The Ghost Town of China & World Markets

in LeoFinance •  5 months ago 

Twelve days ago I made this post about the "Wuhan Flu" and how it might inconvenience us around the Chinese New Year holiday. Upon retrospect, reading that post today, I don't think I or anyone in this country could have guessed at the severity of the situation that has come about today. Not even two weeks later, China has put close to 50 million residents on mandated confinement. The entire provinces of Hubei and most of Zhejiang have now been told "Don't go outside. Once every two days, you can send one family member out to retrieve necessities."

That's insane.

I mean, I 100% understand where this directive is coming from. Super spreaders of this kind of virus is the one thing you want to prevent. The last thing we need right now is a couple hundred people wandering around who don't know their sick, each infecting another couple hundred people who also won't know their sick until it's too late, etc. etc. etc.

There's a reason why they call it "going viral."

The Chinese spirit is kind of amazing. They willingly accept this kind of condition for the good of their nation and, really, the world. They even sing songs and yell encouragement at each other through their windows. It's great. You should probably head on over to that link from my Twitter feed and get your cry on. When I first saw these "Wuhan, Jiayou!" videos, that's what I did.

It's weird how quickly things can change. I came back to China after a 3 weeks-plus of holidaying in the States with my family. We came back a little early to get some chores done before the start of the Chinese New Year, at which point we all usually go up to my wife's family in the Northeast to gorge on dumplings and hearty stews for 7-10 days before joining the Great Migration back into the megacities to wile away our days working to pay off debt.

That's how I figured 2020 would play out. Pretty much the same as the last few years, getting a little bit fatter and richer with each passing year. That was the plan, at least, up until 12 days ago.

Now I'm stuck in Shanghai, a city of 25-30 million people, that is eerily as quiet a place these days as I've ever been to in the most rural parts of America. At least there's cars and dogs and shit, maybe even a couple gun shots here and there, in those kinds of places. These photos from CNN tell the bleak story. Everybody is inside all the time. And it's been like this since the government announced the lockdown of Wuhan, the epicenter of the coronavirus, on January 23. We're pretty much sitting around waiting for the next shoe to drop. Even if they quarantine this city, by some counts the largest city in the world, it wouldn't make much of a difference. We're already self-quarantining ourselves anyway.

image from NYT

Today, the Chinese stock market reopened for the first time since the Chinese New Year. And 3,000 stocks promptly stopped themselves out. In China, they have a circuit breaker for individual stocks. If they trade 10% up or 10% down in a single session, trading is halted and is not to be resumed for the rest of the day.

Despite announcing $170 billion worth of stimulus and the banning of short selling in a desperate move to save the Shanghai and Shenzhen markets, we still saw a near 8% decline on the bourses. CNN simply called it "the worst day in years." It was. We lost the equivalent of one Alibaba from the Chinese market in terms of total market cap valuation today. And though I'm usually pretty optimistic about China, I don't see how this doesn't get worse. I mean you can hardly have an economy if there's nobody out on the streets. I mean, can you? I guess we're about to find out! As a Time headline blurts, "The Coronavirus Outbreak Has Become the World’s Largest Work-From-Home Experiment."

Strangely, the US stonks went on a mind-blowing rally. US-listed China stocks even went along for the ride. I don't get it. Unless most of these trades are made by bots that are just programmed to BTFD, then this rally makes no sense.

China's economy is going to be hit hard by this virus. I'd say, and I've heard other estimates, that we're going to probably lose 2 points off annual GDP growth. Since we're coming off an already slowing growth number, that means 4%, which would be the lowest GDP growth number since Mao times. That's a $250-300 billion hit to the Chinese economy, which will have ripple effects throughout the region and certainly with its #1 trading partner - the United States.

You can't be the "Factory to the World" if your workers can't make it to the factory. You can't be part of an "integrated supply chain" if you can't make anything at the factory.

So from an investment standpoint, for everything not in my retirement account, I'm moving to cash, stablecoins and of course Bitcoin! What do other investors think about their assets during these crazy times?

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It is not cool what happens there. :(

No, it really isn’t. But what else can we do? We don’t know anythinf about this virus really. And until we do, it’s best we limit contact between humans. Hopefully, the R&D will catch up to where we need it to be quickly.

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Mabie a little gold and silver, thanks for the on the ground update and hang in their!

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