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New outbreaks, the risk of new containment and the economic impact. Ouch!

June 21, 2020

Tedros Adhanom Ghebreyesus, Director General of the World Health Organization (WHO), has pointed this out Covid-19 pandemic “accelerates”Since Thursday, June 18, the largest number of cases has been recorded in a single day with more than 150,000 cases. The American continent has become the new epicenter of the pandemic with almost half of the cases worldwide. Apparently, This story is not over yet.

At this point we are all tired of being in our homes and can no longer bear the desire to go back to work. Many are up to their neck in all of this and wholeheartedly yearn for a full return to normal. And it’s not a mood. The economy just can’t go any further. If society doesn’t open soon, the virus will be the least of our problems.

April was a terrible month for everyone. In the United States, for example, they went from (almost) full employment to the worst rate since the Great Depression in just a few weeks. We are obviously facing an extremely unusual situation. So extraordinary that it puts us in the dark because the old models, which help us a lot with estimates, don’t work very well. Mayo surprised us with an improvement, but the phenomenon is explained with common sense. There were many layoffs during childbirth, but many of these people regained their positions during the discharge phase. This may serve as an explanation now, but at the time the old models couldn’t predict it.

New outbreaks, the risk of new containment and the economic impact. Ouch!New outbreaks, the risk of new containment and the economic impact. Ouch!

Read on: IBM launches Watson Works to help companies plan their return to work

Many media misinterpreted the data because they assumed that the recovery would be faster than expected. However, the data now available confirm that the increase in May was exceptional, as a result of an exceptional situation.. The shopkeeper, who had to close for a few months, had to fire his employees because he couldn’t pay the wages, but when he reopened his shop, he called his people again. This does not mean that the economy returned to what it was before.

While the situation on the street was very complicated, the markets celebrated. He had a moment of panic and the March crash was certainly very painful. But optimism has dominated ever since. We owe this primarily to the US Federal Reserve, which took vigorous measures to lift the mood on the markets. Wall Street loves money. And the Fed has been pumping money into the system at a galactic level.

Under this cascade of money falling from above, analysts discuss the nature of the crisis. The greedy ones tend to have a Type V crisis, which is especially handy because it takes us to an excellent location. That is, this is the vision that the worst is over and now we are going to ascend to the blue and magical sky. On the other hand, we have the most conservative, who in rare cases allow themselves to be seduced by the opinions of the population and maintain their hypotheses about historical probabilities. You are talking about a crisis W. In other words, it is too early to win. It is not over yet. The honeymoon could end at any time and we could see further price drops. Oh my God!

Read on: The Austrian government will subsidize a new blockchain project to secure digital communication in times of crisis

Last but not least, we have the side of the pessimists who see a big and deep U. They think we haven’t seen anything yet. This is, The descent has not started yet. I would say that Warren Buffett falls into this category. Man does not let go and his whole life has refused to make macroeconomic speculations, but at this point his actions speak for themselves. A person who believes that recovery is on the way is not selling the way they did.

I honestly think that all of these sites are right and all wrong. Everyone is right because yes, this crisis can be read in different ways. If we search enough, we will see the letter that corresponds to our theory. On the other hand, they wrongly think that others are wrong and the only ones are right. What really happens is that there is no letter in the alphabet that can describe the core in which we are involved. This crisis could be represented in Chinese script. There are things that rise and fall at the same time and send very mixed signals.

At the moment we have a Rorschach test. Psychologists use these tests to (among other things) identify their patients’ obsessions. The figure that forms the ink on the paper is really random. However, people see what they want to see. So this crisis is so atypical that it allows all interpretations and predictions. The great subjectivity.

The detail is that the “Tinker Bell Effect” is very important in the markets. In other words, the subjectivity that achieves the greatest consensus becomes alive and manifest in the real world. Like Tinker Bell, the Peter Pan character, only exists if people believe in it. Perceptions of reality are not a reality, but they tend to become reality in the financial world. If the markets assume that we will recover strongly in the future, prices will rise today. And everyone will say that he was right in his prediction. But deep down, it was a self-fulfilling prophecy.

The above may be true, but not complete. Because we know that an overly optimistic market will exhaust its buyers and cause losses. And vice versa, an excessively pessimistic market exhausts its sellers and brings growth. At the moment, however, we are at a neutral point. The new outbreaks are worrying, but there is still no talk of a new delivery. The economic data that is coming in is not good at all, but the monetary expansion is such that the markets are simply blind and blinded by so much liquidity. There are special cases. For example, Apple’s stock declined as a result of the announcement that it would keep business closed. In general, however, the trend is relatively lateral.

Read on: Tense calm in the markets. Why worry so much? What’s the danger now?

However, What can we do about this uncertain situation? Well, work hard and tighten our belts at a cost. If there is no job, it would be planned to look for a job. We have to be patient. Work and patience alleviate every crisis.

In terms of our investments, including Bitcoin, it’s not a good idea to put all your eggs in one basket. Our portfolio must be diversified and balanced. This is not the time to take too many risks and become too specific in a single asset. Perhaps it is time to be distracted by this anti-Fiat rhetoric and put something in stable coins. If the other crypto guys are making fun of you, pretend you’re crazy. Don’t say anything and act quietly. You can always write something negative about the Fed on Twitter to confuse them. But it doesn’t hurt to hide a few green bills under the mattress. Caution is prepared.