Is anyone panicking yet ?

[Pipsmum]

Speaking from the building industry slant here. Small businesses are suffering already with requests for stay at home workers and already not being able to access clients and sites due to isolation restrictions. With smaller companies, each member of staff is irreplaceable and they each still need a wage as they have families to feed. A staff of seven, with their work income already having suffered from last years Brexit pantomime, there is no financial cushion of support under anyones backside. Businesses such as these were already on their beam ends. It was just beginning to pick up again before this Covid. Paying full wages V no ability to generate any income will be instant demise without urgent outside assistance. Nobody yet knows how to access the immediate help that is needed. It's like a bad dream but we're awake for it.

[scrumpyjack]

I think the best investment strategy now is the 'Ostrich' approach. Bury your head in the sand, don't look at share prices or any financial headlines.

No one really has a clue what is going to happen and Murphy's law will apply. If you buy or sell anything it will turn out to have been precisely the wrong thing to do.

There are far more important things than money (eg health) so just stay positive and get on with things. Forget the markets for a few months - no point in depressing yourself even more!

[JDot]

Is anyone panicking yet ?

Yes mostly because I am now beginning to think that the UK economy might completely collapse under all these pledges the treasury has made to sure up just about everyone with no exit strategy.

[Andy46]

Hi,

I'm not panicking, although my retirement fund has taken a big hit. I can't do anything about it, so will do nothing and hope things improve. I have about 30% of my net wealth in the stockmarket, all of which is in large caps and is fairly well diversified so i'm keeping my fingers crossed.

Andy

[JDot]

Is anyone panicking yet ?

Yes mostly because I am now beginning to think that the UK economy might completely collapse under all these pledges the treasury has made to sure up just about everyone with no exit strategy.

To add further clarity to my earlier post
Disclaimer: I am no expert these are just my views as a layperson.

I think the UK Government is at risk of some serious problems both in the near-term, medium-term and out in the longterm.

This can be viewed as various unforeseen shock events that have the potential to permeate and disrupt the wider system in a pathological way. (magnitudes worse than Coronavirus)

To include but not be limited to: an unfunded liabilities shock( public pension gigantic shortfall, a dramatic increase in welfare assistance demand ) or massive debt burden bond auction failure in the future leading to higher interest rate shock?

The government has agreed to shore up just about everybody for at least the next three months to include( bailing out self-employed workers, all types of workers sat at home not working, bankrupt retail-chains that are closed for business, grounded airlines...? unemployed...) whilst simultaneously dealing with rapid and unprecedented tax receipt decline, leaving the possibility of a solvency crisis down the line. Furthermore, serious issues around if we will have a deal/no-deal Brexit is still hanging in the balance and time is running out!

In addition, a disorderly currency devaluation or absolute currency collapse is not an unreasonable possibility with current interest rates so low and an extreme amount of borrowing taking place or needed.

Also of concern would be a supply chain collapse( if tighter cross-border measures are taken to deal with the COVID-19 crisis borders could close for supplies). Furthermore widespread absenteeism ( due to sickness, self-isolation or care responsibilities within the logistics sector could well add to this problem and potentially lead to acute and then chronic food staples/medication/protective gear/sanitary product shortages, which could quickly lead to a rapid decline in civil order as we know it.


Added together in my estimation the outlook is not good or pretty as these are very significant risks that the UK is facing right now.

I have not taken into consideration the wider potential (shock) or contagion issues such as a possible euro member state debt default would mean for the UK. (Think Italy/Greece/Spain/Portugal during 2009 GFC when nothing was closed, and now in 2020 with a total COVID-19 shutdown scenario). Let us not underestimate the consequences of further escalation of tensions between the US and China?/North Korea?/Iran?/Syria?/Russia? would mean for the global markets.

Not to mention any other black swan event unimaginable.

Ten years of cuts and austerity and now all of a sudden we have an unlimited supply of cash available for everything and everyone.

Something just does not seem right to me at the moment.

[Wuffle]

'Furthermore widespread absenteeism ( due to sickness, self-isolation or care responsibilities within the logistics sector could well add to this problem and potentially lead to acute and then chronic food staples/medication/protective gear/sanitary product shortages, which could quickly lead to a rapid decline in civil order as we know it'

I work in the logistics industry and have posted elsewhere that it will be the last thing that stops.
It is pretty hardcore. Actually I almost laughed!

W.

[Bouleversee]

Good to know it was was waffle, Wuffle.

[JDot]

'Furthermore widespread absenteeism ( due to sickness, self-isolation or care responsibilities within the logistics sector could well add to this problem and potentially lead to acute and then chronic food staples/medication/protective gear/sanitary product shortages, which could quickly lead to a rapid decline in civil order as we know it'

I work in the logistics industry and have posted elsewhere that it will be the last thing that stops.
It is pretty hardcore. Actually I almost laughed!

W.

Hi Wuffle
No so much stopping but more with coping with demand.

Just try and get an online booking slot at a supermarket now, or look at the queues in your local supermarket car parks. Try and get your hands on handwash or hand sanitizer, pasta, rice, long-life milk, eggs, toilet paper. This is with current buying limit restrictions in place!

26 pallets to a 44-foot trailer is not going to go far with the kind of demand we are now seeing. No stock kept at distribution sites ( what goes in goes straight out) 50 percent of stuff imported. I think I do have some of a point.

Also, the average age of UK truckers now is near 60, with a yearly medical requirement to retain the right to drive. Also what health risks may put some of the older driver population in the danger zone in terms of COVID 19 at-risk groups.

I have also read stories of UK third party supply drivers being bunched up together with European continental drivers (once keys are handed in) within crowded supply driver waiting rooms at distribution centers and not being allowed to either use toilets or wash hands.

It stands to reason that it would only take a small percentage of these drivers to be taken out with coronavirus, for this situation to quickly spiral out of control

https://www.theguardian.com/world/2020/ ... irus-fears

[richfool]

The government has agreed to shore up just about everybody for at least the next three months to include( bailing out self-employed workers, all types of workers sat at home not working, bankrupt retail-chains that are closed for business, grounded airlines...? unemployed...) whilst simultaneously dealing with rapid and unprecedented tax receipt decline, leaving the possibility of a solvency crisis down the line. Furthermore, serious issues around if we will have a deal/no-deal Brexit is still hanging in the balance and time is running out!

I think it (the UK Gov) has little choice, JDot. We (the taxpayers) can always help pay it back later.

[Charlottesquare]

In addition, a disorderly currency devaluation or absolute currency collapse is not an unreasonable possibility with current interest rates so low and an extreme amount of borrowing taking place or needed.

.

Pertinent if other countries do not spend similar, less pertinent if they also are spending similar, an exchange rate being in effect a comparison between A and B economies.

I certainly longer out see potential (not certain) for higher interest rates and I certainly see both price and wages inflation, but currency movements will be a factor of the relative strengths of the main currencies when the dust settles ,so where we end up is anyone's guess as we do not yet know who will be spending what.

[colin]

Is anyone panicking yet ?

Yes mostly because I am now beginning to think that the UK economy might completely collapse under all these pledges the treasury has made to sure up just about everyone with no exit strategy.

To add further clarity to my earlier post
Disclaimer: I am no expert these are just my views as a layperson.

I think the UK Government is at risk of some serious problems both in the near-term, medium-term and out in the longterm.

This can be viewed as various unforeseen shock events that have the potential to permeate and disrupt the wider system in a pathological way. (magnitudes worse than Coronavirus)

To include but not be limited to: an unfunded liabilities shock( public pension gigantic shortfall, a dramatic increase in welfare assistance demand ) or massive debt burden bond auction failure in the future leading to higher interest rate shock?

The government has agreed to shore up just about everybody for at least the next three months to include( bailing out self-employed workers, all types of workers sat at home not working, bankrupt retail-chains that are closed for business, grounded airlines...? unemployed...) whilst simultaneously dealing with rapid and unprecedented tax receipt decline, leaving the possibility of a solvency crisis down the line. Furthermore, serious issues around if we will have a deal/no-deal Brexit is still hanging in the balance and time is running out!

In addition, a disorderly currency devaluation or absolute currency collapse is not an unreasonable possibility with current interest rates so low and an extreme amount of borrowing taking place or needed.

Also of concern would be a supply chain collapse( if tighter cross-border measures are taken to deal with the COVID-19 crisis borders could close for supplies). Furthermore widespread absenteeism ( due to sickness, self-isolation or care responsibilities within the logistics sector could well add to this problem and potentially lead to acute and then chronic food staples/medication/protective gear/sanitary product shortages, which could quickly lead to a rapid decline in civil order as we know it.


Added together in my estimation the outlook is not good or pretty as these are very significant risks that the UK is facing right now.

I have not taken into consideration the wider potential (shock) or contagion issues such as a possible euro member state debt default would mean for the UK. (Think Italy/Greece/Spain/Portugal during 2009 GFC when nothing was closed, and now in 2020 with a total COVID-19 shutdown scenario). Let us not underestimate the consequences of further escalation of tensions between the US and China?/North Korea?/Iran?/Syria?/Russia? would mean for the global markets.

Not to mention any other black swan event unimaginable.

Ten years of cuts and austerity and now all of a sudden we have an unlimited supply of cash available for everything and everyone.

Something just does not seem right to me at the moment.

So what is the altermative? What puzzles me is who is going to lend all this money when virtually every country has to do the same thing.

[JDot]

[/quote]

So what is the alternative? What puzzles me is who is going to lend all this money when virtually every country has to do the same thing.[/quote]

The short answer to your first question seems to be the South Korean model. Which would be to isolate the most vulnerable in society! Test suspected cases then contact trace confirmed cases and follow up further test relentlessly, follow with strict quarantines for those concerned.

Keep the businesses open!
https://www.sciencemag.org/news/2020/03 ... s-success#

They have seemed to have gotten a better grip on things than the lockdown countries in Europe just by testing.
https://www.worldometers.info/coronavir ... 9-testing/

As for your second question ( who is going to lend all this money?) I don't have an answer.

[tikunetih]

Where's all the money going to come from?

In the shorter term they'll just print it: the DMO will issue gilts and the BoE will buy them, handing any coupons back to the Treasury. Expect to see Yield Curve Control such that yields can be screwed to the floor, or set at whatever other rate the Govt/BoE determines will help them meet their objectives.

So why won't the currency collapse in this scenario?

Well, it might well do so if every other nation in the world was booming and the UK was alone in a solo crisis, but instead every other nation is/will be in a broadly similar situation. Hence, the currency will just be in the usual beauty contest with every other currency, better than the ropier ones, worse than the stronger ones, but not the outright dead duck disaster it would be if the UK's situation was uniquely bad. Safety in numbers!

In many ways, the GFC was the perfect preparation for the present situation, a dry run to embolden policymakers about what they could do without markets rejecting their actions, allowing them to act now with the utmost speed, which they've done.

And in the future? Tax and inflation to erode all this govt debt. And if other nations are up for it, for central banks to eventually convert it all into some zero coupon perpetual virus bonds that they park in some dark corner of their balance sheet that eventually is just ignored on debt/GDP ratios. Safety in numbers again!

What to do in the face of this scenario? Not hold much cash in the medium to long term, because savers will be slowly boiled.

[ADrunkenMarcus]

my main non unit trust / investment trust holding, is domino's pizza group, which hasn't really been hit that hard. go compare is the other main one, i think it's about 65-70p atm, but i am comfortable with either business model, and so won't be selling.

Indeed, Domino's seem to have experienced growth in sales as people order takeaways to their homes. Moreover, although they are not paying the dividend in April, they did commit to reviewing that over the months ahead, so it may be that we do receive a dividend but some months later - depending on circumstances.

Renishaw cancelled their interim, which is no surprise as they are very cyclical - they cut the dividend in 2009 but restored it to a new record in 2010.

I am hoping the likes of Kone, Unilever, Diageo and AstraZeneca will maintain their dividends.

Best wishes

Mark.

[JDot]

Nearly 10 million jobless people files for unemployment in the US in the last two weeks. This is the shapes rise of unemployment in the history of the country. Like they say when America catches a cold the rest of the world gets sick.

The link below has a graph to illustrate.

https://www.theguardian.com/business/20 ... us-economy

[Bouleversee]

Tikunetih said:

"What to do in the face of this scenario? Not hold much cash in the medium to long term, because savers will be slowly boiled."
Yes, they have been simmering for quite a while already.

JDot said:
" when America catches a cold the rest of the world gets sick." So what happens when America catches a coronavirus? The imagination has been boggling for some time.

[Bouleversee]

Tikunethi also asked where all the money is going to come from. It has crossed my mind that they might discontinue ISA subscriptions or even take the wrapper off existing ones. Do you think they would dare? Not that there are many gains or dividends left to tax as things stand but one lives in hope that they will recover to some extent eventually. I can't believe that my ISAs, which were showing a very good total return last year, are now showing an overall loss on the portfolio value and most of the dividends have been axed. I have several which haven't made it to the list yet.

[JDot]

Tikunetih said:

"What to do in the face of this scenario? Not hold much cash in the medium to long term, because savers will be slowly boiled."
Yes, they have been simmering for quite a while already.

JDot said:
" when America catches a cold the rest of the world gets sick." So what happens when America catches a coronavirus? The imagination has been boggling for some time.

Hi Bouleversee


Rice and beans would be my top investment tip at the moment, and that's not an exaggeration!

[ADrunkenMarcus]

Nearly 10 million jobless people files for unemployment in the US in the last two weeks. This is the shapes rise of unemployment in the history of the country. Like they say when America catches a cold the rest of the world gets sick.

The link below has a graph to illustrate.

https://www.theguardian.com/business/20 ... us-economy

And I suspect the true number is even higher. The system was not designed to process so many applications in such a short period of time. Anecdotally, some people are unemployed but have been unable to file.

Best wishes

Mark.

[tikunetih]

Can you elaborate on why we should not hold much cash? I mean I know money is printing but everything else is getting hammered at the same time.

I wrote: "What to do in the face of this scenario? Not hold much cash in the medium to long term, because savers will be slowly boiled."

I'd expect the financial repression we've experienced since the GFC to continue for a lot longer. So, negative real interest rates, ie. returns on cash lower than inflation, for a further very lengthy period.

Over the past decade, those who could not tolerate any investment risk or volatility and simply saved in cash instead paid a very heavy price for their choice, and I'd expect this state of affairs to continue in the coming decade.

Of course, people should do the usual thing and keep a sufficient cash emergency fund. And investment risk should only be taken with money that can be away put for an appropriately lengthy time period. Those dependent on investment portfolios for living expenses may hold additional cash, potentially much more, in order to act as reserves so as to defer selling risk assets during downturns when prices are low. Etc, etc. All the usual sensible stuff.

But unlike during the 2000s, when it was straightforward to earn useful positive real returns on cash (if you put a little effort in and sought out the best accounts), the coming period, similar to the last decade but perhaps worse IMO, is likely to see cash balances steadily eroded by returns that are lower than inflation. With this in mind, personally I would be seeking to limit my cash balances over the years ahead. Limit is not avoid; as stated above, it's sensible to hold some cash, but IMO doing so is likely to become more "expensive" than even the past decade.

The point isn't to be absolutist - allocation decisions rarely if ever are.

There's nothing new in any of the above; we've experienced the financial repression for a decade already; just expect more of the same, or worse, for the next decade IMO.

Rice and beans would be my investment tip at the moment, and that's not an exaggeration.
I think what will go down from here on will be remembered and talked about for at least the next one hundred years, long after we are gone. This is a big crisis no doubt about it and the lockdown does not look like it will end anytime soon which may mean more damage to the economy.

You'd be a fool to deny it's not a big deal, but it will pass and we'll put it behind us. The world will adapt and continue, economies will recover and grow again, and markets will move to new highs.