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Author: Tan KW   |   Latest post: Thu, 9 Jul 2020, 11:29 AM


Why I Think Markets Are Too Optimistic - SalvadorDali

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Saturday, April 04, 2020

Bastardisation Of Currencies

When governments keep throwing money at the problem, some succeed while others are restricted by their fiscal constraints and prudent financial management. There's only so much budget deficit you can stomach. Not the US and Eurozone, they can literally print their way out of the problems at hand, with no need for any asset backing, particularly from the USA. The rest of the world, we can't do that. Our printing capacity has to correlate with our foreign reserves, government debt to domestic and international bodies, our GDP, etc...

What that does is that at every major financial crisis, involving the big guns, its the smaller guys that get whacked. The big guys has printed more monopoly money, get the money circulated, pay down debt, give people money to spend, and spend trip way out of the issues. The smaller nations just have to tighten our belts and compete ever harder to maintain status quo. Its colonialism in the financial age.

Just when you think colonialism is over, in financial markets, the masters still get 10x, 20x, 30x more than the slaves earnings per day. Even when the master make mistakes, its still the saves that kena.

The Horny Black Swans That Keep On Reproducing

That rant aside, have a look at the video. You will begin to appreciate why swiftness, preparedness and commitment to curtail were so important. Just look at China, South Korea, Singapore and HK. Compare that to the top 4 European countries, plus UK, Iran and USA.

Looking at the trajectory alone, the latter countries have not even peak yet, although Italy has shown positive signs of peaking. USA at near 277,000 confirmed cases, and the equity markets there seemed to have rallied. All markets are forward discounting machines. I want to know how many cases has the US markets discounted thus far, taking into account the substantive trillions of dollars worth of stimulus: 300,000 ... 500,000 .... one million or 2 million? Mind you, China and South Korea seem to have peaked at 80,000 and 11,000 respectively.

How can you discount something that has not peaked? You cannot take the statistical distribution for China or South Korea and extrapolate because: the level of preparedness were different; the "more authoritative governments" have better deployment and effectiveness in curtailment strategies; the level of resources and testing are different ... hence it is likely the trajectory will be pushed out higher and further than the former group.

Look at the above statement from US White House (reported in CNBC)... 93,000 deaths, at 1% mortality rate = 9.3 million cases. OK let's take a 5% mortality rate (which is very worrying for the public) = 1.86 million cases. Look at those figures for a while and compare China's 80,000 and South Korea's 11,000. Even if you double both those figures: 160,000 and 22,000 ... compare that to 1.86 million.

OK, let's not even look at those figures, let's halve that further from 1.86 million to 930,000 cases to deal with say over 2-4 month period. There is no way the US system can take it. There are only 924,107 hospital beds. Other illnesses may require at least 50%-70% of those beds.

So, you still think the US equity markets have discounted the fallout from the virus? If its 1 million cases over 4 weeks .. I think US cities will descend into a state of anarchy ... making handguns very handy indeed.

The Latecomers

Has anyone looked at Japan? Its about to boil over.  Last Thursday the prime minister's plan was no lockdown and everyone gets 2 cloth masks. Look at the table above. On 2nd April  Tokyo had 97 new cases, still hunky dory. That's just Tokyo, in Japan the total has surged past 340 cases.  Ueno Park was only closed on 24th March to the public.

Well, everyday in March 2020 till they closed the park, the scene was like this everyday:

Now imagine the scene below being played out 20 hours a day in every major city in Japan with no lockdown:

... at schools, Disneyland, malls, cinemas, etc...

Japan is a time bomb.

There are other latecomers as well, places where "proper testing" had been insufficient, masking the real numbers. Consider Indonesia and Pakistan to start with.

The Bigger Time Bomb For Us

Unfortunately, Ramadan is just around the corner. Will Malaysia allow the 1 million legal and 1 million illegal Indonesians and other foreign workers to go back for Ramadan. Do we have the resources to check, test/quarantine them when they come back. What about illegal channels of entry? Will we have another wave after Ramadan?





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chinaman great article, last statement is spot on, carry highest weight-quote:-
Unfortunately, Ramadan is just around the corner. Will Malaysia allow the 1 million legal and 1 million illegal Indonesians and other foreign workers to go back for Ramadan. Do we have the resources to check, test/quarantine them when they come back. What about illegal channels of entry? Will we have another wave after Ramadan?
05/04/2020 10:49 AM
probability say, the fight against covid-19 is a complete failure globally....where people are eventually forced to work ..so that they can have food at their table..inevitably accepting that there will be thousands dying...

what should the market pricing be then?

say 3% of the entire world population dies in a year...the 5% growth of real GDP globally will become 2% then...

and this is just for 1 year

should that make the DJIA drop to 18000?

no doubt the world is currently facing extraordinary circumstances...and as always there will be extraordinary solutions when things escalate

If i think i will survive the next 1 year...the market will too

If im not gonna make it...it does not matter what happens to the market anyway.
05/04/2020 3:47 PM
RainT read
05/04/2020 3:51 PM
probability Michael Levitt, a Nobel laureate and Stanford biophysicist, began analyzing the number of COVID-19 cases worldwide in January and correctly calculated that China would get through the worst of its coronavirus outbreak long before many health experts had predicted.

Now he foresees a similar outcome in the United States and the rest of the world.

05/04/2020 3:53 PM
GreenTrade Therefore,
Bitcoin :)
06/04/2020 10:25 AM
probability Even if current quarantine measures to contain/'break the chain' of covid 19 spread fails....and countries are forced to allow to work again...and cases rise again...

the second lock-down after a period of relaxation of the rules will be much more effective to eliminate the virus...since everyone will be much more knowledgeable and disciplined...

the public habits can only improve....this will enable elimination of the virus eventually..
06/04/2020 1:04 PM
Bobii I like to see everyone optimistic and get trapped high
07/04/2020 8:03 AM
Bobii simply just enjoy the drama
07/04/2020 8:03 AM
Bobii so entertaining
07/04/2020 8:04 AM
maxweng Very well articulated.
07/04/2020 10:16 PM
firehawk 93K deaths? now is 11K, another 82K to go ....

1.86m cases? now 350K, 1.6m to go ....

duck will pour another 2 trillion to rescue market ... amid asking compensation from China!
07/04/2020 10:29 PM

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