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Showing posts with label Americas. Show all posts
Showing posts with label Americas. Show all posts

Saturday, February 29, 2020

Covid-19 reaches the West


https://youtu.be/F_Jq7ItdHtA

Tourists wearing protective masks walks by the Duomo in central Milan on February 27,2020 amid fears over the spread of the novel Coronavirus. - The number of COVID-19 infections in Italy, the hardest hit country in Europe, hits the 400 mark late on February 26, with 12 deaths. (Photo by Miguel MEDINA/ AFP)

But keep cool, negative volatility will likely be followed by positive volatility


The coronavirus (Covid-19) outbreak has officially reached Western shores.

Since last week, the virus has spread to Europe, Brazil and the Middle East.

New cases have emerged across Europe.

There have been more than 81,000 people infected with nearly 3,000 deaths so far.

Just the previous Wednesday on Feb 19, stocks in the US were complacently at record highs, never mind that Asian markets were roiling and taking huge hits, thanks to the coronavirus that first took roots in Wuhan, China.

Asia has been battling this disease since January. Markets have been volatile but have since recovered as the number of infections have reduced and governments have been diligent at handling the disease.

It is like the domino effect, with the same reactions, panic and emotions that happened throughout Asia now migrating to the West.

It is almost deja-vu, seeing the fear and market reaction, no doubt the impact to the Dow and S&P 500 has a significantly larger impact.

The Covid-19’s largest impact is the fear it has transmitted with rapid speed.

In the US, stocks fell for a sixth straight day on Thursday, with the S&P 500 price index falling 4.4% and bringing this pullback officially into correction territory. On a six-day basis, the Dow Jones was down 13.4% at 25,766.64.

This plummet followed California governor Gavin Newsom’s revealing on Thursday that the state was monitoring 8,400 people for potential Covid-19 infections.

Adding to the bleak outlook, Goldman Sachs slashed its profit outlook and warned the outbreak could cost Donald Trump his reelection in November.

The MSCI all-country global index has dropped more than 7% over this six-day period. Considering stocks were at record highs the previous Wednesday, this is very harsh and painful.

Why, Tesla was all the hype earlier in February. It was US$901 on Feb 21, and new higher target prices were being touted by analysts, nevermind that the stock still didn’t have a price to earnings ratio.

In the last five days, Tesla’s share price had tumbled more than US$200 or 32.7% as of Thursday to close at US$679.

Don’t panic

For the average investor, panic has likely set in.

Whose confidence level would not be shaken with a 12% decline in the S&P 500 in six trading days?

Now talk of a 20% decline is starting to emerge.

Meanwhile the 10-year US treasury yield dropped below 1.3%, remaining in record-low territory.

The downward spiral in oil also continued with WTI crude toppling 2.71% to trade at US$47.41 per barrel on Thursday. Brent oil hovered at the US$51.42 level. So just barely two months into 2020, it is Covid-19 which has been responsible for crushing markets and dismantling profits across the globe.

Many have already slashed market forecasts for the year.

In the past two market stories featured on StarBizweek, readers would know that Fisher MarketMinder thinks that fears over the virus’ market impact are overdone. It thinks that this is part of a longer-running pattern prevalent throughout this bull market.

“The stock market will do what it does – rise and fall.

“If you’ve got a plan based on your risk tolerance and investment horizon, don’t let fear make you swerve in the wrong direction and lose traction.

“Panic is never a good investment strategy, ” says Fisher MarketMinder.

It adds that Covid-19 is grabbing attention because it is new and somewhat novel, but that doesn’t mean its economic effects far outweigh more familiar diseases.

The Center for Disease Control and Prevention estimates that there were 34,200 deaths in the United States from influenza during the 2018-2019 flu season.

For infections of Covid-19 outside of China, the mortality appears very low.

Furthermore, the people who are dying tend to be the old and immuno-suppressed or otherwise sick.

“Supply chain disruptions as officials work to contain the outbreak probably dent growth temporarily, but markets are efficient and likely pricing in these expectations as companies issue statements.

“Short-term volatility could linger, but patience should pay off, in our view, ” it adds.

As legendary investor Ben Graham once said, stocks are a voting machine in the short term and a weighing machine in the long term.

“Sentiment wins in the short term, but fundamentals matter most over more meaningful stretches.

“The ‘why’ and ‘how much’ behind sentiment swings strike us far less important.

“The emotional swing itself is what matters.

“Market fundamentals likely didn’t change on a dime seven days ago, ” says Fisher MarketMinder.

Thursday’s drop simply put US stocks back at mid-October levels.

Furthermore, the world hasn’t fundamentally changed.

While there is no way to know when this drop will end or how much further it will fall, no drop is permanent.

“Whether the rebound starts in days or weeks, whether it is fast or slow, if you have held on thus far, we think you ought to reap the good that comes with the bad.

“Corrections hurt your long-term returns only if you don’t participate in the rebounds that follow them.

“Selling may feel good at a time like this. But when you remove emotion from the equation, all it does is transform a market decline into an actual portfolio loss, ” says Fisher MarketMinder.

Another investor who is cheering is one of the smartest investors in the world, Warren Buffett, chairman and CEO of Berkshire Hathaway.

He says the stock market rout we’re witnessing today is “good for us.”

“We’re a net buyer of stocks over time, ” he says on CNBC.

“Most people are savers, they should want the market to go down.

“They should want to buy at a lower price.”

Buffett’s comments came as Dow futures were down by about 800 points or 3% on Monday as stocks around the world plunged as the Covid-19 outbreak escalated.

Regarding the coronavirus specifically, Buffett made clear that he is “not a specialist.” And he warns that “a very significant percentage of our businesses one way are affected.”

However, he reiterates that investors should be more focused on the long term, not the short term.

“If you’re buying a business, and that’s what stocks are... you’re gonna own it for 10 or 20 years, ” he says.

“The real question is has the 10-year or 20-year outlook for American businesses changed in the last 24 hours or 48 hours?” the legendary investor asks.

Source link


Read more:


Covid-19 reaches the West


https://youtu.be/F_Jq7ItdHtA

Tourists wearing protective masks walks by the Duomo in central Milan on February 27,2020 amid fears over the spread of the novel Coronavirus. - The number of COVID-19 infections in Italy, the hardest hit country in Europe, hits the 400 mark late on February 26, with 12 deaths. (Photo by Miguel MEDINA/ AFP)

But keep cool, negative volatility will likely be followed by positive volatility


The coronavirus (Covid-19) outbreak has officially reached Western shores.

Since last week, the virus has spread to Europe, Brazil and the Middle East.

New cases have emerged across Europe.

There have been more than 81,000 people infected with nearly 3,000 deaths so far.

Just the previous Wednesday on Feb 19, stocks in the US were complacently at record highs, never mind that Asian markets were roiling and taking huge hits, thanks to the coronavirus that first took roots in Wuhan, China.

Asia has been battling this disease since January. Markets have been volatile but have since recovered as the number of infections have reduced and governments have been diligent at handling the disease.

It is like the domino effect, with the same reactions, panic and emotions that happened throughout Asia now migrating to the West.

It is almost deja-vu, seeing the fear and market reaction, no doubt the impact to the Dow and S&P 500 has a significantly larger impact.

The Covid-19’s largest impact is the fear it has transmitted with rapid speed.

In the US, stocks fell for a sixth straight day on Thursday, with the S&P 500 price index falling 4.4% and bringing this pullback officially into correction territory. On a six-day basis, the Dow Jones was down 13.4% at 25,766.64.

This plummet followed California governor Gavin Newsom’s revealing on Thursday that the state was monitoring 8,400 people for potential Covid-19 infections.

Adding to the bleak outlook, Goldman Sachs slashed its profit outlook and warned the outbreak could cost Donald Trump his reelection in November.

The MSCI all-country global index has dropped more than 7% over this six-day period. Considering stocks were at record highs the previous Wednesday, this is very harsh and painful.

Why, Tesla was all the hype earlier in February. It was US$901 on Feb 21, and new higher target prices were being touted by analysts, nevermind that the stock still didn’t have a price to earnings ratio.

In the last five days, Tesla’s share price had tumbled more than US$200 or 32.7% as of Thursday to close at US$679.

Don’t panic

For the average investor, panic has likely set in.

Whose confidence level would not be shaken with a 12% decline in the S&P 500 in six trading days?

Now talk of a 20% decline is starting to emerge.

Meanwhile the 10-year US treasury yield dropped below 1.3%, remaining in record-low territory.

The downward spiral in oil also continued with WTI crude toppling 2.71% to trade at US$47.41 per barrel on Thursday. Brent oil hovered at the US$51.42 level. So just barely two months into 2020, it is Covid-19 which has been responsible for crushing markets and dismantling profits across the globe.

Many have already slashed market forecasts for the year.

In the past two market stories featured on StarBizweek, readers would know that Fisher MarketMinder thinks that fears over the virus’ market impact are overdone. It thinks that this is part of a longer-running pattern prevalent throughout this bull market.

“The stock market will do what it does – rise and fall.

“If you’ve got a plan based on your risk tolerance and investment horizon, don’t let fear make you swerve in the wrong direction and lose traction.

“Panic is never a good investment strategy, ” says Fisher MarketMinder.

It adds that Covid-19 is grabbing attention because it is new and somewhat novel, but that doesn’t mean its economic effects far outweigh more familiar diseases.

The Center for Disease Control and Prevention estimates that there were 34,200 deaths in the United States from influenza during the 2018-2019 flu season.

For infections of Covid-19 outside of China, the mortality appears very low.

Furthermore, the people who are dying tend to be the old and immuno-suppressed or otherwise sick.

“Supply chain disruptions as officials work to contain the outbreak probably dent growth temporarily, but markets are efficient and likely pricing in these expectations as companies issue statements.

“Short-term volatility could linger, but patience should pay off, in our view, ” it adds.

As legendary investor Ben Graham once said, stocks are a voting machine in the short term and a weighing machine in the long term.

“Sentiment wins in the short term, but fundamentals matter most over more meaningful stretches.

“The ‘why’ and ‘how much’ behind sentiment swings strike us far less important.

“The emotional swing itself is what matters.

“Market fundamentals likely didn’t change on a dime seven days ago, ” says Fisher MarketMinder.

Thursday’s drop simply put US stocks back at mid-October levels.

Furthermore, the world hasn’t fundamentally changed.

While there is no way to know when this drop will end or how much further it will fall, no drop is permanent.

“Whether the rebound starts in days or weeks, whether it is fast or slow, if you have held on thus far, we think you ought to reap the good that comes with the bad.

“Corrections hurt your long-term returns only if you don’t participate in the rebounds that follow them.

“Selling may feel good at a time like this. But when you remove emotion from the equation, all it does is transform a market decline into an actual portfolio loss, ” says Fisher MarketMinder.

Another investor who is cheering is one of the smartest investors in the world, Warren Buffett, chairman and CEO of Berkshire Hathaway.

He says the stock market rout we’re witnessing today is “good for us.”

“We’re a net buyer of stocks over time, ” he says on CNBC.

“Most people are savers, they should want the market to go down.

“They should want to buy at a lower price.”

Buffett’s comments came as Dow futures were down by about 800 points or 3% on Monday as stocks around the world plunged as the Covid-19 outbreak escalated.

Regarding the coronavirus specifically, Buffett made clear that he is “not a specialist.” And he warns that “a very significant percentage of our businesses one way are affected.”

However, he reiterates that investors should be more focused on the long term, not the short term.

“If you’re buying a business, and that’s what stocks are... you’re gonna own it for 10 or 20 years, ” he says.

“The real question is has the 10-year or 20-year outlook for American businesses changed in the last 24 hours or 48 hours?” the legendary investor asks.

Source link


Read more:

Sunday, January 24, 2016

Don’t blame China for global economic jitters; China contributed >25% global growth

‘There has never been a real recovery in North America and western Europe since 2008.’ Photograph: Kai Pfaffenbach/Reuters

The US stock market has just had the worst start to a year in its history. At the same time, European and Japanese stock markets have lost around 10% and 15% of their values respectively; the Chinese stock market has resumed its headlong dash downward; and the oil price has fallen to the lowest level in 12 years, reflecting (and anticipating) worldwide economic slowdown.

According to the dominant economic narrative of recent times, 2016 was the year when the world economy would recover fully from the 2008 crash. The US would lead this recovery by generating growth and jobs via fiscal conservatism and pro-business policies. Reflecting the economy’s robust growth, the US stock market reached new heights in 2015, although disrupted by the mess in the Chinese stock market over the summer. By last October, US unemployment had fallen from the post-crisis peak of 10% to 5%, bringing it back close to the pre-crisis low. In a show of confidence, last month the US Federal Reserve finally raised its interest rate for the first time in nine years.

Not far behind the US, the story goes, have been Britain and Ireland. Hit harder than the US by the financial crisis, they have, however, recovered handsomely because they kept their nerve and stuck to the right, if unpopular, policies. Spending cuts, focused on wasteful welfare spending, accelerated job creation by making it more difficult for people to live off the taxpayer. They sensibly didn’t give in to the banker-bashers and chose not to over-regulate the financial sector.

Even the continental European economies have been finally picking up, it was said, having accepted the need for fiscal discipline, labour market reform and cutting business regulations. The world – at least the rich world – was finally set for a full recovery. So what has gone wrong?

Those who put forward the narrative are now trying to blame China in advance for the coming economic woes. George Osborne has been at the forefront, warning this month of a “dangerous cocktail of new threats” in which the devaluation of the Chinese currency and the fall in oil prices (both in large part due to China’s economic slowdown) figured most prominently. If our recovery was to be blown off course, he implied, it would be because China had mismanaged its economy.

China is, of course, an important factor in the global economy. Only 2.5% of the world economy in 1978, on the eve of its economic reform, it now accounts for around 13%. However, its importance should not be exaggerated. As of 2014, the US (22.5%) the eurozone (17%) and Japan (7%) together accounted for nearly half of the world economy. The rich world vastly overshadows China. Unless you are a developing economy whose export basket is mainly made up of primary commodities destined for China, you cannot blame your economic ills on its slowdown.

The truth is that there has never been a real recovery from the 2008 crisis in North America and western Europe. According to the IMF, at the end of 2015, inflation-adjusted income per head (in national currency) was lower than the pre-crisis peak in 11 out of 20 of those countries. In five (Austria, Iceland, Ireland, Switzerland and the UK), it was only just higher – by between 0.05% (Austria) and 0.3% (Ireland). Only in four countries – Germany, Canada, the US and Sweden – was per-capita income materially higher than the pre-crisis peak.

Even in Germany, the best performing of those four countries, per capita income growth rate was just 0.8% a year between its last peak (2008) and 2015. The US growth rate, at 0.4% per year, was half that. Compare that with the 1% annual growth rate that Japan notched up during its so-called “lost two decades” between 1990 and 2010.

To make things worse, much of the recovery has been driven by asset market bubbles, blown up by the injection of cash into the financial market through quantitative easing. These asset bubbles have been most dramatic in the US and UK. They were already at an unprecedented level in 2013 and 2014, but scaled new heights in 2015. The US stock market reached the highest ever level in May 2015 and, after the dip over the summer, more or less came back to that level in December. Having come down by nearly a quarter from its April 2015 peak, Britain’s stock market is currently not quite so inflated, but the UK has another bubble to reckon with, in the housing market, where prices are 7% higher than the pre-crisis peak of 2007.

Thus seen, the main causes of the current economic turmoil lie firmly in the rich nations – especially in the finance-driven US and UK. Having refused to fundamentally restructure their economies after 2008, the only way they could generate any sort of recovery was with another set of asset bubbles. Their governments and financial sectors talked up anaemic recovery as an impressive comeback, propagating the myth that huge bubbles are a measure of economic health.

Whether or not the recent market turmoil leads to a protracted slide or a violent crash, it is proof that we have wasted the past seven years propping up a bankrupt economic model. Before things get any worse, we need to replace it with one in which the financial sector is made less complex and more patient, investment in the real economy is encouraged by fiscal and technological incentives, and measures are brought in to reduce inequality so that demand can be maintained without creating more debts.

None of these will be easy to implement, but we know what the alternative is – a permanent state of low growth, instability, and depressed living standards for the vast majority.

By Ha-Joon Chang, Guardian Economics News

China Should Take Advantage of Industry 4.0 to Shift Economy: Bill Gates

Philanthropist and co-founder of Microsoft, Bill Gates attends a panel "Preparing for the Next Pandemic" at the World Economic Forum in Davos, Switzerland, on January 22, 2016. [Photo: Imagine China]


Microsoft founder Bill Gates has urged China to take advantage of the Fourth Industrial Revolution so as to face the challenge of transforming its economy.

He made the remarks on the sidelines of the ongoing World Economic Forum Annual Meeting in Davos.

"Well China's obviously got a lot of people, a lot of smart people. It's moved to not only have more people college educated, but lots of engineers, to raise the quality of those engineering skills. It's created a recognition that if people invent something that they can be rewarded for that, which is leading to all new sorts of companies. Not just the IT space, although that's the most visible, but also more and more in biology, robotics, those things, so China's going to carry its weight. "

Gates also expressed his optimism about China's economic future.

"There are a lot of great talents in China. You know, building up the educational system, you know, I think China has got a very bright future. I have a lot of confidence in China partly because they take long-term view; they look at what other countries are doing. You know China is going to contribute more and more to the world's innovation."

Figures from China's National Bureau of Statistics showed that the country's Gross Domestic Product in 2015 registered an annual growth rate of 6.9 percent, the lowest level since 1990.

Though slowing, China still contributed to more than 25 percent to global economic growth.

The Fourth Industrial Revolution, also termed as Industry 4.0, is marked by convergence of smart technology including artificial intelligence with the industrial sector.- (CRI Online)

China to Contribute More to World's Innovation: Bill Gates

With a strong ambition to promote science and research, China is going to contribute more and more to the world's innovation, Microsoft's founder Bill Gates has said.

In an interview on the sidelines of the World Economic Forum (WEF) Annual Meeting 2016, Gates said China would probably become a huge participant in the Fourth Industrial Revolution, which is already under way and bringing a fast and disruptive change for most industries.

Talking about the new revolution, Gates believed the digital revolution, something he spent most of his life working on, was a huge factor.

The Fourth Industrial Revolution refers to the ongoing transformation of our society and economy, driven by advances in artificial intelligence, robotics, autonomous vehicles, 3D printing, nanotechnology and other areas of science.

A key enabler of much of these new technologies is the Internet where Microsoft and Gates has been a leading contributor to the progress.

"An industrial revolution is coming to increase productivity very dramatically," Gates said, "It creates opportunities, and it creates challenges."

New technology changes would free some labor, so that people can do more in culture sector, according to Gates.

He said China had built some advantages in science and technology through its educational system, and the country had a strong will to promote its contribution in different sciences sectors.

"China obviously has a lot of people and a lot of smart people," Gates said, "Not only a lot of people college-educated, but also a lot of engineers with the quality of engineering skills. "

"With the recognition that people have done something that they can be rewarded for that, many experts have been leaded to have new companies, in IT sector, biology, robots and other those things."

"China is going to carry its weight," he said.

In recent years, the former internet elite has been dedicating to driving innovation in global health and development. As the Co-chair of the Bill & Melinda Gates Foundation, Gates decided to join force with China's Tsinghua University to establish the Global Health Drug Discovery Institute(GHDDI) in Beijing during his Davos visit.

"China has made incredible progress in reducing poverty and shares the foundation's commitment to harnessing advances in science and technology to address the critical health challenges affecting the world's poorest people," Gates said.

"We are excited about GHDDI's potential to drive innovation in global health research and development, and look forward to partnering with Tsinghua University on our continued work to address the world's most pressing global health challenges."

In an article released during WEF, Gates pledged his foundation would invest more in innovation in the coming years. He told Xinhua that the investment that went to China's innovation was expected to increase gradually.

Asked whether he worried about China's economic slowdown, which may hinder innovation progress, Gates said he was quite optimistic about China's economic outlook.

"I have a lot of confidence in China, partly because they take a long-term view, and partly because they look what other countries are doing," he said.

Faced with a challenge of turning the economy into new directions, Gates said China had great talent to achieve its goal.

"Most countries would envy a 6.9 percent growth, I think China has a bright future,"he said, adding "China is going to be contributing more and more to the world's innovation." - Xinhua Web Editor: Zhang Peng

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