Viking

As the curve flattens (as expected) talk will shift to what is next. Put your seatbelt on as the ride could be bumpy. 1.) Businesses that rely on person-to-person contact will continue to suffer - airlines, hotels, sit down restaurants, cruise/travel etc 2.) How many small and medium sized businesses do not re-open? 3.) What happens to consumer spending? - people will be concerned about employment situation - will be needing to pay back debt taken on to weather lock down (back rent, credit card debt etc) 4.) what happens to manufacturing? - to end 2019, it looked like globe and US was already in a mild manufacturing recession 5.) What happens to US and global GDP? 6.) What happens to US unemployment? - does it remain elevated and at what level? Trump wants quick economic comeback from coronavirus, but China’s incomplete recovery hints at long-lasting problems - https://www.washingtonpost.com/business/2020/04/07/trump-china-economy-coronavirus/#comments-wrapper ...As the Chinese emerged from quarantine, factories reopened more quickly than restaurants and retail outlets. Any business that relies on person-to person contact is suffering, as consumers remain nervous about catching the sometimes fatal respiratory illness. “People are back at work. But they’re not shopping. They’re not going to restaurants. They’re avoiding public places,” Williams said. ... Yet roughly nine weeks after the authorities began urging people to return to work, many Chinese factories are just treading water. They are open for business, but lack orders. Major exporters are especially troubled since their U.S. and European customers have been idled by the pandemic. Lingering Chinese weakness is evident in a Capital Economics index that blends measures of power station activity, property sales, subway ridership and long distance travel. In mid-February, as the government began pushing people to resume work, the index stood at 22 percent of the year-ago level. By mid-March, it reached 52 percent, but today it is only 59 percent.

Not a nice move by the US. But also, Canada should have been stockpiling in Jan/Feb. Yea, its an interesting narrative and application of responsibility from some here. The US/Trump should have foreseen everything months ago and had massive stockpiles of everything one would be able to think of after the fact. Everyone else who is unprepared is the victim of Trump being an asshole. US standing in the world continues to fall to new lows. Disgusting behaviour. It is in times of crisis that you learn about the true character of people and nations. Premier of Newfoundland and Labrador takes aim at Trump over medical supplies - https://www.theglobeandmail.com/politics/article-premier-of-newfoundland-and-labrador-takes-aim-at-trump-over-medical/ Dwight Ball told a news conference today that the province gained international acclaim for the way its residents helped thousands of stranded airline passengers after the 9/11 terrorist attacks on the United States in 2001. Ball says that when the United States was in crisis, Newfoundlanders and Labradorians “acted fast and did what was necessary.”

Agreed. And no feeding the trolls. (Turn the other cheek :-)

I'm actually pretty optimistic, not based on a return to complete normal, but rather a return to normalcy. I think the frequently posted Hammer and Dance article describes nicely what can happen. If you take the Hammer and Dance article as the medium-term objective, you just need to look for ways to reduce the impact on lives. Based on results in Asian countries, everyone wearing masks dramatically reduces the R0. That makes the dance phase much easier. What's more, as each week goes by, we add to our knowledge of how to treat this disease. If we can reduce the transmissibility through masks and reduce the severity and length of time in hospital through new treatments, then we're basically back to the flu. So, I think there's a decent chance we're in a normal--with the addition of people wearing masks--by July. What about group activities (sports and work). I was surprised to read Trumps meeting with sports executives were discussing Aug or Sept as the targeted start up. That means 4.5 months (or more) of lock down for these groups. The length of time the virus will be crimping economic activity keeps getting extended out. This tells me the economic impact is still being underestimated and perhaps significantly so. Analyzing the Legal Hurdles of Bringing Back Sports President Donald Trump told sports executives that he wants leagues to resume with spectators by August or September. However, most of the logistics to return to play are out of his control. https://www.si.com/nba/2020/04/04/legal-hurdles-sports-returning-coronavirus-trump

To be fair, it’s not just the US, 68 countries have banned exports of PPE.. https://globalnews.ca/news/6769162/canada-medical-supplies-coronavirus/ Germany blocks truck full of protective masks headed for Switzerland https://www.thelocal.com/20200309/germany-blocks-protective-masks-headed-for-switzerland More important question is not whether US will provide masks but why a so-called advanced nation like Canada cannot even produce enough masks for its own people.. What I was getting at is it's not that Canada can't produce. It's that Canada doesn't produce. It mostly buys from 3M. An N95 respirator while looking simple is actually a fairly sophisticated product. So it takes time to setup an operation and a supply chain to mass produce them. You can't just flip a switch. But Canada can produce them, and so can Germany, and France, and the UK, and Switzerland, and Austria, and Sweden, and etc. They all have the technology and engineering capacity to do it. So now once the decide to do it local (for a bit more money), cause you've decided to fuck with their supply, do you think that they'll task a foreign controlled company like 3M to do it for them? Or do you think they'll have one of their local companies do it? It'll probably cost a little bit more money since the local companies are not as good at it as 3M is, but now they've already committed to spending more on masks. Expand this thinking to other medical products. A lot of them come from American companies. They're not low margin products either. So lots of shareholder value destroyed there. And the logical next step is for Canada and Europe and Asia to do something about Google, Amazon, Microsoft and Facebook (and every other US company with a monopoly type position in a vertical). If the US can no longer be trusted as a trading partner then it makes sense to me each Country/region needs local champions in all these verticals. Shades of Huawei. Perhaps similar to what China did (restricting these companies so local champions could grow). If the US is going to act like China then other countries had better get at making the transition. And this would be the ideal time to do it (when the economy is already a shit storm). The bottom line is everyone loses. Should be obvious but politics, just like in the 1930’s, will make a terrible situation much worse.

Looks like we may be the early inning of governments executing more protectionist trade policies. The parallels with the 1920’s and 1930’s are growing in number and magnitude. “History doesn’t repeat itself but it often rhymes,” as Mark Twain is often reputed to have said. https://en.wikipedia.org/wiki/Smoot–Hawley_Tariff_Act The Tariff Act of 1930 (codified at 19 U.S.C. ch. 4), commonly known as the Smoot–Hawley Tariff or Hawley–Smoot Tariff,[1] was a law that implemented protectionist trade policies in the United States. Sponsored by Senator Reed Smoot and Representative Willis C. Hawley, it was signed by President Herbert Hoover on June 17, 1930. The act raised US tariffs on over 20,000 imported goods.[2] The tariffs under the act, excluding duty-free imports (see Tariff levels below), were the second highest in United States history, exceeded by only the Tariff of 1828.[3] The Act and tariffs imposed by America's trading partners in retaliation were major factors of the reduction of American exports and imports by 67% during the Depression.[4] Economists and economic historians have a consensus view that the passage of the Smoot–Hawley Tariff exacerbated the Great Depression.[5]

The virus will be with us until a vaccine is available. 12-18 months? If you are older or have underlying conditions it is rational to avoid work (all situations where you will be exposed). Nothing to do with work ethic. Or wanting to watch Netflix. Lots of shades of grey.

Of course it's not - it's the typical armchair quarterback crap. Trump was the first world leader to close the borders, The WHO criticized him, the opposition party criticized him - since they love the Chinese Communist Party. Turns out, the President was correct - and just about EVERY major country followed suit. Any of them ROLL BACK their travel bans? NO These geniuses have all the answers. Agreed. With hindsight, that decision by Trump was a good one. I wish Canada had done the same thing at that time. I also think that his recent decision to extend ‘social distancing’ for 30 days was also a good move. I also like how he is being aggressive in removing government barriers to moving quickly with medical innovations (testing, medical equipment, vaccine etc).

This is one of the (kind of) reasons i am doing what i can to not get the virus. And my wife/kids. There is simply so much we do not understand about what the virus does to the body longer term (lungs scarring, brain etc). Maybe nothing. Maybe something. So why not be cautious until more is known :-)

Look, if you do one thing right (early China travel ban -- which was probably a fluke done because with the trade war he was looking for any reason to pressure China) but then turn around and call it a hoax and no big deal and it'll go away on its own and airtight controlled and give rallies in arenas and and give no clear direction to states and don't mobilize federal agencies for weeks and have incompetents in those agencies (the war on experts for the past 3 years in favor of loyalists/cronies), pre-announce possible quarantines making sure people flee those areas and spread the virus, contradict experts on TV within the very same press conference, etc, you don't get to pretend that you did the right thing early. You still did WAY more damage than good. The first thing to have done would be to have had smart people able to understand the warnings and react rationally to them in the first place, rather than convince millions of people it wasn't a big deal, which by the time that was turned around, you had daily exponential compounding for weeks. If a politician does something well = praise. If a politician does something wrong = criticism If they do one thing right = 1 praise If they do 10 things wrong = 10 criticisms Assuming each of the ‘things’ are of roughly equal importance.

Nice to see politicians are slowly learning to trust science and the facts. It takes some longer than others. Georgia Gov. Brian Kemp, who resisted strict coronavirus measures, says he just learned it transmits asymptomatically - https://www.washingtonpost.com/politics/2020/04/02/georgia-gov-brian-kemp-who-resisted-strict-coronavirus-measures-says-he-just-learned-it-transmitted-asymptomatically/ After resisting a statewide stay-at-home order for days, Georgia Gov. Brian Kemp ® succumbed to the pressure and issued one on Wednesday. Part of the reason, he said, was that he had just learned some new information. Kemp said he was “finding out that this virus is now transmitting before people see signs.” “Those individuals could have been infecting people before they ever felt bad, but we didn’t know that until the last 24 hours,” he said. He added that the state’s top doctor told him that “this is a game-changer.”

In Quebec they have had to go one more step and hire security guards to monitor the fire doors. Visitors have been banned from seniors homes for a few weeks now. However, family members were just showing up at the old folks homes and when they were not allowed in through the main door to visit their family member, some of the residents just sneaked their visitors in by opening the fire doors. What can you do when a portion of the most vulnerable population doesn't agree with the pandemic control measures? I went to the grocery store on Tuesday, and it was packed with geezers. People who are in the 80+ age range should know better than to leave their home to go shopping or to visit family, but some seem to have different risk preferences than the epidemiologists! SJ survival of the fittest operates on the mental fitness domain as well... Great example of lack of education. Reinforces the importance of leadership and the message they communicate. And the importance of trust in government and media. When these conditions are present (South Korea, Singapore, Taiwan) a crisis can be successfully managed. If not, a crisis can morph into a catastrophe.

Are you suggesting hospitals (who are running out) give their masks to multigenerational families? This is common sense?

AERCAP Parks Hotels and Resorts Basket of Cruises StoneCo American Eagle Urban Outfitters Shopify Tesla Facebook Heico Transdigm These are the stocks in general I found has an overhang of bankruptcy but can't see them being BK unless in a real draconian situation - and if that's the case we won't need money. American Eagle/Urban outfitters/Aercap go bankrupt => US dollar loses reserve status/we are back to cavemen is why I think assets can fall a lot farther. Schwab, i think the US will do better than Europe in the coming months/years. What do you see replacing the US$ as reserve currency?

Financially and health wise in a very good situation. Financially, up to 20% stocks and 80% cash. I have been in and out a couple of times; lucky. It has helped me understand the companies i want to own long term. Gregmal, i am determined to NOT sit in cash through the cycle and appreciate your Jiminy Cricket voice in the back of my head :-) Health wise my family of 5 are doing great. My oldest has just returned from university and we are slowly emptying her apartment. My 3 teenage kids are all taking turns cooking and they are actually better than me at a bunch of items (my son recently oven cooked prime rib steaks and then pan fried them in butter and garlic); it is amazing the chefs they follow on the internet. (My Italian wife's line is if you can read you can cook :-). We have lots of young family members we are thinking will need some financial help... we are going to wait a few more weeks and then likely send out a few one time discrete (they tell no one) cash gifts (we have learned over the years to never give anyone a loan... cash gift or nothing). My neighbours across the street are retired with conditions so i have offered to be their grunt as required. My kids also had a Lego business that we are winding down; we have started giving family and neighbour kids gifts of large Lego sets; families are very appreciative. We also are trying to support our favourite local sushi restaurant (gave them a $100 tip last night; they thought it was a mistake and were touched when i told them is was not a mistake :-)

When i worked at Kraft Foods (as a sales person) we closed a distribution center and lots of people lost their job. We were told not to talk to the media. While i would like to hear what health care workers have to say i also understand why the companies want to control what is said to the public and media.

Dynamic, great post. Over the past 10 years i have held BRK in my portfolio more as a bond substitute than an S&P 500 substitute. Sleep well at night holding. $440 billion market cap. 1.) $120 billion in cash. Once in 10 year opportunity to deploy at very attractive rate of return. 2.) Bonds are very short duration; perhaps opportunity to redeploy some during current bond market dislocation at higher yield (i.e. munis) 3.) insurance pricing is in hard market 4.) utility portfolio should chug along Stock portfolio is getting whacked big time; this will be ok for long term shareholders as it is providing Buffett lots of great opportunities to deploy $100 billion

Agreed. Are all those Asian countries (where everyone wears a mask) who have more experience dealing with virus really that stupid? I am getting more concerned about Canada’s response. I am not seeing any urgency around solving testing issues (number and time to process). Looks to me like a very sloth like response. Limited ability to look ahead, innovate (think outside the box) and drive to the optimal solution. The downside of public health care. The old Peter Lynch line (i think) ‘nobody got fired for buying IBM’ regardless of whether it was a good investment at the time. No incentive to be a risk taker.

Gundlach has his next update tomorrow for those who are interested. - https://doubleline.com/latest-webcasts/ You are registered for: DoubleLine's "The Tale of Two Sinks" Webcast Hosted by Jeffrey Gundlach Tuesday, March 31, 2020 1:15 pm PT / 4:15 pm ET

If you think house prices are high where you live in the US try prices in Vancouver or Toronto north of the border. Canada missed the housing crash the US had in 2008. And for the past 10 years prices have gone much, much higher. Housing construction and related industries is a very big part of our economy (larger as a % of GDP, i think, than the US when it had its bubble in 2008). The near term outlook for Van/Toronto real estate is pretty grim: 1.) asian buyers will likely disappear for a while 2.) properties purchased/rented out as air bnb rentals will quickly become uneconomical. Owners will need to have lots of liquidity to ride out the storm or will be forced to put units back on the market (‘hotel’ business is broken for a while) 3.) coming recession will shrink first time buyer demand Having said all that the market has absorbed every punch thrown at it the last 20 years. Free money (rock bottom interest rates) will help. But will that be enough this time? The real risk for housing might be the economy. If the virus-lead mild recession causes the housing bubble to pop then Canada could experience a severe recession in cities like Vancouver and Toronto.

This is good to hear. Keep us posted on developments! So hard to know what is really going on in China. Yes, thanks for the up to date information. Encouraging.

I agree with pretty much everything you wrote. I think it is crucial to keep the timeline to reopen the economy as short as possible and in order for that to happen, new infection rates will need to come down. I think the key moving forward will be how quickly each state is able to pivot to the next stage of the battle: aggressive testing in volume and contact tracing (like South Korea, Singapore and Taiwan). Is this model 4 weeks away from being implemented or 8 weeks away? Big difference for how big the economic contraction is and what the recovery looks like on the other side (V or U). In my province (BC) it does not look like it is on anyones radar (the South Korea model) so my guess is we are in lock down for at least another 6-8 weeks. Disagree with Bernanke unless the natural disaster was something that left a lingering fallout a la nuclear accident, and what natural disaster shuts down the entire United States and Europe and others all at the same time? Here is how I've been thinking things play out: April - Rest of US cities go through the early part of the curve. NYC reaches peak and daily counts start moving downwards. Florida is a shitshow as are rural areas unlucky enough to get an outbreak. Can't re-open yet. May - Growth of daily confirmed cases levels off in the second batch of cities. Cities are still doing >100 cases for most of May. Economically getting very painful. Can't re-open yet though. June - Still in a "soft lockdown" with cases trending downward. Pressure to re-open things, and we'll probably try to do it. July - Same as June with less and less cases. During June & July stores that didn't close permanently open back up to reduced thresholds of people. Aug - New Normal 75% cash right now fwiw. I can't see the economy doing well during the next 5-6 months and there's the chance we get a double-dip outbreak in fall with a more depleted economy and healthcare system. SP 2000-2200 in the next couple weeks I'll add to some things. I am more optimistic on the timeline. Trump just announced social distancing to extend for the month of April. That is very good news. Now all the governors need to get their lock downs in place. This gives all jurisdictions 4 weeks (April) to also get their testing and contact tracing apparatus in place. I see a scenario where the US could start to reopen in a limited sometime in May (if all goes well). I am starting to wonder if the 35% decline we saw last week was not the bottom :-)

From the Washington Post (from March 24; sorry if someone already provided link) Trump is missing the big picture on the economy - https://www.washingtonpost.com/opinions/2020/03/24/trump-is-missing-big-picture-economy/ ...The same logic applies to social-distancing policies. Prematurely abandoning or relaxing social distancing will be disastrous on both economic and health grounds. If restrictions are lifted prematurely, the result will be a follow-on pandemic surge. More people will die. What will the policy choice be then? If it is a return to restriction, starting from a much less favorable point and much more disease spread, then the cumulative economic loss will be greatly magnified. The costs we have already borne will have been totally in vain. ...The president and the business leaders who urge him to abandon a public health orientation to pandemic policy are nonetheless correct to want to move through the current difficult period rapidly as possible. The right focus is not on false hopes. It is on realistic strategies that permit a targeted approach to reducing transmission. That means more testing, more contact tracing, and more and better facilities for those who need to be separated from others or treated. ...There will come a time when we can gradually let up on current restrictions and help the economy in the process. It will be the moment when new case counts are no longer accelerating; when we have adequate measures in place to quickly catch and contain new outbreaks; and when we are confident that we are not endangering hard-won progress by impetuous actions.

I agree with pretty much everything you wrote. I think it is crucial to keep the timeline to reopen the economy as short as possible and in order for that to happen, new infection rates will need to come down. I think the key moving forward will be how quickly each state is able to pivot to the next stage of the battle: aggressive testing in volume and contact tracing (like South Korea, Singapore and Taiwan). Is this model 4 weeks away from being implemented or 8 weeks away? Big difference for how big the economic contraction is and what the recovery looks like on the other side (V or U). In my province (BC) it does not look like it is on anyones radar (the South Korea model) so my guess is we are in lock down for at least another 6-8 weeks.

Spanish flu also intersected with the end of World War I.