The Recession that cannot be priced Part 2

Dear Members,

The base line financial thinking here came from Blonde Money.

I am summarising what they say down to Point 8. The rest is my own work.

  1. The US employment figures out today, are a disaster. They confirm that we are in the worst recession in our lifetimes
  2. This will have a major impact. We will not recover from it easily
  3. Any yet the stock market seems reasonably buoyant – Why?
  4. Because they have priced in an average recession
  5. Look at the Chart above. Average recession 16%. Today we have 15% drop from the hights, priced into the market. We think this is wildly optimistic.
  6. The Stock market is being supported in the short term by global government interventions. The IMF estimate these to be in the order of $US 14 Trillion or 15% world GDP ($US 80 Trillion)
  7. See the Dark Blue S&P 500 line. Showing the Feds effective interventions. 
  8. This Chart on Financial Conditions Indices FCI’s showing the standard deviations about the mean across a range of financial indices from around the world. Three standard deviations is 99.7% of the data distribution. That is to say that anything above 3 is extreme. As you can see in 2008 they lost control resulting in the banks collapsing. Today we have put $US 14 Trillion globally to support the position and we are just below 3 SD’s. Our problem is that there is a law of diminishing returns see https://www.welhatchamber.co.uk/whatever-it-takes-unless-we-cannot-afford-it/ also the Courts are starting to rule against continuous support. There comes a point where you have to take the pain now, rather than keep kicking it down the road for the next generation.
  9.  You cannot have 20 to 30 million people lose their jobs and bounce back overnight. In the US, 20.5 million jobs were wiped out in April, the most ever reported, with unemployment rising to 14.7 percent, the highest since the Great Depression.
  10. These people have friends and familities. They are in shock. They have lost loved ones and bread winners alike. For the forseeable future they will not be spending money. They will be risk averse.
    1. Why go to the pub? When you can meet friends in the back garden
    2. Why visit a theatre or cinema?
    3. Why travel on a plane or any kind of public transport?
    4. Why travel to work?
    5. Why sit in an office?
    6. Basically any kind of human contact is a risk to your life, AND that of your Spouse and Children
    7. Excuse my French but XXXX THAT!
  11. This in turn will devastate income into firms who will employ fewer people who, along with the firms, will pay fewer taxes.
  12. Global supply chains based upon the firms excluding local labour in the pursuit of profit, will need to cease. The local people will need the jobs and the state won’t be able to support the out of work. Let’s hope they can support the sick.
  13. The Nation State will take preference again. EU countries are shutting their Borders. The UK have stopped the planes and have today announced 14 Day Quaranteen for all arrivals. Shame they did not do this in February when we asked them to. They could have saved 60,000 lives and counting and £trillions of our money. I don’t think we have heared the last of this. New Zealand Lives lost 20. They stopped the planes in March.
  14. So Where to from here?
  • Batten down the hatches
  • Reset the clocks. I think this time we may be forced to take the pain now, rather than kick it down the road for our children to deal with.
  • Start to help each other. Bring back human self respect for each other.
  • Slash the Public sector overhead back to 1990 levels. Things have only got worse over that time.
  • Reward people who solve problems. From Nurses to Researchers.
  • Put lives,  health and wellbeing before money, status, entitlement and exclusion.
  • Encourage Growth Mindset behaviour.
  • Identify the greedy fixed mindset people who focus on money, and remove their influence and sense of entitlement. How can a university vice chancellor, or a news reader be worth £350k a year. Its pure Hubris, at our expense.
  • Elect people with the skills to help us solve our own problems. People who help us to be prepared for new scenarious. (which they have spectacularly failed to do in this case, in fact they have actively prevented it. (PPE))
  • Identify all the people who were responsible for the failure to deliver PPE, from Councils to PCT;s to government and make them accountable.
  • At least remove their ongoing ludicrous salaries and pension packages.
  • Then give that money to people who can make a difference. If we do that we will be fine.
  • We don’t need the Gold Bathtap brigade. Their agenda is to shaft us. Our mistake was to let them.
  • This has happened over the last 30 years. If you want to know more read my book Crime of the Century when it comes out.

Stay safe

Nick

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