingering hopes to rest Friday, and with them the three-plus years of cooperation with OPEC that had restored those big oil producers to their traditional role as arbiters of the world’s most important commodity market.

“Russia decided the needed cuts were just too big and didn’t want to start down that road,” said Bob McNally, the president of Rapidan Energy Group, an energy consultancy. “They think they can live with the lesser evil of lower prices. We’re going to test that.”

https://www.cnn.com/2020/03/08/investing/oil-prices-crash-opec-russia-saudi-arabia/index.html

Per this article - Russia's move may have been to target US shale oil producers.  Which is beyond the COVID impact.  Up until this point, I didn't think the COVID concerns would be longer than a 3-6 month thing.  This changes the script significantly.

https://twitter.com/JavierBlas?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor


Offline David in MN

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #12 on: March 09, 2020, 12:34:02 PM »
VXX is up 21% on the day. Trader's dream come true.

I'd be happier if the bond market hadn't been in the doldrums for so long. Yes, I have bond exposure so that's all well and good. But I'm still looking around because there could be issues. Looking at a basket of commodities is very eye opening. Even something as little as a Midwest chicken farmer probably sells the feet to China. The number of people who remotely understand these businesses are very small. We're in a way sinking back into 1700s economics. Grain in Odessa and hunger in Paris.

I hope I'm right that the number of infected is vastly higher than reported and we kinda get control and find that healthy people rebound quickly. But there are some real economic landmines that we're going to run past while in a bad ways. Very many industries like fishing, flowers (in Holland), shipping, tech, etc. rely on massive clearing houses and handshake deals. Anything commodity priced needs the creator, the middleman, the vendor, and the retailer to get it in your hands. Losing one link would be bad.

Many moving parts. I doubt we'll really know the scope for a while. It's really hard to price in what happens when a port closes.

Also, one thing we can say for sure about corona is that it's hard hitting on the elderly. Take a good look at your CEOs, CFOs, Boards of Directors, Senate, House of Representatives, Presidential candidates, Supreme Court, etc. Markets like stability and predictability. China squandered that. But we could be hot on their tail.

Offline iam4liberty

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #13 on: March 09, 2020, 01:30:04 PM »
VXX is up 21% on the day. Trader's dream come true.

No kidding.  I couldnt resist buying into some of the airlines and US growth funds.  So much quality on sale today.

Offline David in MN

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #14 on: March 10, 2020, 01:09:28 PM »
Some numbers are scary. SXSW has been cancelled. Formula 1 and rugby are going spectatorless. Pearl Jam cancelled a tour. Also keep on mind Disney made about 65% of its business last year on parks an live shows. CPAC had a corona scare.

Major events all over are being cancelled. That has a lot of tertiary effects on businesses like airlines and car rental. Especially if we limit business travel. The entire hospitality industry will take a hit.

Too early to tell but this could  really stir up a few industries.

Online mountainmoma

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #15 on: March 10, 2020, 01:39:02 PM »
I'm more worried about what the government response is going to be.  I am afraid we will only bail out industry, yet again.  And, not productively, for example, travel and entertainment, or tax write offs for x, y and z When maybe all we should do is, if and when alot of areas are sick and/or quarantines out of work, have a moratorium on bills for that month or 2 until the virus initial surge passes.  This should not cost the taxpayers, only keep it so people and businesses do not have evictions due to rent or mortgage or have late fees on the loans.

And, of course, do spend money on the virus treatment itself, and on food if needed, we could give the states USDA food to distribute.  We could reimburse for some of the costs for medical, as this is an emergency, assuming it is going to stay on course and overwhem hospitals.  We cant have hospitals go out of business or not have needed supplies, this we should be putting money towards

But, I am afraid that we are going to go crazy on bail outs.  You would think that everyone would be happy to have hits on travel and cruises, isnt that what the global warming scare wants ?  Well, here it is.  Less carbon burnt, and some things go out of business so cant waste all that fuel in the future....

Offline iam4liberty

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #16 on: March 10, 2020, 01:43:35 PM »
Major events all over are being cancelled. That has a lot of tertiary effects on businesses like airlines and car rental. Especially if we limit business travel. The entire hospitality industry will take a hit.

Too early to tell but this could  really stir up a few industries.

On other side of coin, I am loving the returns from robotics (robots dont get wuhan coronavurus) and cybersecurity (lots of people now working from home) stocks.  Bought into Delta yesterday and it is already up 5%.  Disney parks may see big boost this summer as people will tend to vacation near home rather than travel overseas.  Now is probably a great time to invest in outdoor recreation (hiking, etc) stocks as people will be antsy to get out and see things.  And it looks like it will be quick as South Korea almost already has it licked.  So US will likewise likely fare much better than China  And if it does end quickly, the market will likely rally to records.

Online mountainmoma

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #17 on: March 10, 2020, 01:59:17 PM »
Quote
Washington State Gov. Jay Inslee said Tuesday that the entire state of Washington might need to be quarantined because of the outbreak. With so many expected to be out of work, Inslee said the state would be expanding unemployment benefits to cover anybody who misses work because of the virus.

Ok, I am feeling abit better, I wasnt thinking about how the states do unemployemnt benefits.  So that will be a help. 

However, we still would need a moratorium on certain bills for a short bit to keep small businesses from failing

Offline FreeLancer

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #18 on: March 11, 2020, 07:41:44 PM »
On other side of coin, I am loving the returns from robotics (robots dont get wuhan coronavurus) and cybersecurity (lots of people now working from home) stocks.  Bought into Delta yesterday and it is already up 5%.  Disney parks may see big boost this summer as people will tend to vacation near home rather than travel overseas.  Now is probably a great time to invest in outdoor recreation (hiking, etc) stocks as people will be antsy to get out and see things.  And it looks like it will be quick as South Korea almost already has it licked.  So US will likewise likely fare much better than China  And if it does end quickly, the market will likely rally to records.


Still as sanguine today?

Offline iam4liberty

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #19 on: March 11, 2020, 08:45:11 PM »

Still as sanguine today?

Absolutely.  Portfolio doing great and continues to rise.  And lots of good investment options for rebalancing.  Kind of hard to lose with treasury bonds up 21% YTD.

Offline David in MN

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #20 on: March 12, 2020, 06:02:03 AM »
Trump has 30 day travel ban from most of Europe. NBA suspends season after Jazz center Rudy Gobert tests positive.

These are big impacts. We shall see.

Offline iam4liberty

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #21 on: March 12, 2020, 11:58:46 AM »
This is probably a good time to encourage people to look into Harry Browne's permanent portfoilio.  There are forum threads on it.  It is a method of portfolio diversification which works well in all environments including panics.  You divide your core (non-speculative) holdings into four equal  buckets: stocks, bonds (long term treasuries), cash (short term treasuries), and gold. 

For example, here is my implementation within a tax-advantaged ira:

Stocks
VTSAX Vangaurd Total Stock Market Index Fund                20%   -18.5% YTD
VTIAX Vangaurd Total International Stock Market Fund.      5%  - 15.71%

Bonds
US Treasury CPN 3.00000% MTD 2045.                                 25%     +20.7%

Cash
VFISX. Vanguard Short Term Treasury Fund                          25%    +1.8%

Gold
SGOL. Aberdeen Standard Physical Gold ETF.                        25%    +4.0%

Total:                                                                                             100%   +2.6%

So, despite panic, the portfolio is up +2.6% from start of year (and way up vs YAG), not including bond dividends which is icing on the cake.  This is funneled into growing core holdings and speculations.  Which means right now buying high quality assets CHEAP, CHEAP, CHEAP!

Net, there is no need to fear panics like what is going on right now.  Diversification mutes the drops and enables buying low and selling high.  As things calm down, simply rebalance and watch the value jump.

Offline Mr. Bill

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #22 on: March 12, 2020, 12:31:11 PM »
This is probably a good time to encourage people to look into Harry Browne's permanent portfoilio. ...

You and I actually agree on something. 8)

Harry Browne's system has saved us from a lot of grief over the years.  The hardest part is sticking to it when it looks stupid, e.g. "Gold is NEVER going to go up, I don't want 25% of my assets in it!" or "It's impossible for Treasury bonds to go higher".  We missed out on some gains when we got timid and reduced one or another category down to 20%.  Gotta remember, the purpose of the Permanent Portfolio is to protect your savings (and maybe make some modest gains), not to beat the market and get fabulously rich in a month.  This means some of your investments WILL decline in value -- but that should be counterbalanced by the others that go up.

Nothing wrong with trying to beat the market if you want to try, but that part of your assets is the "Variable Portfolio" and must be money that you can afford to lose.

Offline iam4liberty

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #23 on: March 12, 2020, 01:20:08 PM »
You and I actually agree on something. 8)

We agree on a lot of things.  Just not on a few political points.

Oops, just noticed I flipped returns on the stock portion when transcribing: 

Stocks
VTSAX Vangaurd Total Stock Market Index Fund                20%   -18.5% -15.7 YTD
VTIAX Vangaurd Total International Stock Market Fund.      5%  - 15.71% -18.5%

Bonds
US Treasury CPN 3.00000% MTD 2045.                                 25%     +20.7%

Cash
VFISX. Vanguard Short Term Treasury Fund                          25%    +1.8%

Gold
SGOL. Aberdeen Standard Physical Gold ETF.                        25%    +4.0%

Total:                                                                                             100%   +2.6%

Offline iam4liberty

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #24 on: March 13, 2020, 07:25:28 PM »
Largest one day rise in history.

https://markets.businessinsider.com/news/stocks/stock-market-news-today-index-reaction-trump-coronavirus-speech-plan-2020-3-1028995408
Dow surges 1,985 points as Trump's coronavirus address eases concerns of economic damage

Offline iam4liberty

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #25 on: March 14, 2020, 11:45:32 PM »

Offline Mr. Bill

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #26 on: March 15, 2020, 10:12:18 PM »
Gold/silver coin inventory is apparently drying up.  Texas Precious Metals has effectively stopped selling any coins (well, you can buy what little they have in stock, but only to be stored in their repository until "normal operations resume").

https://www.texmetals.com/news/

Offline surfivor

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #27 on: March 16, 2020, 03:39:10 AM »

Norm Patis who is a lawyer and part of federalist society says his associate and other have been in meetings with trump to not declare martial law but that’s essentials what trump wants to do. He is saying trump wants to ban all interstate travel and similar. The implications of that and how to enforce it would essentially be martial law is what is being said

Offline Chemsoldier

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #28 on: March 16, 2020, 06:27:20 AM »
I dont understand the point of the fed cutting interest rates to zero now.  As long as the population is worried about their safety, more long term concerns are going to take a back seat.  It seems to me to be all the bad parts of stimulus with none of the benefits.  Wait for panic buying to stop, people allowed to go commerce freely, THEN stimulate if you are bound and determined to stimulate.

Offline iam4liberty

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Re: Economic impact of the COVID-19 coronavirus outbreak
« Reply #29 on: March 16, 2020, 08:57:55 AM »
I dont understand the point of the fed cutting interest rates to zero now.

They were trying to bail out out some big players with huge margin positions.  But it backfired as it sent a negative message at a critical time.  So now we see stock market zig down again.  It is a giant seesaw right now. 

This sharp up and down definitely makes it difficult to figure out when to rebalance a portfolio.