Archive for July, 2020

Yesterday the ABS data showed that for the first time Australia entered in deflation and the media duly scare mongered us.

This is a very good example how data can be misinterpreted.

The deflation happened as the government subsidised childcare and in April oil price crashed.

As the childcare subsidy will disappear in July and oil price recovered we are already out of deflation! It was just a statistical quirk!


Sweden has been treated like a pariah as it did not implement the lock down. It simply forbade large gathering. How did it went?

Initially it went quite bad – but the numbers are actually a misrepresentation. The number are high as the Government, for their on admission (surprise!!), did not enforce a strict lockdown for elderly people.

Sweden faired worse than its neighbors – but also better than many full lock down states

Sweden 10.2 million -Deaths 5,667

New Jersey (full lockdown) population 9.2 million deaths 15,684

The reality that Sweden came in on average as middle of the pack.

The great advantage is that now there are only 2 deaths per day (similar numbers to flue and other diseases).

The chance of a second wave is low as they achieved the herd immunity.

The GDP fell just by -1.5% while other countries on average -10% and did not need any mega stimulus which saddles the next generations with debt.

So Sweden 1 – rest of the World 0

Lockdowns made little difference to the number of people who have died from coronavirus, a study has claimedResearchers from the University of Toronto and University of Texas found that whether a country was locked down or not was “not associated” with the Covid-19 death rate.

Experts compared mortality rates and cases in 50 badly-hit countries up until May 1 and calculated that only 33 out of every million people had died from the virus…The study found that imposing lockdown measures succeeded in stopping hospitals becoming overwhelmed, but it did not translate into a significant reduction in deaths.

“Government actions such as border closures, full lockdowns, and a high rate of Covid-19 testing were not associated with statistically significant reductions in the number of critical cases or overall mortality,” the study, published in the Lancet online journal EClinicalMedicine, said.”
(“Coronavirus lockdown ‘made no difference to number of deaths but stopped hospitals being overwhelmed”Evening Standard)

Sources in Channel 9 and SBS are pointing to the fact that almost every case in Australia is linked to the quarantine hotel bungle.

If this is true this is not acceptable as Dan Andrew is always ready to point fingers at families.

In a Democracy Dan Andrews and his ministers should resign. Moreover there should be a massive lawsuit for the billion damages they caused.

I am simply disgusted.

Source: Pinterest

This market is utterly scary. While it still playing with the June reversal island scenario (has not broken the 2 resistances on SP500 3180 and 3225) it is an utterly scary market. Yesterday intraday reversal was not seen since March 2008.

On one side we have the current market sistained by the Fed, Robinhood accounts and the vaccine coming ever closer.

On the other side we have continuous virus resurgence, elevated valuation, Fed balance sheet.

This can lead to a crash or a blow off top in equal measure.

Portfolio construction with real diversification (remembering that in 2008 only currencies and gold maintained diversification) can help. The most important is to be psychologically ready to anything as even both situations can happen before year end.

As per my July 2020 newsletter, unless the market clears 3,180 and then 3,225 the market is trapped by Island Reversal Pattern of early June.

It will clear it,there could be even a nice correction with a backstop at 2,925/2,960 but it takes a bit of time.

Why so sure?

There is too much stimulus in the market and too much cash on the sidelines.

All the “working metals” have recovered a lot and even the shipping (Dry Baltic) shipping rates went up 250% in June.

The earning season sentiment in the US is very low. Factset’s Earning Insights shows that SP500 earnings are expected to decline 44% and Bottom-up estimates fell 37% over the quarter – a lot worse than the average and it all happened in April when the market was stopped – so a quite easy beat as June the sentiment recovered a lot, economic surprises are at 2 years high and USD weakening.

Victoria is in lockdown again.

As I reported before most of the cases came from the mismanagement of the quarantine hotel. By the way the same security agency that had the contract for the quarantine hotel got the job for the towers.

The second issue was the Black Lives Matter – admitting that there is no linkage to known cases (which is not true as one BLM protester and store worker in H &M was one of the first transmission cases).

By looking at the pure numbers font Deputy medical Officer of Victoria) number are bad, but do not stuck up for a mass hysteria pandemic.

The Covid-19 numbers that sparked the closure was 191 (the day after they got reclassified to 164, due to double up) of which 75 from the infamous towers and 33 from the quarantine hotel.

This is on a total of 23,000 tests in that day and excluding false positive (on average 3%, font Food and Drug Administration).

This means 0.71%. of which just 20% had symptoms.

So much so that the current number in the hospitals due to Covid-19 Victoria are (not one day but overall) 41 people in hospital and 7 in ICU (in May/June 2019 there were 21,800 cases on influenza in Victoria, 37 people dead, hospitalisation rate 3.4%).

For this “scare” Australia has already reached the maximum withdrawal from Super (early super access A$27Bn) and Victoria closure will cost between A$1 and A$2 a week.

It will cost 1% of Australian GDP and the closure of many small businesses like cafes and restaurant.

Even worst the modelling from Brain and Mind Centre that suicides had already spiked by 750 in the fist lockdown and could spike to 1,500.

You can make up up mind, too angry to write it.

A simple mandatory face mask wearing would have solved the situation.