Archive for the ‘Uncategorized’ Category

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.

Once you analyze the facts you can see that the current spike is a Dan Andrew’s mistake.

The biggest known cluster is linked to the mismanagement of 2 quarantine hotel.

The others are 4 families of immigrant descent and the Government forgot to set non English advice instructions.

Even more interesting one of these families is linked to an H&M store. The person infected in the H&M (font The Age) was at Black Lives Matter protest rally. As it shows that he was infectious it means that he would have infected people at the rally.

So do not point fingers at families, but at the Victorian Government mismanagement.

President Trump vs Biden

Posted: June 25, 2020 in Uncategorized
Tags: ,

Font – Washington Times

Black Lives Matters damaged seriously President Trump campaign who is now seriously lagging Biden. While this is a serious blow – he was similarly lagging Clinton in July 2016.

CNN and the media are in general are pushing this lead as the end of President chance of being reelected.

I call it wishful thinking.

My call is that we need to see the state of the US economy in September to understand, but we should see if President Trump starts to panic and do something that compromise his chances like restarting a trade war.

The big plus for President Trump is that Biden wants to roll back part of the corporate tax. At the end most voters vote with their wallets and protesters usually do not vote.

The data point and the Fed stimulus point at a good market for September.

Also we should have a vaccine by Moderna in September (currently in Stage 3) . A vaccine release would be a huge boost.

Statistically the market has a good history of returns when the exiting president is Republican. Contrary to the common perception a Democrat President statistically is overall better for the market.

Not a conspiracy theory – but a reality Mr Moncef Slaoui has been nominated for Operation Warp Speed in developing the vaccine. Mr. Moncef Slaoui resigned from the bard of Moderna last week. Coincidences.

So the President battle is still wide open and still has President Trump in advantage – contrary to the media.

This quarter showed a massive difference between stock market performances and bond performances. A bit like last quarter, but this time favouring bonds.

This is due to the fact that stocks rallied as they believed the Covid-19 sell off was finished, while bond traders where always skeptical.

This situation is bringing the balanced abd pension fund to reallocate huge quantity of money from bond to stocks (in US between USD35 billion to USD billion – in the world in excess of USD170 billion).

So there could be a dip – that probably the media will attribute to Covid -19 resurgence.

The recent battle between Indian and Chinese troops deserves to be examined more deeply.

Since 2014 there have been more confrontations between China and India than from 1962 (last India China war) to 2014.

On the surface a confrontation seems a one way affair with China a clear winner as its army is much more modern. The reality is that while China has the upper hand in a limited confrontation (both are nuclear powers with the complete triad of delivery – from missile to ship) a war would not be so easy as logistic at high altitude is an issue.

The Chinese airfield are such at a high altitude that airplanes can carry only 50% of the load. Also the most modern Chinese equipment is in the South to confront the Americans.

But aside the potential conflict it is the strategic implications that makes things interesting. India has always tried to appear neutral in the power struggle between the US and China. This latest attack will probably push India to the US side – a moment that could have the same importance of when the US succeeded to separate the USSR from China (1956-1966) that practically laid the foundations to the US victory over the USSR.

India can easily increase the cost of Chinese interference in Vietnam, Malaysia and other countries. China imports 80% of energy needs via the Indian Ocean and Strait of Malacca – with the US more than happy to sell anti-ship missile systems this could create an easy choke point to China.

If India pivots to a US, Japan, Australia alliance it could change the entire strategic map of the Asian power struggle. Interestingly also the issue of the “Western coalition” versus China is that – even if the West has slightly military advantage – it will never have the numbers to confront China. India could tilt this equation quite easily.

As a strategic moment for the balance of power in East – the behaviour of India is of strategic importance.

What we know so far is that Coronavirus started in China, but in reality in September/ October 2019.

There are several facts that point to this theory.

In September /October the hospital traffic in Wuhan increased by over 100% year on year (383 cars/day October 2018 versus 714 October 2019, satellite images).

Probably it escaped from the Wuhan Institute of virology that was studying SARS and Coronavirus. The prove in that it is that in October that institute had an emergency closure in early October 2019. In a facility with 300 person all phone communication went dark (disappeared ) for 2 weeks. It is not a confirmation, but no mobile activity between 7 October and 24 October in a place with over 300 people indicates an issue to me.

Why they were playing with the virus (the Americans were doing the same until 2014 as a bioweapon until President Obama closed the studies)s as deemed too dangerous) it is not known.

The main theory is that China wanted to catch up in the vaccine development with the US and trying to create an HIV vaccine. This is supported by the fact that some anti HIV treatment are partially effective against Covid-19.

Another theory that it was a weapon development – this is supported by the fact that mainly the virus seems to cripple the system and not a pure killer like Ebola. A warfare doctrine shows that for any “wounded” you take away 3 combatants – so much more important to cripple than to kill.

China knew, but adopted a “if we go down you go down with us” – this is proven by the fact that China closed the internal flights from Wuhan 2 weeks before closing international flights.

Western governments reacted late and then got taken over by panic.

They did reacted late as from early January everybody knew of a pandemic and the incoming Chinese holidays.

They panicked as the Coronavirus modelling was wrong (they did assume no change in habit) and the model produced different outcome if run on different computers (yes for real!). Even in Australia the lowest ICU bed prediction was 5,000 – the max ICU bed occupancy has been 23 April at 98. Even in UK, Italy and US the predictions were off by 90% (UK death prediction 500,000 vs real 36,793 at 25th May). There are some studies that compulsory mask wearing and better management of old people facility would have been as effective as lockdown.

The virus is losing potency – probably it will transform into an annual flue -like event (and flue kills almost as Covid-19). Vaccine will be found as too many AI – pharmaceutical companies are studying it. SARS vaccine was never found as SARS disappeared and so the research funding.

The market – as I told my clients the March 2020 as striking resemblance to the 2008 crisis, but in a superfast move (practically the Nov 2007 – Mar 2009 in a single month.

Following that script we should be in the June -July 2009 period where the market went sideways (with violence) and then powered up into Christmas.

So practically this period will stay from a Fed hard put around 2,900 – 2,950 and a roof 3,250/3,300 until the end of July.

Then bold prediction – in 2009 the market powered up 11% which would bring us to SP500 close to 3,600.

Fabio Ferro

Scala Private Wealth