Sitting facing the cold winter fog I wonder to myself how long does this pandemic last as the words of Rockefeller sound, “There are days when many are discouraged, but in my 93 years of my life, depressions have come and gone and prosperity has always returned and will again”
The comparison to the great depression sounds reasonable except when you talk with bankers who mostly claim governments are different now. It’s true but how different is the question, and the answer is very different. While we know governmental involvement boils down to printing money and spreading it across the board but I doubt they can go as far as printing enough without serious consequences.
I won’t go off on a tangent about Trumpism or his general de-construction of American and global politics. In a nutshell, zero diplomacy and smashing and bashing anyone and everyone. Now that’s over the stage is set for Biden and Harris and I won’t comment on their futures.
The pandemic and the outcome mirrors the signals of a great pandemic depression and it isn’t just a matter of bailing out businesses and stalling or prolonging the economy. I can’t help to think about the Great Depression and the market crash, and it took 3+ years until the consequences crashed on the heads of the world’s largest economies.
It remains disputed as to the conclusion, while many see the stock crash as a symptom, rather than a cause, of the Great Depression. I am afraid that we are in a typical cycle of symptoms, political confusion will it be enough to pull us all out of this mess by printing money.
The idea of a pandemic is not at all about those few investors reaping the benefits of the stock market. The stock market rises based on a certainty and confidence in both a recovery and the greed of investors. I am not concerned about the stock market as long as it goes up more than it goes down. Since one year we have a sufficient recovery despite many investors losing their fortunes. Impatient and afraid pulling out their capital from the market at the wrong time the markets remain buoyant.
I am asked about the stock market by friends almost daily and its not an issue of markets, its an issue of the time duration until this pandemic is under control. We learned so far, open travel increases Covid, and we see a spike in cases until government closes borders, restaurants and social events, and only then we see an immediate reduction in cases. But this isn’t making people very happy so close up and we save lives, or open up and we expose ourselves to a deadly virus.
The virus is mutating and many believed mutations meant it would be less virulent but unfortunately the opposite happened. I am not sure the mutations are more dangerous, possibly more “spreadable” though it doesn’t mean more deadly. This doesn’t matter at this stage because the single greatest challenge is how do we vaccinate the populations and as quickly as possible.
All this is rhetoric if you take into consideration the devastation of the pandemic. Some governments and banks in Europe are taking advantage of those starving businesses earning lots of fees for helping to throw a lifesaver to those businesses drowning. It repulses me to think about how the system never changes and why, because people never change 😡😡😡
Coming back to my original point: the pandemic is leading us into an economic depression,
government excessive spending by printing of money, mass unemployment and most importantly a significant decline in GDP. If the restaurants and businesses impacted cannot reopen it will have a ripple effect on the economy, and whether or not it matters long term, no doubt many countries will starve and struggle. Just look at Eurostar, it is bankrupt and once upon a time they have double digit trains daily, and now it’s over. Certainly Brexit didn’t help, and just watch Britain fall apart without much hope.
We cannot ignore the past year, during 2020 February-to-April decline in industrial production was the biggest two-month decline in the history of the index, which started in 1919. The cumulative declines in the index were similar during the first fourth months of the Depression and the 2020 recession.
During the 2020 recession, the unemployment rate rose from 3.5% in February to nearly 15% in April before declining in the subsequent months, and consumer prices also fell during the two periods, though the Great Depression had prolonged deflation. In comparison, stock prices fell around 20% from February to March 2020, however by June 2020, stock prices had rebounded to 94% of the February levels. So, we cannot compare the Great Depression as it happened but we can compare the fallout, the fact is what will happen in a year after the dust settles.
I worry about the loss of productivity and the world becoming more egocentric as we start to depend on electric cars, space travel, computer technology, drones, AI, and foods grown in labs. Will this suffice the changes we are going to endure, and while I am not predicting the future it is wise to stay ahead of the game and be protected as best you can.
My predictions: Global tensions rise, and the South Sea of China, and Russia maintain tensions with the USA, who are now under the leadership of a politician who wants to do right, and fix the wrong. The markets yo-yo until such time we have a stabilization of the spreading of Covid, and after some time even if the vaccine doesn’t work we become used to the practice of social distancing. I guess this carries on for a few more years and until we are confident enough to open and social without any restrictions. By this time happens it could be (2) more years, many restaurants and businesses will have disappeared and it will be a bloodbath unless the government starts to throw more trillions at those desperate and unemployed.
A painful cleansing of the industry, new owners, new ideas and the change we never expected to happen so quickly. Lots of disappointment, emotional and mental strife, a painful period for all of us. It becomes a part of everyday life, a twisting of times, a new scary era where the rich get richer and the poor get poorer.
I think about the good old day, and the continual change around us: Beauchamp Place once one of London’s premier shopping streets. San Lorenzo the restaurant where ‘who is who’ of London congregated. Now a days Beauchamp Place is filed with Hookah parlours and San Lorenzo a memory of the past, almost no customers any longer, it will likely never re-open.
Do we go back to normal and do we see in Europe being stable as broders close and Chinese shoppers vanish. And does the Chinese government keep their economy thriving by restricting travel? This is one part of the equation as the Chinese are spreading across the globe taking a foothold in domestic markets. The Chinese forge ahead with a relatively robust domestic economy and target exports through their various channels without suffering, *they have no depression only repression.
In the case of the Great Depression, the US economy continued to contract for more than three years, and we can expect to a certain extent recession and stagflation. The US Commerce Department estimates that inflation-adjusted (i.e., “real”) gross domestic product (GDP) fell at annual rates of 5% in the first quarter of 2020 and 32% percent in the second quarter 😱😱😱 *it was severe.
The contraction apparently was relatively brief and economic activity began to increase in May or June. Most forecasters expected output increasing in the second half of 2020, and given the pandemic resurges to the point of necessitating widespread business closures it could get worse until it gets better. I seriously worry about airlines, retail, and hospitality (hotels, restaurants, etc) given governments seem to be letting this sector suffer beyond a reasonable level.
How will retail in general survive with Amazon dominating, can we see office spaces becoming as they were before after so long. I continue to hear Brookfield properties who manages millions of square meters saying they are optimistic but from my perspective it looks like a rough ride.
The stagflation or recession-inflation could lead to to high inflation rate, the economic growth rate slows, and unemployment remains steadily high. The other factor is Gross National Product (GNP) and during the second quarter of 2020 it exceeded the largest one-quarter real GNP contraction during the Depression. The Depression era contraction continued for more than three years, and if we have a contraction we can face some serious consequences.
The bottomline is we see peaks and valleys, rebounding markets and buoyancy until such time there is a dive deeper and longer than we expect. Fueled by a reality check we cannot exclude a post depression once the dust settles and then the only saving grace is more printing and distribution of monies, handouts to those starving as we see in the USA. It is happening in the United Kingdom and in Italy it could start next and even France, Spain and Portugal.
Governments need more taxes to feed the mouths of their citizens or they’ll face anarchy and more disbelief. But governments are bullshit and they are hopeless except those who have the absolute power., i.e. China. Think of it this way; in sports if athletes use anabolics to enhance their performance and others do not, the game is not on a level playing field. China does as they wish and without any real consequences, and Trump had the idea to challenge them but his big mouth pissed them off, and Corona put a quick end to their rhetoric.
At the end of the day we carry on and the only thing that keeps investors going are the financial markets staying positive. Does this mean artificial intelligence works best or value seekers using traditional methods to build clients portfolios will struggle during these times. Four hundred computers blinking as market data is digested at a rate of one quadrillion calculations per second, firing order requests to electronic traders in Chicago.
Then you have Burton Malkiel’s “A Random Walk Down Wall Street” first published in 1973 and is now in its 12th edition. Its thesis is that “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by the experts.” https://www.nytimes.com/2019/11/13/books/review/the-man-who-solved-the-market-gregory-zuckerman.html
It is confusing and no one knows where the wind blows, digest it, live it, and stay well diversified paying careful attention to the short and near term. Buy gold, even if it’s a fool’s game, and Bitcoin too to be safe rather than sorry, and don’t be caught a boomer.
Watch the world unfold, it is either feast or famine, the pain of the pandemic once people called a flu is not. I blame Donald Trump for masquerading the pandemic’s seriousness, trying to kick start his own career at the expense of watching so many Americans struggle.
We pray even if we are not religious for a better future 🙏🏻🙏🏻🙏🏻 avoiding an Apocalypse Now given news events will crash the markets and it takes only a handful more events to create a mudslide.
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