Reality bites very hard; US virus caseload jumps again; consumer confidence dives; many countries take drastic action; China profits shrink; a dash for cash; UST 10yr yield at 0.68%; oil and gold down; NZ$1 = 60.4 USc; TWI-5 = 66.6

Reality bites very hard; US virus caseload jumps again; consumer confidence dives; many countries take drastic action; China profits shrink; a dash for cash; UST 10yr yield at 0.68%; oil and gold down; NZ$1 = 60.4 USc; TWI-5 = 66.6

Here's our summary of key economic events over the weekend that affect New Zealand, with news the world's economy is shutting down.

The US is still getting explosive increases in its coronavirus infections and deaths, becoming the world's epicenter for the disease. State shutdowns are spreading in the absence of any Federal leadership to deal with the crisis, except on a financial level.

As a consequence, consumer confidence is diving, almost its steepest decline ever. Not only is it likely to get worse, it is likely to get much worse as people realise the policy failures have been toxic. It could get ugly for civil society there. New emergency measures are on the table for helping State and local governments from going broke.

On the economic front, Congress has finally passed its US$2 tln stimulus and bailout bill, and it is now signed into law.

In the real economy, the dive in economic activity is having many costly effects, not the least of which is that back-haul freight opportunities have vanished leaving only one-way traffic and effectively doubling the cost of moving goods.

Across the now-closed border, Canada cut its official interest rate by -50 bps overnight to 0.25%. But that was just part of a coordinated response with their government which included a 75% wage subsidy for affected workers.

India has also cut its official interest rate by -75 bps to 4.40% and unleashed US$30 bln of stimulus.

In the UK, senior members of their government, including their prime minister, have tested positive for Covid-19. And the UK has suffered a credit rating downgrade.

China has now effectively closed its borders to travelers who are not citizens, worried about undoing their hard-won and painful Covid-19 containment gains. Their recovery rate is now up to 91% but it has cost them 3300 deaths so far. But China is increasingly optimistic it can restart its economy and a number of innovative 'helicopter' measures are being deployed. New Zealand's immediate economic future probably depends on these being a widespread success.

Company profits fell by a third in the first two months of 2020 in China, according to official data. It is a result that reinforces the fact that while the impact was nationwide, the virus shutdown only really affected one province fully. China's 2020 economic issues will be more due to the international effects than its own local impacts.

In Australia, confused signals continue and there is still no nationwide lockdown. But they have just announced a "two person rule" - no groups larger than that, and that may effectively be a lockdown. Some state borders are closed, many businesses are shuttering, but many aren't. And many people are ignoring the risks. They have a fragmented and dangerous situation brewing.

And we are now all aware of the wild up and down swings in the equity markets. But more analysts are suspecting that this unique volatility is being driven by trading robots, software AI that was not designed for a crisis like this. Real investors are getting hurt by these programmatic gyrations. And those that are getting out, are rushing cash funds. That leaves pension and superannuation funds (KiwiSaver in passive index funds?) very vulnerable indeed because managers of this vast sector became enamoured with robot trading.

For the record, the S&P500 was down -3.4% on Friday. European markets fell as much in their final session. But it is crystal clear equity market pricing signals now mean squat as investors have no idea how to price their holdings. Time won't be friendly to pricing decisions taken over the past week.


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There are now 514 Covid-19 cases identified in New Zealand, with another 146 new cases over the weekend, in six important clusters. One person has now died here. We have nine people in hospital with the disease, 3 in Wellington, and 1 each in Blenheim, Nelson, Whangarei, Waikato, Taranaki and Dunedin hospitals. There are currently no cases in any Auckland or Christchurch hospital. More than half the cases from visitors are from three countries - Australia, the UK and the USA. Direct visitors make up more than half our cases and they have spread it to the other half.

Worldwide, the latest compilation of Covid-19 data is here. The global tally is now 692,000 of officially confirmed cases, up +162,000 from this time on Saturday and still accelerating. China is no longer the epicenter. That has moved to the US which now has 125,000 cases, up a third since Saturday. Italy is about to report 100,000 cases; Spain is about to pass China's total. Australia has now over 4000 cases, and 16 deaths. The pace of global infection is accelerating even quicker and global deaths now exceed 33,000.

The UST 10yr yield is soft again today at under 0.68% and down another -5 bps. Their 2-10 curve is still very positive at +43 bps but slightly less so overnight. Their 1-5 curve is positive at +29 bps, also less so, and their 3m-10yr curve is still way out there at +67 bps and also less so. The Aussie Govt 10yr yield is now at 0.86% which is down -3 bps. The China Govt 10yr is unchanged at 2.68%. The NZ Govt 10 yr yield is also unchanged at 1.10%.

Worldwide, companies with investment grade ratings are racing to raise more cash ahead of expected cashflow strains. Companies without investment grade ratings will be paying steep premiums if they can raise market debt.

Gold is down -US$10 today, to US$1,628/oz.

US oil prices are staying lower at under US$21.50/bbl and the Brent benchmark is also low at just under US$25/bbl. The world is drowning in crude oil nobody needs anymore.

The Kiwi dollar is starting today marginally firmer again than this time Saturday, now at 60.4 USc. That is a remarkable +4c rise in a week as the greenback takes a hammering. On the cross rates we are still high at 98 AUc. Against the euro we are at 54.2 euro cents and a +2c rise in a week. That means our TWI-5 is up to 66.6 and its highest in ten days.

Bitcoin is now at US$6,104 and giving up all its gains over the past week. The bitcoin rate is charted in the exchange rate set below.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Our exchange rate chart is here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

117 Comments

If you want a frightening look at what lies ahead for the US check out these projections that the University of Washington are running (updated twice daily). Includes peak and total case loads as well as available medical facilities. Also gives a projected breakdown state by state: https://covid19.healthdata.org/projections

USA is in serious trouble. Daily hundreds of flights, trains, buses, each and everyone potential CV19 carrier(s) spreading far and wide. No possible way health system will cope. Trump will inevitably get the blame same as any other President would have.

14
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And rightly so, along with the Governors that aren't doing enough.

Cuomo For President?

Not with his latest opposition to locking down NYC. He was looking promising for a while.

That was the dumbest thing he could have said. He should have parked his anti trump sentiment and committed to lock down. It'll bite him big time

10
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He should get the blame. He has managed it incredibly poorly.

Well he did close the European & some other borders reasonably smartly, but the enemy was already within. Seems to have seduced himself into thinking this outbreak was not much more than the annual flu & would run out in the “warmer” weather. Apart from that, could one question exactly how Trump Inc is faring amongst all of this, the all important occupancy rates for instance.

From Panthers link - "Total COVID-19 deaths projected to August 4, 2020 in United States of America 81,114 COVID-19 deaths.

From CDC 17-18 estimates there were 61,000 (46-95k 95% UI) flu related deaths. So an extra 20,000 projected deaths when compared with 17-18.

https://www.cdc.gov/flu/about/burden/index.html

It's important to note:"The estimated excess demand on hospital systems is predicated on the enactment of social distancing measures in all states that have not done so already within the next week and maintenance of these measures throughout the epidemic, emphasizing the importance of implementing, enforcing, and maintaining these measures to mitigate hospital system overload and prevent deaths"

Without this you could expect in the range of 7M deaths over the next 1-3 years.

Also while there would likely be some cross over in likely mortality (individuals with pre-existing health conditions) it wouldn't be 100% overlap for sure, also there's the knock on effects of unavailability of medical services driven by COVID-19 capacity constraints.

Americans are dying to stay at a Trump hotel.

Voila!

Projections are as good as anyones guess as you cannot factor in the human element. Most countries are doing a poor job of the self isolation. New cases should be contained within your bubble so should very quickly stop within a month. With Trump in control the USA is screwed. In his brain the financial crisis and the medical crisis were mutually exclusive and had nothing to do with one another.

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This is going to be the great reset crisis.

18
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No no no, oneroof said there will be a bounce back in May!

19
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Did they specifiy a year?

2032 would be my guess. I wonder how much money Oneroof and other companies get from pushing up house prices from RE companies.
I think they will soon switch direction once it starts to show in monthly figures that market is falling they will have plenty of website clicks with people wondering what to do next.
This could also create a massive rush to sell and accelerate price falls as everyone starts to cash up and lock in profits.
The Re agents will make plenty from this market even tho they will pretend to feel bad for everyone.
What we need now is a new app that can replace agents and then see who has last laugh.

It can only be the great reset if it drives policy makers to fundamentally change the way we develop economic policies. Otherwise we will just go down the same path as before, possibly faster.

Wait and see if economists start changing the way the talk about it and the advice they give to Governments.

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Nothing like Doug Noland on a Monday morning.

'The Austrian “Bubble Economy” concept will be invaluable as we analyze dynamics going forward. From the economic perspective, a decade of ultra-loose financial conditions incentivized businesses to over-borrow – from multinational corporations, to mid- and small business to sole proprietorships. Tens of thousands of unprofitable (and negative cashflow generating) enterprises proliferated throughout the economy – from Silicon Valley “tech Bubble 2.0,” to shale, alternative energy, biotech, media, entertainment and leisure, and so on. Ultra-loose financial conditions stoked over- and malinvestment, while generally distorting business spending patterns. Confounding post-Bubble financial and economic landscapes will create investment decision mayhem.

U.S. and global economies are severely maladjusted – and ravenous Credit gluttons. Importantly, this ensures Trillions of monetary stimulus along with Trillions of fiscal spending will be absorbed as if dumping buckets of water onto the scorching desert sand.

Stimulus will for a time sustain scores of uneconomic enterprises, at the cost of prolonging the workout process. Nonetheless, with Bubbles popping in shale, technology, leisure and entertainment and elsewhere, millions of job losses will prove permanent.'

http://creditbubblebulletin.blogspot.com/2020/03/weekly-commentary-solve...

Yep, these are the zombie companies everyone has been talking about. They aren't just small either, Ford is one...

"Ford is one"

The business may have new shareholders in the next economic cycle.

GM restructured its debts and has different set of shareholders from pre 2008 to post Chap 11 bankruptcy reorganisation, yet the business is still operating.

Other companies where businesses had a vastly different group of shareholders in 2012 vs pre GFC 2008
- Citigroup -
- AIG

Fords bonds are junk and it was issuing them in the last few years to buy back it's own stock. Last time I looked they have something like 35b in junk bonds, make 47m a year and still just gave their workers a 6k bonus...

These companies are acting recklessly financially because they know that when push comes to shove, the government will just bail them out. They have no incentive to actually operate well.

You've got to wonder if the world adjusts to a 20% reduced demand, then we do muddle along at that reduced rate for 10 years before the next energy crisis pushes us down in consumption again.

I had to change my phone display to show the actual day as I was losing track of what day it is, I don't own a calendar. Stay safe everyone, cabin fever is a real and serious thing!

in a week it just won't matter

Oz has maybe 10 days left if their numbers keep doubling every 2-3 days before the hospitals collapse. I thought my niece in Brisbane whos a theater nurse was mad by getting takeaways last week for her birthday but look at this attitude.
https://www.theage.com.au/national/nsw/they-haven-t-listened-medical-pro...

SFM says today you cant leave the house unless you are going to work. WTF.

Shut it down cobber else the Rapture will be something everybody will believe in.

Everyday without flu symptoms is a good day

I still know what day it is as I'm still running a work routine through the week, with work to finish up. The weekend still feels like a weekend then.

I was talking with the neighbours over the fence and the rainy weather yesterday wasn't helping with the cabin fever. Sometimes keeping busy can help.

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it's finally raining, not much yet but 30ml forecast. Lots of capital stock on the market now, going to get interesting and very sad for many. I am starting out now with zero feed and staring down into winter. I sprayed some Humic acid on yesterday with a bit of fert, all it's done so far is wreck my sprayer pump and now I have to find a shop that's open to get some parts.
My soil temperatures are still high so with a bit of luck the Southerly following this ( we always clear from the Sth in NZ) won't be too cold but looks like single digit temps in South Island.

Up here on the west coast we are still really dry. Still on fire restrictions. We have run out of grass silage. One paddock maize so poor we fed straight to the cows, so 2/3 less maize silage in stack going into next season. Waiting for final rules around what stock agents can and cant do re selling cattle. And I have a heap of cattle I have to get rid of before winter. With no feed reserves its not the winter to be going into overstocked. So far our staff have a good attitude to the self isolation rules and staying positive. Each minor issue does blow up worse thou when you cant remedy straight away. But so far going okay. Wishing rain for those, like us, that need it.

We're all wishing for rain for you guys too.

I'm hopeful the govt will realize from this what a valuable role farmers do actually play.

We're all wishing for rain for you guys too.

I'm hopeful the govt will realize from this what a valuable role farmers do actually play.

Wilco that sounds pretty rough, I am waiting for info on what Stk agents can do too, was quoted stock last night so sounds like it's all go. Often we get a bit of respite after a tough patch, so perhaps an Indian summer is due followed by a warm winter.

I've got machinic mates in HB that are the fix anything type. I could give them a shout to see if they could take a look. Let me know.

I suspect Andrew is also a fix anything, old school New Zealand type. He just needs the parts!

More contacts the better, who you know not what you know.

they are not that expensive new, so yes I pulled it apart cleaned it all up and now it's back together waiting for a test run. I'm getting better at fixing stuff these days, that's the stuff you can.
Thanks for the offer.

Are you also affected by the whole right-to-repaid schmozzle and the demand for older tractors instead of new ones requiring brand service agents?

The modern tractors have so much specialised hardware that only the dealer can fix them. Great for business, not so for the farmer

Harris Machinery is open in Omahu Rd for pump parts

thanks Pat, I may need to give them a ring

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We have been talking about The Great Reset for years, and now it is happening.
The pandemic is the side show, as the world markets readjust themselves. What is catching out the unwary, is the speed of the reset, its virtually instant, and unstoppable. The buckets of water onto hot sand is a good analogy.

Either a reset or a bubble 3.0 blown by the IMF/BIS through some new debt instruments yet to be revealed.

Seeking info. I have a new 6.2 solar system. Then nec minute, Genisis, says the new price is12c a unit for what I send them.
Up to now it seemed every company paid 8c. Is there a published price, and a unpublished price.
What is going on here.

In engrish?
6.2 solar system?

And you are complaining about them paying you 50% more than you thought you were going to get?

It's a gloat thinly veiled as a complaint. Probably owns a Nissan Leaf and incessantly posts on social media about how much range they've gotten out of a charge.

Pointing out a possible issue with power supply to educate us as investors, would be more to the point.

@Pragmatist. 6.2 KW. And I did not complain, I asked for info - read the post.
If there are any informed comments out there on various pricings please let me know.

Thanks for pointing this put. A lot of useful info to keep an eye on. Thanks.

Pointing out that the price is doubling. Why is that, are there power supply issues?
Try thinking about it pragmatically Prag.

All the lakes in the south are full.

You'd hope not a power price rise...

Any solar export from my house gets paid at the market rate. So I get a lot of variability. There could be many reasons they are paying that much when typically the rate is 10c a unit but can vary substantially (as low as less than a cent to 50 cents or more). My guess is they are either doing well at 12c on average or they are pushing a greener policy.

Thanks Dictator. First info based comment so far. Who are you selling it to? KH

We've had no notice of change from Ecotricity. Still 8c. Do you have a 3phase system? I am aware of folks with 3phase receiving substantially more than 12c.

No Casual Observer. Not three phase. A simple residential setup.

KH, I am with Genesis, have a 4.8kW solar rig (LG panels and 9.8kWh 400 volt battery, SolarEdge inverter and controller), and have received the notice of the increased FIT (8 to 12 c starting 1 April). Their reason:

The solar electricity buyback rate reflects several different factors, including the underlying market price for wholesale electricity. As you may have seen in the media, this has increased over the last year, and we’re now lifting your buyback rate too.

My public monitoring site here.

SolarEdge gear has the ability to change profiles: ours is currently (pun, sorry):
Winter - from 15 April to 15 August - 'Maximise Self Consumption' from 0700 to 2359, then 'Charge from Solar or Grid' from 0000 to 0659
Summer - from 16 August - 14 April - 'Maximise Self Consumption' from 0000 to 0614, then 'Charge from Solar or Grid' from 0615 to 0659, then 'Maximise Self Consumption' from 0700 to 2359

Overall (last full year Feb 19-Feb 20) my average cost per unit was around 17c, and we're consuming about 12,000 kWh per year, so are not stinting ourselves. I frankly don't expect that average cost per unit to change much because the greater FIT is highly likely to be counteracted by higher unit and line charges.

thanks Waymad. So I can now guess that is the standard Genesis price. Bit of a gamechanger from the near universal 8c offered about.
I was about to switch to Ecotricity from Genesis, but now ??
I'm not in a hurry, have to get to grips with how this works. And see the pattern of what we generate and what we use. The 6.2 KW is at one of the two houses we live in so it's a bit all over the place.
I see also that Trustpower offer the ability to offer the surplus to friends (ie, I can send it from me to me). But there is a 50KW limit, which is tiny and probably not worth it and being linked to Trustpower.

"The French government has officially sanctioned prescriptions of chloroquine to treat certain coronavirus patients."
https://www.france24.com/en/video/20200327-france-sanctions-use-of-chlor...

US too - 1200 trials going on in NYC.

And just over the weekend my prediction for the USA was disregarded by some commentators here. While Trump dithers rome will burn.

But remember this: The US didn't die from Covid. I died WITH Covid, but it died from the Fed.

14
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Hmmm

"in the absence of any Federal leadership"

The US were first to ban flights from China (before us)
Then banned flights from Europe (before us)
Have dispatched 2 hospital ships, one to NY and one to LA
Enacted wartime measures for mask, glove and ventilator production
Created a CVID19 test that gives results in 15 mins
deployed the military to build makeshift hospitals in NY
....

"And we are now all aware of the wild up and down swings in the equity markets. But more analysts are suspecting that this unique volatility is being driven by trading robots"

No this unique volatility is due to the massive economic impact of the virus and the fact that the markets were massively overvalued. The Dow had grown by 70% over the last 3 years while GDP had been growing at 3% pa. Sentiment based stocks with no correlation to earnings, so really just a partial correction

I agree that the quote you mentioned was loaded with anti-Trump sentiment. Not cool. If we are going to load up the commentary why not start with our Queen of Kindness and her soft and late response?

The missing six weeks: how Trump failed the biggest test of his life
https://www.theguardian.com/us-news/2020/mar/28/trump-coronavirus-politi...

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In two weeks straya will be in a world of pain.
Also Kiwi Indians are really worried about their families in India.
Could get nasty there too.
The way I see it is we have to keep our border shut for the foreseeable future.
Then we can get our local economy back up and running albeit without the tourism side.
Must stop a second wave coming.
The govt must know this, they can't afford to keep paying for us to stay home.
Will be a different NZ for quite some time, but I'm ok with that.

14
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Yep, even if we eliminate the virus here over this lockdown, we will be unable to open our borders for probably a year at a minimum

If that's the case - I wonder what that means for our tourism and airline sector. That is a lot of lost income for many, for a significant period of time.

If we can stamp it out internally domestic life can get back to 'relative' normal - domestic tourism will pick up (slowly at first) especially in the absence of international options. I'd expect domestic travel to lift again too but perhaps only to say 50% of pre-COVID demand due to economic downturn & no international connections.

A year is a long time. Pretty good chance that some treatment options that greatly reduce mortality will become available during that period, and that there will be a massive increase in available hospital resource, many medical staff with immunity, or maybe even a lower-mortality wuflu variant that confers some immunity will naturally develop. Buying time right now is super useful.

60 Minutes last night featured a piece on the University of Queensland who see promise in a combined treatment of a HIV drug and chloroquine. A good treatment is our best hope in lieu of a vaccine.
Here's hoping an effective treatment is widely available in the next 3-6 months.

We just cannot risk tourists coming in from anywhere in the world.
Even if a country is adamant they are virus free, would you believe it? I wouldn't.
With the way global air travel is, with people transiting through other countries, it just ain't going to happen.
Air NZ will just have to service domestic routes.
As in any downturn people will take any job on offer, tourism workers to hort for example.
Move with the times as they say.

Countries will be out selling the 'travel in your own country and keep the money here'.
Don't leave home till you've seen the country.

Yep keep the borders closed indefinitely. We just have to accept that international tourism is non existent for a year or so.
We need to get the domestic economy back to relative 'normality' in 2-3 months

If the 5 minute result test that Abbott Labs are developing becomes widely available and is found to be reliable - perhaps people the world over will be tested prior to boarding a plane.

I don't see how any pre-testing can be fail safe. For most viral tests, they are only accurate once the viral load is sufficient to show up. However, because of the incubation period, it can take time before the viral load reaches this point. You could have just picked up the virus and not know and it not show in any test. So the only way to keep the virus at bay, is to quarantine people before or after the flight for the maximum possible incubation period for the viral load timescale to be met.

Singapore is managing incoming folk well. However it's probably not conducive to tourism:

1. Registration
2. Mobile app that records geographic location
3. Thrice daily check-ins (contact centre calls the person)
4. Video calls to confirm you are where you're supposed to be during those check-ins

If the visitor doesn't behave they get Singapore style punishment.

By 'Singapore style punishment' you mean actual consequences to breaking the rules.

There is currently a ban on transit passengers in Singapore.

"Air NZ will just have to service domestic routes"

Is that a viable business model?
Where does fuel / maintenance parts / come from?
where do solvent customers come from?
NZ cant isolate itself from (a non functioning) world economy and supply chains and tick over as normal

You cant undo economies to scale /leverage / debt nicely

My guess 18 months plus.
Airlines restarting at 30 percent capacity and prices double to recover some costs and new costs like cleaning and advertising to get bums on seats again.

There was a long article interviewing Greg Foran in the Herald in the weekend.

"''What I want to make sure that we do as an organisation is ensure that we come out of this fit and ready to deal with the changed aviation market. There's a risk that you could go through Covid 19, survive and come out, (but) really encumbered with high debt, labour in excess of what you need because you'll never quite got back to the size you were.

And then on the horizon airlines that have failed but now their assets have been bought for pennies in the dollar and the competitor that you're up against is much fitter and able than what you are so you need to get yourself in shape during this period.

There won't be a shortage of airplanes at the end of this and some are going to get some incredible deals and going to set themselves up with new contracts and new ways of working and Air NZ will have to compete with that."

Once we have reliable fast testing (perhaps only weeks away) flying might become a lot less problematic - test at check-in, perhaps again on arrival. At worst add a couple of days quarantine on arrival.

Yes, most likely not until everyone has had the covid vaccine.
So it all depends on how long until that happens.

and so the lesson is learned

""More than half the cases from visitors are from three countries - Australia, the UK and the USA. Direct visitors make up more than half our cases and they have spread it to the other half.""

If we live to see a next time will it be remembered and acted upon.?

It is very obvious that the virus has come via travelers flying in NZ. And another very obvious point is: when you only test those who had flew in for COVID19, and those who have direct contact with them, you will see that they are the majority of your cases! As up this morning, the test criteria was only for travelers and those in contact with confirmed cases. Only after the death of a woman who checked in with flu-liked symptom, and I kid you not she checked in last Friday, who was not tested for Corona virus (as she did not meet the protocol), the MOH has changed its protocol (from this morning) to check people with flu-like symptom.

NZ testing regime, has a massive catching up to do. And NZ Health system does stop people from checking in to hospitals (and the population is used to that, people dying from cancer, losing eyesight etc, because doctors tell them to stay put) until too late. So many seriously sick people might be roughing it up in their homes.

So, NZ does not know much about COVID-19 in NZ as the MOH has acted very poorly and continues to act poorly. So we know nothing about our cases as we do not know nothing about the extent of the spread in our communities. Only when testing is scaled up, we will know about the more probable statistics. at the moment, COVID-19 stats are utterly useless and misleading (purposefully so) so people get a false sense of security.

Higher interest rates and taxes in the future to pay back debt created to get us through these times:

https://www.newshub.co.nz/home/money/2020/03/coronavirus-massive-govt-bo...

Wonder if Bagrie would be admitting this is he was still working for the banks? Any thoughts on what this means for assets, such as shares and property?

Yep what I said yesterday. Patently obvious.

"Patently obvious"

FYI, from Tony Alexander ...

Will prices therefore sit unchanged? No. They are likely to fall slightly in our main centres, to a greater degree in the regions, and to a far greater degree in our tourism hotspots. Regional declines will be accentuated by the effects of the drought and people shifting to the cities looking for work. Also, investors have probably over-bought in many places and will look to consolidate their portfolios now.

Fourth, we still have property shortages in our major cities, and investing in property involves a long-term focus which on the basis of the ongoing shortage remains in favour of long-term price gains eventually returning.

But the long-term fundamentals of our housing market don't look to have much changed. In fact, with the isolation-reputation of New Zealand hopefully to be enhanced in coming weeks and months, long-term net migration inflows may well take a new step up once global movement options are fully back on line next year sometime.

https://www.stuff.co.nz/life-style/homed/120584834/housing-market-will-f...

And the following opinion is sponsored by OneRoof ..

But does this freezing of activity and of our economy imply a different outlook for the housing market than the one I presented last week? No, if the government, Reserve Bank, and banks can pull this off. I listed six factors so let’s run through them again.

1. Interest rates are at record lows, heading lower, and still set to stay low for years.

2. We enter this period without a boom in housing debt.

3. Banks remain well capitalised and look like they are about to receive even more support for lending from the Reserve Bank and maybe Treasury.

4. China shows us that if implemented early enough lockdowns/self-isolation can work. There is light at the end of the tunnel and inhabitants of Wuhan are slowly leaving their homes, entering their streets and parks to once again start enjoying life.

5. The shortages are there, and now they will get worse because all house building is now on hold for 4-8 weeks.

6. There is a fiscal stimulus coming and the Minister of Finance has even told us when – in the May 14 “Recovery Budget”.

https://www.oneroof.co.nz/news/the-real-estate-market-is-about-to-freeze...

To gain a balanced perspective on the property market, what are the counterpoints to Tony's points raised above? Please feel free to list yours below.

1. Interest rates are at record lows, heading lower, and still set to stay low for years.

Likely. And will highly leveraged households with a high debt service ratio still be able to maintain their debt service payments at the low interest rates if they don't have a job or experience a significant loss in income? FYI, forecasts are for unemployment in NZ to reach 9%, levels not seen since the early 1990's.

5. The shortages are there, and now they will get worse because all house building is now on hold for 4-8 weeks.

He is still arguing that there is a underlying housing demand shortage and that will mean house prices do not fall by much in Auckland. Yet market prices are determined by effective demand vs effective supply.

For example, what will happen to that house in Queenstown purchased by a property investor using high amounts of mortgage debt to be let on Airbnb and is now either sitting vacant, or earning a negative cashflow as it is let on the long term tenant market? What will that property owner do in those financial circumstances if they have also lost their job or experienced a significant fall in their household income? What would you do under those circumstances if there is an absence of buyers? (due to buyers that don't want to buy at the current price as they believe prices will fall, falling confidence in the property market, fear of loss of job / loss of income, etc)

What will happen to that house in Auckland, that is owned by a property investor that is negatively geared and has negative cashflow, who has just lost their job or experienced a large loss in income?

Not going to waste my not so precious time! The guy is a just a long term cheerleader of the property bubble!

Fair enough.

I choose to raise counterpoints for first home buyers to consider so that they can make a fully informed buying decision of the potential risks involved with their largest asset purchase.

They deserve to see both viewpoints to make a fully informed choice, not just a one sided viewpoint from the vested financial interests of property industry and property promoters.

They are then free to choose their viewpoint and act accordingly. However they are not free to choose the consequences of their choice.

There can e all the demand in the world but with people not working and the economy tanking the money is not their to buy at the current levels.
Very few will buy in this kind of market.
Kiwi Saver accounts have taken a hammering.
Low job security for most.
Less money in the system.
Less immigration, less leaving as well.
Low interest rates aren't much of an incentive when you could wait and buy a hundred thousand less.
There is a world of hurt out money hurt out there and it will not become clear how bad it has effected the economy for months.

One positive, price increase could potentially be Kiwi expats returning home in mass if NZ control the virus fast.

Who is picking sharemarkets tank again this week.
I am picking a retest to previous bottom soon and plenty of companies reporting they will run out of cash soon unless goverment bails them out.
I am watching carefully very few options to purchase at these prices.
ASX has better value compared to NZX

Yep, still a long way further to go yet, wait for the Bankruptcies to start rolling through and the cascading effect that that will have. Depending on where you draw the start (lets say Lehman collapse) the GFC took a full year to unfold.

As others have commented many of the largest companies on the NZX are utilities which should in theory be less impacted than tech & resource stocks, while NZX has further to go it'll probably remain more stable than others - AIA and SKC are in for a rough ride however and I wouldn't put it past Fletchers to F#$%^ up a surge of infrastructure investment and go belly up.

KMD and SCY look like they will struggle and also Farmers but they are private so who knows what cash they hold.
Mountain Warehouse is also selling same type of product to KMD will be interesting to see how KMD can keep paying rents and staff costs when consumers are going slash costs and maybe hold of $300 jackets etc.
SCY would actually be a good fit for Briscoes they could expand range of house hold items etc into exsiting stores etc but could cut cost base by selling without pesky sales people and undercut Noel lemmings etc which could put pressure on WHS profits.
Remember Ikea will have a big impact on homewares which Briscoes have relied on lastt 10 years.
Rebel Sport will also face increased pressure soon from Decathlon with online shipping straight from Australia at much better prices.
The Sydney Decathlon is right next to the airport which would allow fast easy shipping.
We may start seeing struggling NZ operators fail as consumers move more online in this current environment and hunt for better prices etc.
I think we may even see Aldi make a move to NZ if retail property prices collapse as they could setup for less than current mobsters.

Im not too sure!

It feels like the markets still have some blinkers on and reality hasnt set in yet.

Nothing would surprise me at this point but by the end of April, it will all be down alot

theglc. Yes, the NZX could go down 'a lot' more by then. But for a long term investor perspective the NZX50 was 4268pts in 9/2007 before the GFC, it's currently at 9370pts. This gap probably less if cyclicals are excluded. Unless you think corporate NZ will do a lemming act over coming months, a 10 year investment in equities will still have returned a better result than investing in cash or equivalents even allowing for more downside to come. The property light brigade team lead by Tony Alexander the great continues its into the valley of death ride ignoring threatening cannon to the left and right, dismissing the markets prediction that property values are set to slide as evidenced by its marking down of real estate investment trust and retirement village operator shares. We shall see. As was my ultimately beneficial strategy in the immediate post GFC 2009 period I believe sound defensive companies continue to be good investments and am positioned accordingly ....... albeit with a stronger weighting to cash just in case this time really is different.

It's amazing how we can be hogtied by assumptions.

'Investing' is 'tapping into the resource/energy flow, in a parasitic fashion, contributing nothing but expecting something.

And 'cyclical' is a linear comment, but we live in exponential times. Beware self-justification, methinks.

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It really annoys me how commentators quote the CCP figures on COVID virus deaths in China as fact when clearly its rubbish. We all know its a lie. Was it 21 million mobile phone accounts that disappeared from China in the past 3 months? And anyone who saw all the videos coming out before the CCP censored all outgoing citizen reporters, were attesting to 24/7 crematorium operations. Even the number of urns delivered around the country is in the tens of thousands. 3,000? Phooey!! To honour the murdered whistleblowers in China, could we not say "the questionable death rate as reported by the CCP......."

I guess the official numbers get quoted because those are the only 'approved' stats available... and the actual number is anybody's guess. It could be 10000, it could be a million, or anywhere between those. Or less. Or more. So news writers can either quote the official numbers, or come up with their own estimates, which would be just as unreliable.
That said, conclusions based on the official stats are meaningless.

I had to look up the meaning of 'Pall' - only knowing the word from Pall Mall. Appropriate but best headline for a longtime was last weeks "It's a wreck".

Why the American Health System is designed to fail. Bureaucratic delays by institutions CDC (Center for Disease Control) had to apply to the FDA for approval to conduct tests. Which was refused. In 2016 the Trump administration gutted the CDC
The Inquiry - A must listen BBC podcast
https://www.bbc.co.uk/sounds/play/w3csythj

Everyone here needs to watch the Pandemic Doco on Netfix. Its the best watch for a decade. This was made BEFORE the Corona virus and it sends chills down your spine now better than any horror movie. The only issue is the timeline of the series but it was not before a few episodes that a date of August 2019 came up for H2N5 eradication in Egypt. The problem for us all now is clear, its no longer going to be a once in a 100 year event but a once in 10 year event.

An emergency room doctor in Elmhurst, Queens, gives a rare look inside a hospital at the center of the coronavirus pandemic. “We don’t have the tools that we need.”

‘People Are Dying’: Battling Coronavirus Inside a N.Y.C. Hospital | NYT News
https://youtu.be/bE68xVXf8Kw

Its only the start, watch Pandemic on Netflix they have been closing hundreds of small town hospitals all over the USA for years due to lack of funding. Trump also pulled 20% of the CDC budget a few years back. The USA is screwed on so many levels you don't know where to start.

And they were basically bankrupt before this started.
I think if this isn't the end of The States as we know it, it will not be long until it dose implode.

How likely is and independent California / New York before the end of this decade?

I'm guessing there will be at least one split off.

Foreign buyers have been slapped with tougher rules to prevent acquisition of Australian companies during the coronavirus crisis amid plunging share prices and fears of predatory takeovers. Federal Treasurer Frydenberg moved on Sunday night to slash a key takeover threshold from $1.2 billion to zero in order to ensure any overseas bid could be blocked. The new rules apply to all overseas buyers, Will NZ follow suit?

"Will NZ follow suit?" - Knowing this government, it will... 6-12 months later than needed. Knowing the opposition, if they get elected, NZ will be merrily sold to the Chinese.

Yep. However unfortunately such a thing would come up against those who are newly enamoured with China. On both sides of the house.

Well, even if (big IF) long-haul tourism comes back, we should at the very least ban any flight, cruise (include yachting, rowing, sailing, drifting, rafting, submarining in the definition of 'cruise') originating from, or transiting through, any country that cannot prove to independent observers that it has no wet markets.....