/ Global recession commences

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SenzuBean 12 Mar 2020

So, there's a global recession starting (I hope that much is obvious). I can't see it being over until a Covid-19 vaccine has been widely deployed. What I'd like to know, is what should individuals do during a recession? What products and services do well? How does the outdoors industry do during a recession? I suppose it's a good time to head back to studying if limited education is still possible.

3
pasbury 12 Mar 2020
In reply to SenzuBean:

A global recession is necessary. For a long time. I think it is quite OK for humans to survive a downturn in a single measure. If we don’t have a recession millions will die.

3
RomTheBear 12 Mar 2020
In reply to SenzuBean:

> So, there's a global recession starting (I hope that much is obvious). I can't see it being over until a Covid-19 vaccine has been widely deployed. What I'd like to know, is what should individuals do during a recession? What products and services do well? How does the outdoors industry do during a recession? I suppose it's a good time to head back to studying if limited education is still possible.

In the lead up to the recession boost your savings and pay down any debt. Cut any unnecessary costs.

SenzuBean 13 Mar 2020
In reply to RomTheBear:

> In the lead up to the recession boost your savings and pay down any debt. Cut any unnecessary costs.

According to this random article: https://www.economicshelp.org/blog/2314/inflation/inflation-and-the-recession/
Recessions can (and lately have been) periods with high inflation. So I don't think the idea of holding savings and paying down debt is a definitely good idea. I agree with cut unnecessary costs.

I think we will see inflation rise as governments try to print money to mitigate the situation. The global economy is so intertwined that only one superpower doing it would likely cause effects in all the others.

1
Timmd 13 Mar 2020
In reply to SenzuBean:

One wouldn't want to have less put aside in savings during a recession, though?

Post edited at 00:07
SenzuBean 13 Mar 2020
In reply to Timmd:

> One wouldn't want to have less put aside in savings during a recession, though?

Well in the case of hyper-inflation - you want no savings, because money becomes worth less (and even worthless). This is why the prices of things such as gold and silver are spiking, because they don't lose their value from inflation.
So if high inflation were to be on the menu, you want to spend on things that will hold value, as well as perform work before material costs increase*

* - During a recession, investment into new buildings plummets. Steel consumption plummets. Steel manufacture is cut. Fixed costs to manufacture steel form a higher portion of the price (i.e. we have less economies of scale, so price is higher). Thus the cost of materials increases through this manner. I don't know how this compares to currency changes due to inflation though.

RomTheBear 13 Mar 2020
In reply to SenzuBean:

> Recessions can (and lately have been) periods with high inflation. So I don't think the idea of holding savings and paying down debt is a definitely good idea. I agree with cut unnecessary costs.

Yes you could have inflation, all the more reason to have more cash in your pocket as it will buy you less.

What you need in a recession is to be agile and be able to survive without income, a job etc etc.

Cash allows you to do that. Ideally get a basket of currencies and metals.

Debt does the exact opposite.

> I think we will see inflation rise as governments try to print money to mitigate the situation.

Who the f*ck knows. Could go any direction. Could be deflation instead, the economy is crazy and nobody understands it.

I wouldn’t bet.

Post edited at 01:20
wbo2 13 Mar 2020
In reply to SenzuBean:Not sure you've looked at any market data as gold is spiking down....

What you do in a global recession depends on your personal circumstances, but generally getting rid of debt is a good idea

Flinticus 13 Mar 2020
In reply to SenzuBean:

What did ypu do after the  Great Financial Crash?

SenzuBean 13 Mar 2020
In reply to Flinticus:

> What did ypu do after the  Great Financial Crash?

I was studying, which as far as I know is often given as a great way to spend your time during a recession. We're eyeing up the possibility of doing this

1
SenzuBean 13 Mar 2020
In reply to wbo2:

> Not sure you've looked at any market data as gold is spiking down....

I've read this is a temporary effect mostly due to the stock crash. Once the stockdust settles a bit, I think we'll see the return to gold buying. [I'm not suggesting to buy gold, but that I think it's unlikely to act differently to almost every other recession so far]

> What you do in a global recession depends on your personal circumstances, but generally getting rid of debt is a good idea

Luckily I have no debt. I don't however have guaranteed income.

1
Lord_ash2000 13 Mar 2020
In reply to SenzuBean:

Inflation for me is good, I invest heavily in property so just as it makes savings worth less it makes debt worth less too. Although increased interest rates would eventually have a impact but I'm on fixed rates for the next few years so should be able to ride that out realistically unharmed. 

The question I've been asking myself is when to buy more, me and my wife have been looking at some apartments in our home town to buy but if there is going to be a possible property price crash do we hold off for a month or two and get a good discount?

In the meantime it's not escaped my attention that the stock market has just gone through the floor so maybe there are some bargains to pick up there as well, after all once the virus is over nothing has really changed so you'd expect things to pick up again quickly.

There will definitely be people ready to make some good money out of all this, I just hope I can get a little slice of the pie too.

On the downside the future of the company where my wife works is going to be in the balance as they are a collection of outdoor education centres and are already seeing schools and universities cancel bookings, if they close all schools for any length of time it'll send them under.

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dread-i 13 Mar 2020
In reply to SenzuBean:

>Well in the case of hyper-inflation -

There is a difference between inflation and hyper inflation. Wheel barrows full of cash to buy a loaf of bread, are probably not going to happen. A loaf of bread going up an extra 50p - £1, possibly.

If there is a recession, then you need to think about things like employment, will you have a job? If not, then how will you pay the rent or mortgage? More importantly, if food goes up in price, can you afford to eat or eat the same things as before? What about family and friends, how are they going to cope? Will they have to move into your spare room / garage / garden shed?

Gold and silver are useful, but only physical metals. Even then, Asda wont accept your grans wedding ring, to pay for food. It might be useful, though, if you need to flee the country on the last cross channel ferry. But by then, gangs of marauding chavs will have probably robbed you of it before you manage to walk* to Dover. 

Or, it could be like the last one, where some people had it bad and others didn't.

*You wont be able afford fuel or rail faire and you'll have sold your bike, in order to buy potato's.

1
SenzuBean 13 Mar 2020
In reply to Lord_ash2000:

> Inflation for me is good, I invest heavily in property so just as it makes savings worth less it makes debt worth less too. Although increased interest rates would eventually have a impact but I'm on fixed rates for the next few years so should be able to ride that out realistically unharmed.

> The question I've been asking myself is when to buy more, me and my wife have been looking at some apartments in our home town to buy but if there is going to be a possible property price crash do we hold off for a month or two and get a good discount?

I think if anything close to worst case happens, there will be a very large property crash in 12 months (once the spike passes, and once people realize that there's very little demand). Shorter term, I'm not sure there'll be much of a drop as I think the tendency will be for people to wait it out.

> In the meantime it's not escaped my attention that the stock market has just gone through the floor so maybe there are some bargains to pick up there as well, after all once the virus is over nothing has really changed so you'd expect things to pick up again quickly.

I suspect you're correct. Maybe tech companies that work with remote working technology... ;)

> On the downside the future of the company where my wife works is going to be in the balance as they are a collection of outdoor education centres and are already seeing schools and universities cancel bookings, if they close all schools for any length of time it'll send them under.

Yes this type of event could cause mayhem for our area as well. I'm wondering (other than perhaps going to get more education) what ways there are to hedge against this sort of effect. E.g. tourism will take quite a hit here, so unless you can survive in a niche, you will lose a lot of business. We don't have any businesses running yet, but this would affect starting one.

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SenzuBean 13 Mar 2020
In reply to dread-i:

> >Well in the case of hyper-inflation -

> There is a difference between inflation and hyper inflation. Wheel barrows full of cash to buy a loaf of bread, are probably not going to happen. A loaf of bread going up an extra 50p - £1, possibly.

I agree, the historical cases of hyper-inflation were due to very poor control of the economy and we probably won't see them again. However very high inflation - that may make an appearance, and my feeling is that it will (although I'm not an expert so wanting to hear more).

> If there is a recession, then you need to think about things like employment, will you have a job? If not, then how will you pay the rent or mortgage? More importantly, if food goes up in price, can you afford to eat or eat the same things as before? What about family and friends, how are they going to cope? Will they have to move into your spare room / garage / garden shed?

These are the things we are thinking about mostly. We are planning to use most of our savings to reduce as much of these expenditures as possible (I'm thinking that is a better bet than hoping there won't be inflation due to irresponsible money creation).

> Gold and silver are useful, but only physical metals. Even then, Asda wont accept your grans wedding ring, to pay for food. It might be useful, though, if you need to flee the country on the last cross channel ferry. But by then, gangs of marauding chavs will have probably robbed you of it before you manage to walk* to Dover.

I'm not suggesting anyone buy gold and silver, but I do think they will probably be hoarded as soon as it looks obvious there's a recession (and then you will have feedback, as people will buy because it's rising).

> Or, it could be like the last one, where some people had it bad and others didn't.
> *You wont be able afford fuel or rail faire and you'll have sold your bike, in order to buy potato's.

I'm really basing this on the idea that there's no way to release the lockdowns without resuming exponential transmission (unless a vaccine is available). I've seen one graph from 1918 that shows when a city did relax lockdown - indeed there was more exponential growth and a bigger peak than before the relaxation.
Perhaps that's a faulty assumption- but I do think it's pretty clear now we're entering a once in a lifetime epidemic, and thus we can expect once in a lifetime consequences.

Lord_ash2000 13 Mar 2020
In reply to SenzuBean:

> I think if anything close to worst case happens, there will be a very large property crash in 12 months (once the spike passes, and once people realize that there's very little demand). Shorter term, I'm not sure there'll be much of a drop as I think the tendency will be for people to wait it out.

Interesting. Why do you think there will be very little demand in 12 months? I'm thinking there might be a short term drop as the global economy tanks a bit but as things start to improve virus wise nothing has really changed demand wise it's just people panicking about lack of supply as major economies face disruption. Once that disruption is over and people go back to work I expect everything to carry on as before. I see this as more of a short sharp shock rather than the beginning of a prolonged downturn. But who knows really.

1
Dax H 13 Mar 2020
In reply to Lord_ash2000:

He said "if anything close to the worse case happens". Worse case to me being X% of the population dies and as the deaths are mainly in older people who also tend to be the property owning demographic we could be seeing a lot of properties suddenly on the market.

I was looking to move house this year but I'm sitting tight now, yes my house will lose value should we see a market crash but losing say 10 or 15% off the value of my £140k house compared to 10 to 15% off the £250k house I would be looking at gives me a net win. 

jethro kiernan 13 Mar 2020
In reply to SenzuBean:

About to start working for a European company involving international travel to an enclosed germ factory, for the oil and gas industry.

Brexit

oil crash

Coronavirus

things could turn very bad for me

In reply to SenzuBean:

What will be interesting is how the eurozone copes with Italy after this recedes...weak banking system, a lot of debt and too big to fail (apparently). How big a bail out will it need? a trillion euros? how is that going to sit with tax payers throughout eurozone? If they cannot contain it, could the contagion be far more deadly than this virus and bring the whole lot tumbling down?

Happy Friday

Blunderbuss 13 Mar 2020
In reply to jethro kiernan:

> About to start working for a European company involving international travel to an enclosed germ factory, for the oil and gas industry.

> Brexit

> oil crash

> Coronavirus

> things could turn very bad for me

Brexit will be postponed i.e the transition period will be extended for another 12 months, I am convinced of it... 

1
jethro kiernan 13 Mar 2020
In reply to Blunderbuss:

Unfortunately when we need trained medical staff to stay our PM has said that June is a fixed date for a hard brexit and all the uncertainty that that creates, if I was in the NHS and European I would be heading somewhere were I was wanted and appreciated.

on a more personal note obviously they are looking how best to proceed and at the moment I’ll probably be as a limited company subcontractor giving the best option with the uncertainty over brexit and the usual way of dealing with project based management , however this gives me no employment rights or sickness cover.

Post edited at 15:45
summo 13 Mar 2020
In reply to Bjartur i Sumarhus:

> What will be interesting is how the eurozone copes with Italy after this recedes...weak banking system, a lot of debt and too big to fail (apparently). How big a bail out will it need? a trillion euros? how is that going to sit with tax payers throughout eurozone? If they cannot contain it, could the contagion be far more deadly than this virus and bring the whole lot tumbling down?

Print the money, head in the sand, they'll keep the schengen going even when it's logical to close the borders... in a few months time they'll come out with some measures that other countries have been doing for months and pretend it's their idea.

Economics, it's going to kill Spain too, loss of tourist revenue will probably tip them into full recession. It's not like there was any flex left in the euro before this. 

Post edited at 16:29
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Lord_ash2000 13 Mar 2020
In reply to Blunderbuss:

> Brexit will be postponed i.e the transition period will be extended for another 12 months, I am convinced of it... 

Wouldn't surprise me actually, or at least it'll be used an excuse. 

Andy Johnson 13 Mar 2020
In reply to SenzuBean:

> What I'd like to know, is what should individuals do during a recession? What products and services do well?

Info-graphic designers seem to be doing pretty well designing "dashboards" and the like.

Other than that? Home booze delivery maybe? Domestic broadband repair technician?

Post edited at 18:03
meggies 13 Mar 2020

Universal income

Pefa 14 Mar 2020
In reply to SenzuBean:

This capitalist system turns us all into vultures. 

We have a pandemic that could kill many more people needlessly and when they have many more years left to live yet we see this terrible situation as an opportunity to make money to line our pockets. Many of us that are pretty well off or comfortable already.

I'm not blaming though as it is what this system creates, what it needs to function, what it teaches us is good. It's just a symptom of another virus. 

Post edited at 07:19
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Lord_ash2000 14 Mar 2020
In reply to Pefa:

You've got to look on a national or even global scale. As sad as it would be personally if one of our relatives died of Corona virus. To a random person at the other side of the country is going to be more concerned about losing their job because everything is shut down. 

Looking longer term, a massive global recession is going to do far more damage than a tiny additional fraction of the lease productive members of society dying off this year than do every other year.

The same people who go on about the deaths from Tory austerity over the last few years should take note, depending how this pans out it has the potential to cause a huge impact future government spending and debt levels which will make the last few years seem like a golden age of abundance. The fact a few of us got a cough back in 2020 will long be forgotten.

Post edited at 09:34
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Pefa 14 Mar 2020
In reply to Lord_ash2000:

In case of any confusion I gave your post about getting a slice of the pie a like myself then a few moments afterwards I realised that this is what we are but it is not the way we really are,hence my subsequent and predictable (yawn) Marxist analysis. 

I agree with you about a recession and its effects which is why we need the government to step in and protect all small businesses and workers jobs for the coming months and if that costs £50 billion then so be it, let's scrap trident then and save £180 billion :Just one example. We don't have to wreck the economy to stop death tolls rising, we have the means to do both easily and help other developing countries who don't have the wealth. 

I read a letter in the Guardian from someone saying the over 60s are being written off by Boris which is interesting, I'll link to it at the bottom + I like your optimism but I don't really think we will look back on 2020 as a year we got a cough but perhaps a year when the world came to a halt because of an incurable virus which is the first pandemic in 100 years and entire countries of 60 million (so far) in quarantine with a 21 year prison sentence for mixing with people if you have cv symptoms. 

https://www.theguardian.com/world/2020/mar/13/this-government-must-show-us-the-evidence-behind-its-covid-19-policies

Post edited at 12:04
mullermn 14 Mar 2020
In reply to Pefa:

> This capitalist system turns us all into vultures. 

> We have a pandemic that could kill many more people needlessly and when they have many more years left to live yet we see this terrible situation as an opportunity to make money to line our pockets. Many of us that are pretty well off or comfortable already.

> I'm not blaming though as it is what this system creates, what it needs to function, what it teaches us is good. It's just a symptom of another virus. 

Yes, if only we were a communist or hardcore socialist nation, they’ve been famous throughout history for taking excellent care of individuals. 

3
Pefa 14 Mar 2020
In reply to mullermn:

See current health care provision for everyone in sanctions crippled Cuba. 

Post edited at 12:04
mullermn 14 Mar 2020
In reply to Pefa:

See literally every other example from history. It’s been a while since GCSE history but I don’t recall excellent care for retirees being part of The Great Leap Forward. 

Wingeing Old Git 14 Mar 2020
In reply to Bjartur i Sumarhus:

> What will be interesting is how the eurozone copes with Italy after this recedes...weak banking system, a lot of debt and too big to fail (apparently). How big a bail out will it need? a trillion euros? how is that going to sit with tax payers throughout eurozone? If they cannot contain it, could the contagion be far more deadly than this virus and bring the whole lot tumbling down?

I fear you could be right. If as many people die / get ill as some predict I think we are in for something far worse than a global recession. I wonder if the world will be a much different place in a few years time. 

SenzuBean 14 Mar 2020
In reply to Pefa:

> This capitalist system turns us all into vultures. 

> We have a pandemic that could kill many more people needlessly and when they have many more years left to live yet we see this terrible situation as an opportunity to make money to line our pockets. Many of us that are pretty well off or comfortable already.

> I'm not blaming though as it is what this system creates, what it needs to function, what it teaches us is good. It's just a symptom of another virus. 

Yeah, you're damn right.

In my own special case however, any resources I can get will be spent trying to teach people to easily grow their own food. This is a very long term approach to reducing dependence on wage serfdom in the population. So it's for a good cause.

Blue Straggler 14 Mar 2020
In reply to Pefa:

> This capitalist system turns us all into vultures. 

> We have a pandemic that could kill many more people needlessly and when they have many more years left to live yet we see this terrible situation as an opportunity to make money to line our pockets. Many of us that are pretty well off or comfortable already.

> I'm not blaming though as it is what this system creates, what it needs to function, what it teaches us is good. It's just a symptom of another virus. 

Aside from POSSIBLY one contributor on this thread, where are you seeing people taking the opportunity to line their pockets? On this thread ? On the UKC forums? Or beyond ?

Pefa 15 Mar 2020
In reply to mullermn:

> See literally every other example from history. It’s been a while since GCSE history but I don’t recall excellent care for retirees being part of The Great Leap Forward. 

You won't learn anything but lies about socialist countries in GCSE history I'm afraid so maybe that is where you are going wrong and yes retirees done so well during Mao's tenure that life expectancy shot up. So much so that in 25 years of his rule the population of China increased from 500 million to a whopping 950 million. Communism saves lives you see. 

Post edited at 13:29
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Pefa 15 Mar 2020
In reply to Blue Straggler:

> Aside from POSSIBLY one contributor on this thread, where are you seeing people taking the opportunity to line their pockets?

That one contributer. 

> On this thread ?

The 5 likes he got. (one was from me) 

> On the UKC forums? Or beyond ?

Do you think there will be no speculators out there ready to make a financial killing from this? You just have to look at the myriad ways in which speculators will do anything to get money - from creating wars and all its attendant suffering to destroying the earth's biosphere or wiping out countless species. 

Post edited at 13:27
BnB 15 Mar 2020
In reply to Pefa:

> That one contributer. 

> The 5 likes he got. (one was from me) 

> Do you think there will be no speculators out there ready to make a financial killing from this? You just have to look at the myriad ways in which speculators will do anything to get money - from creating wars and all its attendant suffering to destroying the earth's biosphere or wiping out countless species. 

You are truly nuts. Do you think the virus was planted by some mad Wall St genius? Virtually all the financiers out there are wondering what the f*ck just happened and they’re scrambling to manage their sudden and huge losses.

3
jimtitt 15 Mar 2020
In reply to Pefa:

How well retirees did (if such a thing even existed in rural China at that time) is debateable, the population rise and life expectancy increase was primarily due to the massive reduction in child mortality and of course the ending of 21 years of civil war.

Pefa 15 Mar 2020
In reply to BnB:

> You are truly nuts. Do you think the virus was planted by some mad Wall St genius? 

No that would be without evidence and at no point in my posts have I indicated anything that implies that. You have gotten the wrong end of the stick there I'm afraid, sorry if I didn't make my point clearer. 

> Virtually all the financiers out there are wondering what the f*ck just happened and they’re scrambling to manage their sudden and huge losses.

Agreed. And many will be seeking to take advantage of the situation for personal gain. 

Edit--after looking back I see why you thought that ,which is because I wrote ' from creating wars'.Which should have been from profiting from wars, sorry 😬

Post edited at 17:13
Pefa 15 Mar 2020
In reply to jimtitt:

There was a huge leap in life expectancy as well.

jimtitt 15 Mar 2020
In reply to Pefa:

Read what I posted carefully again.

BnB 15 Mar 2020
In reply to Pefa:

> No that would be without evidence and at no point in my posts have I indicated anything that implies that. You have gotten the wrong end of the stick there I'm afraid, sorry if I didn't make my point clearer. 

> Agreed. And many will be seeking to take advantage of the situation for personal gain. 

Well that's what investors do all the time, not just during natural disasters. But can you explain to me how that would proceed? It's just that I'm a market participant and I'm far too pre-occupied by the volatility of the markets to buy up all of Europe's respirators in order to price-gouge its inhabitants. And the hand sanitisers have all been snapped up.

> Edit--after looking back I see why you thought that ,which is because I wrote ' from creating wars'.Which should have been from profiting from wars, sorry 😬 

Hence my comment

Pefa 15 Mar 2020
In reply to jimtitt:

> Read what I posted carefully again.

Perhaps it is you who should re-read my initial post to mullermn. 

Pefa 15 Mar 2020
In reply to BnB:

> Well that's what investors do all the time, not just during natural disasters.

Yes so you acknowledge that speculators will be out to take advantage of this situation as much as they can. 

> But can you explain to me how that would proceed? It's just that I'm a market participant and I'm far too pre-occupied by the volatility of the markets to buy up all of Europe's respirators in order to price-gouge its inhabitants. And the hand sanitisers have all been snapped up.

I'm not a speculator so I can't help you I'm afraid. 

BnB 15 Mar 2020
In reply to Pefa:

> Yes so you acknowledge that speculators will be out to take advantage of this situation as much as they can. 

Only in the sense that they might think the market crash creates an attractive entry price into some worthy assets. That doesn’t mean they caused the crash nor does it involve exploiting anyone except the other market participant who needs to sell to cover his margin call.

Timmd 15 Mar 2020
In reply to BnB: Or 'her' margin call.

2
RomTheBear 15 Mar 2020
In reply to Pefa:

> Yes so you acknowledge that speculators will be out to take advantage of this situation as much as they can. 

It would be very difficult to take advantage of this situation after the fact. Other than buying the dip.

Personally I am set for a decent payday but that’s only because I’m mostly invested in safe havens, and I always kept several 3 month rolling tranches of out of money put options. It gives me an explosive payoff in case of severe market crash.

But note that 99% of the time I’m losing money on these trades. So on the long term I’m not compounding more than anybody else, probably a bit less in fact, it’s just that I’m less dependent on investment horizons realising as expected, which suit my own needs better.

So, I reassure you I haven’t been bio engineering  covid19 in my secret mad scientist lab.

And to be clear I’m not enjoying this situation, AT ALL. I’m vulnerable to covid19, I have really shitty immune system since I had a bout of cancer a few years ago, plus I’m hypertensive. Double shit sandwich.

Not to mention my older parents who are now lock down in their flat.

Basically I think you’d really struggle to find anybody, even arseholes like me, who is really enjoying this situation, even if you looked really hard. 

Post edited at 22:05
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jimtitt 15 Mar 2020
In reply to Pefa:

> Perhaps it is you who should re-read my initial post to mullermn. 


What has "See current health care provision for everyone in sanctions crippled Cuba" got to do with the fact you can massively increase life expectancy in China by killing most of the old people and at the same time hugely decreasing child mortality?

Pefa 15 Mar 2020
In reply to BnB:

> Only in the sense that they might think the market crash creates an attractive entry price into some worthy assets. That doesn’t mean they caused the crash.

Who says it does? 

> nor does it involve exploiting anyone except the other market participant who needs to sell to cover his margin call.

So speculators will be out to make a killing off this grim situation as they do with many grim situations like war for example. Glad we have finally cleared that up. 

RomTheBear 15 Mar 2020
In reply to Pefa:

> Who says it does? 

> So speculators will be out to make a killing off this grim situation as they do with many grim situations like war for example. Glad we have finally cleared that up. 

You should really rejoice. The vast majority of them are losing big time right now.

Pefa 15 Mar 2020
In reply to jimtitt:

> What has "See current health care provision for everyone in sanctions crippled Cuba" got to do with the fact you can massively increase life expectancy in China by killing most of the old people and at the same time hugely decreasing child mortality?

Strange why you would ask me since it was mullermn and not I who introduced socialist China into the debate after my comment about health care in Cuba. 

If you kill all the old people(which didn't happen) then life expectancy will plummet not 'massively increase', so why do you say it would increase? Life expectancy increases as more people live longer. 

Pefa 15 Mar 2020
In reply to RomTheBear:

> You should really rejoice. The vast majority of them are losing big time right now.

I know what you mean and I would rejoice if speculators and their families weren't left destitute and money was redistributed to those who need it most but it never does. Don't get me wrong I'm not saying there are no massive relief and aid programs set up by governments I'm just referring to purely financial markets, institutions and the type of soulless speculators that are happy to make money from wars and the things I stated upthread. 

jimtitt 16 Mar 2020
In reply to Pefa:

> Strange why you would ask me since it was mullermn and not I who introduced socialist China into the debate after my comment about health care in Cuba. 

> If you kill all the old people(which didn't happen) then life expectancy will plummet not 'massively increase', so why do you say it would increase? Life expectancy increases as more people live longer. 

Indeed but that doesn't mean there are more old people or that any of them lived longer, in the case  of China the main driver was stopping them dying younger.

BnB 16 Mar 2020
In reply to RomTheBear:

> It would be very difficult to take advantage of this situation after the fact. Other than buying the dip.

> Personally I am set for a decent payday but that’s only because I’m mostly invested in safe havens, and I always kept several 3 month rolling tranches of out of money put options. It gives me an explosive payoff in case of severe market crash.

> But note that 99% of the time I’m losing money on these trades. So on the long term I’m not compounding more than anybody else, probably a bit less in fact, it’s just that I’m less dependent on investment horizons realising as expected, which suit my own needs better.

> So, I reassure you I haven’t been bio engineering  covid19 in my secret mad scientist lab.

> And to be clear I’m not enjoying this situation, AT ALL. I’m vulnerable to covid19, I have really shitty immune system since I had a bout of cancer a few years ago, plus I’m hypertensive. Double shit sandwich.

> Not to mention my older parents who are now lock down in their flat.

> Basically I think you’d really struggle to find anybody, even arseholes like me, who is really enjoying this situation, even if you looked really hard. 

It had crossed my mind that you might have a strategy that would work well in these circumstances. And hats off to you for not crowing about it. Indeed you’re right to focus on the more immediate risk to health. As my next-door neighbour would say, “there’s no pockets in shrouds”.

I look at my investments in a sanguine way. I didn’t buy a slice of my chosen listed companies in order to turn a quick profit. I invested because I believe they are better placed than those in other markets to benefit from megatrends that are shaping the future of our society: digital health, automation, Asian tourism, personal wellbeing, cloud computing, fintech etc. Some of these sectors are struggling horribly in 2020 but it’s intended as a way of buying a slice of the most productive portion of the world’s long-term economic growth. Pefa likes to call this speculation but I see it as participating in the future.

Today the valuation  of these companies is trashed, but their long-term value is unaffected by the virus. I wouldn’t say I’m keeping perfectly calm, but this perspective is very helpful and it got me happily through the GFC. To anyone worried about their pensions or investments, I recommend you adopt the same perspective.

RomTheBear 16 Mar 2020
In reply to Pefa:

> Who says it does? 

> So speculators will be out to make a killing off this grim situation as they do with many grim situations like war for example. Glad we have finally cleared that up. 

If I were you I would blame the government and the central banks.

I can already predict with reasonable certainty that shareholders won't be required to cough up the cash required to keep all these businesses that aren't ready for a crisis afloat. Instead, they'll ask you, the taxpayer, to save the day for them.
Same for all those over-indebted households and businesses unable to weather a common cold let alone a pandemic. It's honest and responsible workers who will be the one paying.

Post edited at 09:26
RomTheBear 16 Mar 2020
In reply to BnB:

> Today the valuation  of these companies is trashed, but their long-term value is unaffected by the virus. I wouldn’t say I’m keeping perfectly calm, but this perspective is very helpful and it got me happily through the GFC. To anyone worried about their pensions or investments, I recommend you adopt the same perspective

Careful out there, don’t ignore counterparty risk, things are pretty dire to the point that even the bears are asking for a break. If we keep getting bad news, we are slowly getting to the point where major funds could blow up. That could cause irreparable damage with consequences felt for a long time, even if coronashite gets sorted. They might have to simply shut down the stock markets if it continues.

Post edited at 12:13
RawPowa! 16 Mar 2020
In reply to RomTheBear:

Yes we'll all jump in the time machine and boost our savings. This is the ultimate black swan event, no-one could have predicted it in November. Sadly in our current world insecure work and low wages combined with a high cost of living make it hard for a lot of people to save money, let's not look down on them because their crystal ball was a bit dusty.

RawPowa! 16 Mar 2020
In reply to BnB:

How has the long term value not been reduced? All these companies trade on future earnings, this is going to be the mother of all global recessions and is going to effect future earnings enormously. I would be shocked if any airline survives this. You really need to have a good hard think about the economic consequences of locking the entire world in their houses for 3 months, it's economic Armageddon.

RomTheBear 16 Mar 2020
In reply to RawPowa!:

> Yes we'll all jump in the time machine and boost our savings. This is the ultimate black swan event, no-one could have predicted it in November.

And that is exactly why one should never rely on predictions to invest.
 

RomTheBear 16 Mar 2020
In reply to RawPowa!:

> Yes we'll all jump in the time machine and boost our savings. This is the ultimate black swan event, no-one could have predicted it in November. Sadly in our current world insecure work and low wages combined with a high cost of living make it hard for a lot of people to save money, let's not look down on them because their crystal ball was a bit dust

 

Not looking down on anybody if anything I am utterly disgusted at a system which basically forces honest people to bear risks they shouldn’t have to bear.

With those pensions everybody across society is heavily invested in this bullshit even though we don’t actually need to.

Sure, maybe in time it will recover, but it’s the big one off losses that crush your rate of compounding, and leave you at the end with a shit pension.

funds don’t care because when they make small gains they get their bonus, but when something like corona hits they say “ho it’s a black swan, not our fault”

Post edited at 12:29
RawPowa! 16 Mar 2020
In reply to RomTheBear:

Fair enough Rom, I just hope we don't start blaming people for their predicament when we should be trying to help people. I think it is going to go very pear shaped though and it won't take long.

wbo2 16 Mar 2020
In reply to RawPowa!: How long is long term? Five years?  This may well be 'the mother' , but then again it may just be very hard.  I'd note that China is starting to 'come out the other side' so at least it won't all be at the same time.

  But this will be very hard for many in the west compared to the last great recession of 2008 as the effects of not working , and getting paid will be painfully obvious

RomTheBear 16 Mar 2020
In reply to wbo2:

On the bright side: The wealth gap has vastly improved over the past 3 weeks.

BnB 16 Mar 2020
In reply to RawPowa!:

> How has the long term value not been reduced? All these companies trade on future earnings, this is going to be the mother of all global recessions and is going to effect future earnings enormously.

It will affect 2020 earnings very substantially. 2021 quite probably. But that's short, not long term. How will it affect 2025 or 2030 earnings do you think? There is a monster level of monetary stimulus already enacted that will do nothing to stop the spread of the virus but it will feed through to the consumer in due course, augmented, I would wager, by large fiscal giveaways, including negative taxes. Hong Kong has already started the process.

> I would be shocked if any airline survives this.

Not without massive state support I agree. But will the infrastructure of global travel collapse, ie airports and railway stations? Or will they have a terrible year?

> You really need to have a good hard think about the economic consequences of locking the entire world in their houses for 3 months, it's economic Armageddon.

Thanks for your concern but I'm a professional investor. I'm well aware of the consequences. Will it be for 3 whole months, or just the one, as it turned out in China? We don't know and it will certainly have a dramatic impact on many, many companies. That's why it's important to own shares in businesses that have a future, which I would define as those with no current debt, so they can fund cash flows in the short term with reserves (and ultimately access borrowing more easily) and those in structurally growing industries, notwithstanding the impact of the virus this year. I acknowledge not everyone has the experience, opportunity or time to carry out such research. But the managers looking after everyone's pension or investments do, and it makes more sense to stay calm after market drops of 35% rather than to panic and sell at a loss, only to buy back in at a higher level. My post was aimed at helping people retain their calm, while yours achieves the opposite.

BnB 16 Mar 2020
In reply to RomTheBear:

> Careful out there, don’t ignore counterparty risk, things are pretty dire to the point that even the bears are asking for a break. If we keep getting bad news, we are slowly getting to the point where major funds could blow up. That could cause irreparable damage with consequences felt for a long time, even if coronashite gets sorted. They might have to simply shut down the stock markets if it continues.

That's why I don't invest via funds, preferring to build my own portfolio of companies. However, I am not competent in the field of fixed income and I rely on professional managers, like the vast majority of us, to assess the underlying. The funds are falling as fast as shares and that is flashing a warning, as you say.

It has not been a good month. Still, as you point out, inequality is falling fast this year!

neilh 16 Mar 2020
In reply to BnB:

There must be some good shares to buy smith and Nephew, 3m spring to mind. 
 

meanwhile I am still even today getting enquiries. 
 

pity I cannot use airfreight at the moment. 

BnB 16 Mar 2020
In reply to neilh:

> There must be some good shares to buy smith and Nephew, 3m spring to mind. 

Smith and Nephew is looking good value on a relative basis, it has fallen 42% compared to the FTSE 100's 32%. It is well exposed to structural growth themes unlike most of FTSE100 with its oil companies and banks, and is far more defensive, even if knee replacements are not a priority for the NHS this spring. It is probably a good buy, indeed I'm monitoring it, although be aware there is some indebtedness (not a lot).

3M is a good dividend stock but it isn't a leader in any of its niches. It will carry on for decades but I think its days as a market darling have past, rather like GE or GM. Also, moderately indebted.

> meanwhile I am still even today getting enquiries. 

Good to hear.

> pity I cannot use airfreight at the moment. 

Good luck in the coming months.

stevieb 16 Mar 2020
In reply to BnB:

Out of interest, for you or other regular investors on here, what’s your view on the interest rate cuts? 
from the outside, it looks like wasting your ammunition when it has no effect (these cuts would provide a boost at a more stable point in the future). Was there any point? Be seen to do something, or something better than nothing? 

BnB 16 Mar 2020
In reply to stevieb:

> Out of interest, for you or other regular investors on here, what’s your view on the interest rate cuts? 

> from the outside, it looks like wasting your ammunition when it has no effect (these cuts would provide a boost at a more stable point in the future). Was there any point? Be seen to do something, or something better than nothing? 

Will the cuts help stimulate economies in the near term? No they won’t. Longer term, no doubt they will, and the effect on the consumer is not lost by cutting sooner, which seems to be your concern. Central banks are caught between a rock and a hard place. It is necessary for them to act fast and boldly in order to show the market that they have its back, even when the actions are of questionable value. And also to accelerate the moment when governments realise they need to step in. The responses on both sides have been reasonably prompt, to be fair, but governments will need to scale up their actions, and soon.

RomTheBear 16 Mar 2020
In reply to BnB:

> Will the cuts help stimulate economies in the near term? No they won’t. Longer term, no doubt they will, and the effect on the consumer is not lost by cutting sooner, which seems to be your concern. Central banks are caught between a rock and a hard place. It is necessary for them to act fast and boldly in order to show the market that they have its back, even when the actions are of questionable value. And also to accelerate the moment when governments realise they need to step in. The responses on both sides have been reasonably prompt, to be fair, but governments will need to scale up their actions, and soon.

The more I look at it, the more apparent it is that the western economies are currently sliding into a typical war-time type of economy.

Just like in a wartime economy, whole industries and professions may have to adapt very quickly  and the state will have to take over the entire demand in some sectors.

We have plenty of ingenuity and talented people who will find ways to make this shit shower work. So actually I’m feeling pretty optimistic.

I just seriously hope that at the end of this, some tough lessons will finally be learned about the extreme fragilities of our globalised economy.

Post edited at 14:27
BnB 16 Mar 2020
In reply to RomTheBear:

> The more I look at it, the more apparent it is that the western economies are currently sliding into a typical war-time type of economy.

> Just like in a wartime economy, whole industries and professions may have to adapt very quickly  and the state will have to take over the entire demand in some sectors.

> We have plenty of ingenuity and talented people who will find ways to make this shit shower work. So actually I’m feeling pretty optimistic.

> I just seriously hope that at the end of this, some tough lessons will finally be learned about the extreme fragilities of our globalised economy.

Yes. I've compared the virus to an invasion in several conversations, and the response on a human level evokes the blitz. We are today waiting for the hum of the doodlebug in the air.

It's the sheer scale of the hiatus in employee wages and corporate earnings that is daunting. What would be your fiscal and stimulus response?

Edit to add that markets are falling and economies are shutting down (voluntarily) on virus proliferation more than anything else, or they would have spiked upwards today on the Fed's big bazooka of last night, so the most effective tonic for all outcomes would be the achievement of a turning point in the virus' spread, ie a fall in new cases. The sooner that comes, the lower the pain for everyone. That would be my priority.

Post edited at 14:53
RomTheBear 16 Mar 2020
In reply to BnB:

> Yes. I've compared the virus to an invasion in several conversations, and the response on a human level evokes the blitz. We are today waiting for the hum of the doodlebug in the air.

> It's the sheer scale of the hiatus in employee wages and corporate earnings that is daunting. What would be your fiscal and stimulus response?

I would get the central banks to back loans for shareholders, which they would be able to use, if they wished to do so, for the sole purpose of providing ongoing funding to the businesses they own.

Note that they would be required to repay those loans.

I think this would align incentives quite nicely.

This is just a wish though,  I don’t expect this will happen, instead I expect that the taxpayer will pick up the tab.

> Edit to add that markets are falling and economies are shutting down (voluntarily) on virus proliferation more than anything else, or they would have spiked upwards today on the Fed's big bazooka of last night, so the most effective tonic for all outcomes would be the achievement of a turning point in the virus' spread, ie a fall in new cases. The sooner that comes, the lower the pain for everyone. That would be my priority.

You are absolutely correct. A vaccine or a sustainable reduction of the pandemic is really the only thing that’s going to take us out of the hole.

redjerry 16 Mar 2020
In reply to RomTheBear:

"I would get the central banks to back loans for shareholders, which they would be able to use, if they wished to do so, for the sole purpose of providing ongoing funding to the businesses they own."

Given the state of Corporate governance (where I live in the US), thats actually a pretty comical suggestion. 

BnB 16 Mar 2020
In reply to RomTheBear:

> I would get the central banks to back loans for shareholders, which they would be able to use, if they wished to do so, for the sole purpose of providing ongoing funding to the businesses they own.

> Note that they would be required to repay those loans.

> I think this would align incentives quite nicely.

Isn't that already what has been facilitated by the likes of BoE and Fed, albeit not to the absolute extent required and by regulatory adjustment rather than cash guarantee?

> This is just a wish though,  I don’t expect this will happen, instead I expect that the taxpayer will pick up the tab.

You could compel businesses to issue new capital for which the state or central bank subscribes. There is no reason for this to be a long term cost to the taxpayer since a successful recapitalisation of a profitable concern would yield a gain in a short number of years. This works for listed entities but not private companies, for whom the first suggestion seems more appropriate.

> You are absolutely correct. A vaccine or a sustainable reduction of the pandemic is really the only thing that’s going to take us out of the hole.

I think under current global standards that a vaccine is not feasible before the middle of next year, primarily owing to the rigorous testing constraints. Therefore a swift suppression of the spread is our best hope.

Post edited at 15:33
neilh 16 Mar 2020
In reply to BnB:

By chance I was in hospital this morning have some minor surgery.It was amazing what you could over hear .Big plans to slash protocols to speed everything up, lean processing big style. All good stuff. I would expect judging from that there are some serious things they could do to slash the testing time constraints in this sort of situation.DT has already alluded to that in the USA.

pasbury 16 Mar 2020
In reply to BnB:

> Yes. I've compared the virus to an invasion in several conversations, and the response on a human level evokes the blitz. We are today waiting for the hum of the doodlebug in the air.

> It's the sheer scale of the hiatus in employee wages and corporate earnings that is daunting. What would be your fiscal and stimulus response?

> Edit to add that markets are falling and economies are shutting down (voluntarily) on virus proliferation more than anything else, or they would have spiked upwards today on the Fed's big bazooka of last night, so the most effective tonic for all outcomes would be the achievement of a turning point in the virus' spread, ie a fall in new cases. The sooner that comes, the lower the pain for everyone. That would be my priority.

That fall isn't going to happen though is it? India is only just getting it, imagine if they can't control it. Europe is failing to contain. Industries like aviation are going to effectively not exist for a couple of months. Manufacturing will take a massive hit because workers are worried about proximity.

But, really it's just a case of the whole world taking a period of unpaid leave. Unfortunately the world is up to it's asshole in debt. So I don't really know how that might pan out.

Timmd 16 Mar 2020
In reply to BnB:

> I look at my investments in a sanguine way. I didn’t buy a slice of my chosen listed companies in order to turn a quick profit. I invested because I believe they are better placed than those in other markets to benefit from megatrends that are shaping the future of our society: digital health, automation, Asian tourism, personal wellbeing, cloud computing, fintech etc. Some of these sectors are struggling horribly in 2020 but it’s intended as a way of buying a slice of the most productive portion of the world’s long-term economic growth. Pefa likes to call this speculation but I see it as participating in the future.

Can I ask which things relating to personal well being you have invested in? You could email if you prefer, or decline to answer which is also fine. 

Post edited at 16:58
1
BnB 16 Mar 2020
In reply to pasbury:

It's going to take a while but the issue for each economy is the resumption of normal activity. Once every country has sealed itself off, as is happening very rapidly, India included, it can be achieved faster than you fear. Look at S Korea. Meanwhile Lombardy's medical chief is quietly whispering about a slowing of the curve today. When was shutdown? A week ago! Don't lose hope.

As for treatment, Roche's arthritis drug Actemra is showing promising effects on patients with an acute reaction. Decreased oxygen requirements in 75% of patients. Further data from a human trial in China in May.

pasbury 16 Mar 2020
In reply to BnB:

I don't think the issue is resumption of normal activity it's the level of damage that some industries could sustain in even a short period of shutdown. If they are indebted then debt relief is needed, and where does that eventually end up? All the arrows point to a huge devaluation of wealth and assets.

Could be a good thing.

BnB 16 Mar 2020
In reply to Timmd:

> Can I ask which things relating to personal well being you have invested in? You could email if you prefer, or decline to answer which is also fine. 

If you're angling at mental health then I can't help you but digital health is the key theme here. It's a revolution in healthcare that enables patients and practitioners to monitor our health with devices from smartphone apps to internet-connected non-invasive glucose monitors to implanted connected medical devices. Meanwhile drug development is now facilitated above all by data and the cloud and it is bringing a revolution in therapy development. I also like the sportswear and equipment sector as a way of following trends in well-being, eg yoga.

BnB 16 Mar 2020
In reply to pasbury:

> I don't think the issue is resumption of normal activity it's the level of damage that some industries could sustain in even a short period of shutdown. If they are indebted then debt relief is needed, and where does that eventually end up? All the arrows point to a huge devaluation of wealth and assets.

So it is the issue. The longer for the resumption, the more damage is done. Meanwhile, the stock market already evidences your devaluation.

> Could be a good thing.

Rejoicing at the discomfort of the wealthy is never a good look. It means there is less money available to pay for the welfare of the needy, let alone support the great business ideas of the impecunious. I was about to put money into a start-up initiated by three new graduates. Now the deal is off. Be careful what you wish for.

Post edited at 17:44
1
pasbury 16 Mar 2020
In reply to BnB:

> Rejoicing at the discomfort of the wealthy is never a good look.

What discomfort?

MG 16 Mar 2020
In reply to pasbury:

> What discomfort?

Take a look at the stockmarket!!

pasbury 16 Mar 2020
In reply to MG:

will they have to visit food banks or worry about health cover?

jkarran 16 Mar 2020
In reply to Lord_ash2000:

> The fact a few of us got a cough back in 2020 will long be forgotten.

I bet this doesn't age well.

Jk

MG 16 Mar 2020
In reply to pasbury:

> will they have to visit food banks or worry about health cover?

Some will. Are you really wishing destitution on people!? 

pasbury 16 Mar 2020
In reply to MG:

No for f*cks sake. The asset rich might be be a bit less asset rich - whats the problem?

2
MG 16 Mar 2020
In reply to pasbury:

> No for f*cks sake. The asset rich might be be a bit less asset rich - whats the problem?

Rich guy owns company. Company goes bust. Rich guy loses everything. In debt. Loses home. Loses family. Employees lose jobs, then houses etc. etc. See a problem here yet? 

BnB 16 Mar 2020
In reply to pasbury:

> No for f*cks sake. The asset rich might be be a bit less asset rich - whats the problem?

In a parallel world to that of your rich c*nt fantasies, also known as the real world, most millionaires built their wealth by making enormous financial sacrifices along the way. They already know what it is to have no income, no car, no security, and for their home to be taken by the bank as security against the funding provided for their business idea. That’s what the early years of a new business consists of. Once finally up and running, they’ve then spent 20 years at the back of the queue for whatever scraps of cash remain after the staff have been paid in full, the rent, the creditors, the suppliers, often going completely without an income in lean years, yet never letting down those who depend on them.

When finally all comes good and there is profit to spare, you’re licking your lips at the prospect of them being cut down to size without a moment’s consideration for the enduring and vital role they’ve played in putting bread on hundreds of tables, nor for the possibility that their ruin puts so many dependants in jeopardy. Nice one.

2
pasbury 16 Mar 2020
In reply to BnB:

I don't have any rich c*nt fantasies. Not sure what that even means. I'm quite taken aback by your vitriol.

Not all wealth and wellbeing is generated by these self sacrificing ex poor people you describe.

In fact your whole post was a load of self congratulary, self regarding bullshit.

3
MG 16 Mar 2020
In reply to pasbury:

> I don't have any rich c*nt fantasies. Not sure what that even means. I'm quite taken aback by your vitriol.

Wishing people lose all their money is pretty unpleasant. I think some vitriol is warrented. It's also stupid because we all need a good economy for e.g. healthcare. 

1
RawPowa! 16 Mar 2020
In reply to BnB:

You don't think the unemployment rate is going to spike, business and consumer confidence plummet and credit markets freeze up? They are. This is a long term problem. Not to mention the zombies released by this event, the PIGS crisis was never actually resolved and two of them have the worst of this. Good luck getting them not to default this time.

kevin stephens 16 Mar 2020
In reply to pasbury:

> No for f*cks sake. The asset rich might be be a bit less asset rich - whats the problem?

This is the problem:

stock markets (value of companies) fall because it becomes apparent that the companies make less money, or lose money compared to before

This signals that employees of those companies will lose wages or their jobs

 Many of these companies are actually owned by pension funds, collapse in company’s value and profits means a severe cut in pensions, especially for those about to retire on meagre pensions

BnB 16 Mar 2020
In reply to RawPowa!:

> You don't think the unemployment rate is going to spike, business and consumer confidence plummet and credit markets freeze up? They are. This is a long term problem

i never said they wouldn’t. The duration of the crisis is what’s in question. No one knows for how long it will resonate. But what is for sure is that the day will come when its ripples have calmed. At that point the companies’ share prices will reflect future circumstances untrammelled by the current situation.

Those that survive will anyway, and the aim of an investor is to make sure he/she sides with them. 

Pan Ron 16 Mar 2020
In reply to SenzuBean:

Does seem a good time for a moratorium on rent, and possibly mortgage payments, for a few months considering a lot of people in the former category are probably hourly paid.  Would go a long way to easing the pain.

RomTheBear 16 Mar 2020
In reply to BnB:

> Isn't that already what has been facilitated by the likes of BoE and Fed, albeit not to the absolute extent required and by regulatory adjustment rather than cash guarantee?

Sort of, mostly they have simply relaxed the capital requirement of banks. But I think a lot of them are going to be reluctant to increase their balance sheets to the scale that is required.

My “plan” is slightly different because the loans would be issued to the shareholders, to be used as a cash injection in the businesses that need them. 

The shareholders themselves would be personally liable.

We would essentially be putting a gun to their face: if you want to save the business and your investment, we will help you. If not, then take the hit (as you would have been expected to otherwise).

This is the only time way I can think of that doesn’t create again moral hazard, and doesn’t again shifts all the risks shareholders have accumulated to someone else.

Post edited at 22:53
Ian W 16 Mar 2020
In reply to Pan Ron:

> Does seem a good time for a moratorium on rent, and possibly mortgage payments, for a few months considering a lot of people in the former category are probably hourly paid.  Would go a long way to easing the pain.


Thats fine, but in my particular little bubble, a not insignificant part of my income is from renting out properties. Do I then get to pass on the pain? To whom?

Note - in my part of the world, it is perfectly possible to afford to rent a decent house whilst on minimum wage, so I dont think we will be as badly affected as other parts of the country, where the financial implications of a major economic downturn will be pretty bad.

However, I do agree that a rent / mortgage moratorium would be a good idea. Afte rmany years of carrying the financial can. its about time those at the "bottom" of the economic pile get a break, apid for by those of us more fortunate. As a private landlord, i could afford to do without the rental income for approx 6 months without it impacting on my financial situation too much. If that enables my tenants to ride out whatever financial storm comes their way, and gives them the ability to repay whatever loan i have effectively given them over (say) 2 years, then i wouldnt have a problem, as it would enable us all to return to normal faster than would otherwise be the case. I'd much rather do that then end up having to evict someone and have a property empty for 3 months......

BnB 17 Mar 2020
In reply to RomTheBear:

How about governments or central banks subscribing for convertible debt* in the companies who need a bridging loan? It avoids the stigma of nationalisation while providing a mechanism for taxpayers to profit from interest on the loan AND the recovery of the asset value. It would be easier to administer than dealing directly with millions of shareholders and provides a cash boost to the state at the expense of the diluted shareholders. It’s the very opposite of 2009 bailouts in that it delivers moral hazard to the shareholders. If the loan is not taken, the company fails, and if it saves the company, their portion shrinks. Meanwhile the taxpayer makes a tidy profit.

*For the layman, a convertible bond is debt which has the right to convert into shares on the achievement of defined asset prices. In a liquidation it usually has more claim on the assets than equity but profits from a rising share price, which, in a successful recovery situation, is a reliable outcome.

Pan Ron 17 Mar 2020
In reply to Ian W:

> As a private landlord, i could afford to do without the rental income for approx 6 months without it impacting on my financial situation too much.

I think that is the core issue.  Landlords, or mortgage lenders, are far better able to absorb this. 

I'm constantly coming across people whose entire income has just dried up and are unable to pay the rent if this goes on beyond a month.  They are faced at best with a hefty loan/overdraft that might take a year or more to pay off and at worst losing the roof over their head.

In the South/Southeast, property owners have benefitted greatly from the state of the market over the last couple of decades.  The idea that they can keep gouging tenants who are in turn going to be left broke just seems incredibly unfair.

neilh 17 Mar 2020
In reply to BnB:

I have been scratching my head on various scenarios. One of the issues must be  to look back historically at what happened during WW2. My Dad always told me that profits were effectively nationalised and you were not as a company allowed to make any money.I assume wages were controlled along with prices.

if this goes on for more than a couple of months there is going to be some serious restructuring along these lines. After all the govt to finance day to day spending has to get cash from somewhere.If they literally print money then rampant inflation follows.

These are big economic decisions.

I suspect the key stategic thing will not be pubs etc. It will be keeping food, pharma, finance,transport, utilities and manufacturing going.

RomTheBear 17 Mar 2020
In reply to BnB:

> How about governments or central banks subscribing for convertible debt* in the companies who need a bridging loan? It avoids the stigma of nationalisation while providing a mechanism for taxpayers to profit from interest on the loan AND the recovery of the asset value. It would be easier to administer than dealing directly with millions of shareholders and provides a cash boost to the state at the expense of the diluted shareholders. It’s the very opposite of 2009 bailouts in that it delivers moral hazard to the shareholders. If the loan is not taken, the company fails, and if it saves the company, their portion shrinks. Meanwhile the taxpayer makes a tidy profit.

Sounds like a pretty good idea ! Maybe you should email Boris with it...

wbo2 17 Mar 2020
In reply to neilh:As a point of pedantry they've 'printed' plenty of money in the last 12 years but there hasn't been enough inflation... so not necessarily

neilh 17 Mar 2020
In reply to wbo2:

Not the same imho. They did not " print" money to go directly into people's pocket.s. They do not have the economic abilty to do that.

I am sure Rom can correct me on this.

BnB 17 Mar 2020
In reply to RomTheBear:

> Sounds like a pretty good idea ! Maybe you should email Boris with it...

There's one large flaw. It only works for businesses whose shares trade on a liquid market. That narrows the field rather a lot, even if it captures all the biggies.

BnB 17 Mar 2020
In reply to neilh:

Money will likely be raised by debt issuance. The question is, if every state needs money for stimulus, and every investment house needs cash rather than more creditors, who's going to buy the debt?

neilh 17 Mar 2020
In reply to BnB:

That is what I was wondering. 

I am predicting increases in interest rates across the piece.

this could be grim. 

Post edited at 15:55
neilh 17 Mar 2020
In reply to BnB:

There is some clever marketing going on in holiday companies to keep cash and generate a few quid..One of my  daughters was going to Thailand tomorrow for 7 days  ( she postponed it). They have just  offered her 2 weeks next March if she postpones it for an extra £50.She said yes.

Clever deal making on the tour operators part. I would have asked for a few more £ but there you go. An old trick.

BnB 17 Mar 2020
In reply to neilh:

> That is what I was wondering. 

> I am predicting increases in interest rates across the piece.

> this could be grim. 

I don’t see interest rates rising for a couple of years at least. Probably longer. This is a demand shock with deflationary impact. How soon did interest rates rise after 2009?

RomTheBear 17 Mar 2020
In reply to BnB:

> I don’t see interest rates rising for a couple of years at least. Probably longer. This is a demand shock with deflationary impact. How soon did interest rates rise after 2009?

Agree I wouldn’t expect any rise until roughly 2022.

RomTheBear 17 Mar 2020
In reply to BnB:

Inflation down to 0.5 until 2022 would be my guess as well. I don’t see the money printing causing inflation at this point due to severe shock to demand.

neilh 17 Mar 2020
In reply to BnB:

Fair point. I was looking at it from the capability of the Gov to raise money in the bond market.if there is a shortage of lenders.

By the way I reckon Rishi Sunak is a confident Chancellor.Impressive.

RomTheBear 17 Mar 2020
In reply to neilh:

It’s already a total bloodbath out there.
So many companies, large and small, going into administration, and we’re barely a few days in.

That is what happens when you build an entire economy on debt.

Post edited at 18:03
BnB 17 Mar 2020
In reply to RomTheBear:

Rom, what’s happened? We keep agreeing. Maybe we should set up a financial consultancy together called “Bull and Bear”, geddit?

BnB 17 Mar 2020
In reply to neilh:

> Fair point. I was looking at it from the capability of the Gov to raise money in the bond market.if there is a shortage of lenders.

I was being a tad flippant. Plenty of companies have been raising cash piles through debt this week, including Exxon, a business that is certain not to exist in its current form twenty years from now, so the demand for paper is still out there.

> By the way I reckon Rishi Sunak is a confident Chancellor.Impressive.

He's a very accomplished young fellow. Imagine being thrust into the middle of this at his age.

neilh 17 Mar 2020
In reply to RomTheBear:

You could be really ruthless about it. Zombie companies holding back on the productivity gap now failing. 
 

also there will be some really sharp  business practises of businesses failing and restarting   it picks up again. Wipe out vat and tax debts etc .Particularly useful in the pub trade. 

kevin stephens 17 Mar 2020
In reply to BnB:

> He's a very accomplished young fellow. Imagine being thrust into the middle of this at his age.

Fancy a finance expert being made chancellor, next thing they will have a senior doctor as health Secretary and a logistics expert as Transport Secretary and pigs will fly?

BnB 17 Mar 2020
In reply to kevin stephens:

> Fancy a finance expert being made chancellor

The remarkable thing is he's the second in a row. Javid was a better-regarded banker than Sunak. It's almost as if Boris' government contains some competence after all (ignoring the fact that Javid was effectively sidelined).

RomTheBear 20 Mar 2020
In reply to BnB:

> He's a very accomplished young fellow. Imagine being thrust into the middle of this at his age.

He certainly presents and communicates well, but it’s actually an easier job when you are pretty much given carte blanche to spend.

When this is over and the country is up to its neck in ever more debt, then this will be the real test.

Post edited at 17:53
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