A quick break from the Coronavirus news which is evidently usurping the planet!
The ABS reported that the capital cities population of Australia increased by +303,100 in FY 2019.
Greater Sydney, which includes the Central Coast, increased by +87,100 or +1.7 per cent, and remained the most populated city at 5.31 million.
However, Melbourne grew at the fastest pace, up by +113,500 or +2.3 per cent to 5.08 million.
As in previous years the densest locations included parts of inner-city Melbourne, Sydney's Potts Point-Woolloomooloo, and Ultimo-Pyrmont.
Brisbane's population increased quickly too, at +2.1 per cent or +52,600, to increase to 2.51 million.
Source: ABS
Capital cities accounted for 79 per cent of population growth over the financial year, reported the ABS, and some 17 million Aussies now live in the capital cities.
Immigration will effectively be paused in 2020 due to the...well, you know what!
---
Virgin Airlines, Star Entertainment, and a raft of others announced tens of thousands of stood down workers today.
And job postings are already collapsing, even just a few days into the shutdown period.
Source: Indeed
Suffice to say, the government is going to need to throw together a monumental package to turn this shellacking around.
Job ads were already down -9 per cent over the year to February 2020, representing a decrease of -16,100 vacant positions, according to the Department of Employment's latest figures.
New South Wales advertisements had already declined to the lowest level since 2014.
In a separate release from the ABS, engineering construction was also down -8 per cent over calendar year 2019.
Record stimulus needed
These are old figures, sure...but they aren't irrelevant.
They show that the economy was already losing momentum well before the COVID-19 pandemic, suggesting that even a 'return to normal scenario' isn't going to be that great.
The economy was already stalling and needs much more stimulus to start bringing the forthcoming massive unemployment spike back down.
The LMIP noted that the COVID-19 impacts weren't yet in evidence in the job advertisements figures by the end of February, so the March and April figures will likely be brutal.
More positive vibes in financial markets overnight following the Fed's nuclear bomb stimulus package.
There could be a rotation back into stocks from fixed interest, though that might be more easily executed in theory than in practice in the present environment.
Meanwhile the US government's US$2.5 trillion stimulus plan appears to be inching closer to a deal.
The sheer scale of these figures suggests that Australia will need to do much more in a third round of stimulus measures to build a bridge to the other side of the coronavirus recession for small businesses and households.
Cases in Spain and the US continue to grow exponentially.
On the other hand, there's been gathering evidence that lockdowns work, as both Italy and Germany appear to be flattening their respective curves, while Wuhan in China is now back in business.
Australia shutdown
Australia's shutdown has now been extended to shopping centres and most other small outlets, including nail bars, beauty salons, and the like.
Food markets and food courts may still offer takeaway food, and for some reason barbers may still cut hair for 30 minutes per customer.
But essentially the government advice has ramped up to suggest strongly that people should now stay at home until further notice.
Exercising with family and visits to the supermarket are still allowed, but public gatherings are no longer acceptable.
To date there are more cases in New South Wales and Victoria than elsewhere, and Victoria looks set to tighten up further with Stage 3 measures later today.
Realty deep freeze
In the property space, open homes are no longer deemed to be essential services, and must now be cancelled.
Public auctions are also banned until further notice.
It is still possible to list homes online to make property sales or to find tenants, but inspections will be by private appointment only, making the drawn-out process too much hassle for many vendors.
Effectively the market will be in 'deep freeze' over the coming weeks.
Landlords without tenants may opt to take a payment holiday if required.
Short and sharp
Markets have adopted a hopeful stance today that the inevitable recession will be short and sharp, and that life can get back to normal quickly.
Virgin stood down 8,000 or 80 per cent of its staff today and the queues at Centrelink around Sydney continue to grow, which is probably more akin to the reality of what we'll be facing over the remainder of 2020.
There's so much going on in the world that one's brain may explode this week.
Virtually in bullet point format, here are a few loosely assembled thoughts, broken up for ease by the geography of the globe.
US (Fed bans risk)
When the Fed's Bullard reported that the US jobless rate could rise from the lowest level since the 1960s to 30 per cent by next quarter, this was a crystal clear signal that we should expect a money-printing bonanza on a previously unfathomable scale.
Given that we're now promised open-ended QE, it's impossible to put a figure on the dollar value of the combined stimulus, but 'somewhere in the trillions' might be a reasonable place to start.
Where will all the money come from?
It's worth thinking back to Bernanke's 60 Minutes interview from some years ago:
-is that tax money that the Fed is spending?
-it's not tax money. We simply use the computer to mark up the size of the account....
Maybe the world's gold bugs were always on to something!
I read the Federal Reserve's latest release last night before bed and quickly got lost in a maze of acronyms and other shorthand for new stimulus programs.
The gist of seemed to be that open-ended QE will continue ad infinitum, with the Fed to purchase anything from corporate bonds to investment grade securities, both in the secondary markets and through ETFs.
And more or less everything is to be backstopped, with the Fed apparently taking all of the risk out of banking and lending, in a bid to keep credit flowing through the economy.
The Fed will also 'provide liquidity' (the new term for bailout) to Main Street, though I'm not across any of the details on that point.
These are crazy times.
US stock markets continued to fall regardless by another -3 per cent.
The S&P 500 is down -34 per cent in just over a month, and the Dow Jones is faring even worse through March, but stocks and the CAPE ratio still remain far too expensive given the outlook and likely deterioration in earnings.
UK (Johnson summons Churchill)
Prime Minister Boris Johnson summoned the Churchillian spirit in calling for Brits to pull together through the coronavirus crisis.
Rail franchises have been suspended, and Brits overseas have been warned to return home immediately lest there are no commercial flights available (Singapore is closed anyway, making such a move rather tricky for many).
The UK public has been advised to stay at home, and non-essential businesses have been shuttered.
Police may enforce the advice to stay at home with fines, so it appears to be a virtual lockdown scenario.
The FTSE 100 is beginning to look interesting and relatively cheap, having crashed by about -40 per cent from above 7,700 to 4,993 in double-quick time, and with yields gradually becoming more and more attractive (not advice).
Europe (Germany flattens the curve, Italy may be improving)
Now for some long overdue good news: social distancing works!
Germany appears to have successfully flattened the curve of total cases, with new cases now also falling over the past few days since March 20.
Germany has had 123 deaths to date, which in the context of some of the more extreme predictions is remarkably good result, at least so far.
Italy has been the most heavily impacted country outside China, now with more than 6,000 deaths, but is also tentatively reporting consecutive daily improvements in the increase of new cases.
Italy saw another 8 per cent increase in cases yesterday to about 64,000, but this was the lowest percentage increase since February 21.
This is the first really positive news in some time, in some respects, and it gives me some hope that we'll eventually see the virus out the back door and get back to business (though it may not be business as usual).
China (new dynasty)
My old man reminded me by email from his self-imposed isolation of an old saying that Chinese civilisation has been around for 5,000 years, so they can afford to be patient.
Whether by design or by accident, China will surely ascend to become the world's greatest economic powerhouse as the US flounders into a dire recession.
Meanwhile, western nations are left to consider the wisdom of outsourcing the cheap production of everything from facemasks to respirators - and indeed everything else - while racking up seemingly endless government debt and deficits.
Wuhan has effectively stopped new cases of the coronavirus in their tracks, and China's factories are quietly rumbling back to life, while years of surplus put China in a powerful position to tip in trillions of dollars of infrastructure programs and other stimulus should they be desired or required.
This can ultimately be a positive for resources-rich Australia, now too with a much lower Aussie dollar boosting our export revenues, though the boost may not be as timely as we'd like it to be.
Down Under
With Australia effectively shutting down for a while, we're about to discover how a consumer-driven economy fares without consumers over the coming few weeks.
Aussie deaths from the coronavirus remain low, at just 8, and for whatever reason it seems likely at this point that we can successfully flatten the curve if we follow the rigorous testing and quarantine measures deployed elsewhere, while keeping the borders closed or closely monitored.
There will be printing here, too, in the form of bond purchases, though they'd probably prefer you called it 'unconventional measures' or 'yield curve control', or anything other than money printing.
But the big question is what the government will now do for the all the businesses which now must shut up shop, and their employees.
Bailouts for businesses are one option.
Loans are another option, but potentially a messy one.
Welfare support for stood down workers will be essential.
Some forecasters now think that Aussie unemployment could rise from about 5 per cent to as high as 10-15 per cent, so the next round of stimulus will need to be big and bold, and focus on putting cash into the hands of households immediately.
There's light at the end of the coronavirus tunnel, and there'll be plenty of time for asking questions on the details later.
But whatever the deal is, it needs to be big and quick.
This is general market commentary only, individual circumstances differ, and this blog post does not constitute financial advice.
The US Federal Reserve's Bullard said that the US jobless rate could hit 30 per cent in Q2, which is potentially on a par with what played out in the Great Depression.
An economy built on hiring and firing casual labour is about to be smashed.
Australia is now effectively shutting down, except for some unknown reason in Queensland where cafes remain open and the nail bars remain packed out (even this morning in Noosa).
The queues for Centrelink in Australia will be growing from this morning too.
Australia cannot and must not allow such an increase in unemployment, but it will take a Herculean and co-ordinated policy response to keep small business and households afloat, and money printing on a scale we've never previously contemplated.
US stock market futures opened this morning Aussie time and hit limit down within a matter of minutes, confirming there will be another sharp round of selling tonight.
We previously discussed with buy and hold investing doesn't work in expensive stock markets back in January here.
ASX back to 2009 levels
The ASX 200 opened down another -8.4 per cent this morning at about 4,400, which takes the index level all the way back down to where it was in July 2009.
This once again shows why dividends are such a key component of stock market returns over the long run, as we'll cover in a future blog post.
NAB's share price fell to $13.20 as hybrids hit the wall, taking the stock price to its lowest level since about a quarter of a century ago.
Many funds are pleading with investors to stay the course, fearing that funds will be withdrawn.
Some are asking without much luck for clients to add more cash to buy the dip (in aggregate funds are obviously selling themselves...just look at market prices).
Macro valuations
Others are writing about the great buying opportunities, as some 'value' returns to the market, with the market about 40 per cent down from the peak a month ago.
Clearly valuations are more attractive than they were.
And the good news is that your cash will now go much further when the time to buy comes around.
But there are two problems with the market commentary about piling back in now.
One is that many listed companies now have no earnings and are bleeding cash.
If you view this as a temporary issue then that's one thing, but in the meantime many listed companies will become insolvent or will need to be bailed out.
The other problem is that in the short term momentum matters, and after years of outright speculation the tide is now going back out.
Some of the new market gurus in this cycle have even managed to write years of blog entries about stock markets without ever mentioning dividend yields or macro valuations, which is a remarkable feat of self-deception.
And although the Aussie market has now dropped by about 40 per cent, it's only been about four weeks of declines to date.
The second phase of the bear market hasn't even begun yet.
Apparently the only thing that can arrest the downtrend at the moment is the stock market being shuttered...or a cure for COVID-19.
There's no mad rush to deploy your cash, as we discussed here, and there will be plenty of time to make judicious investments.
Yes, there will intermittently be bear market rallies, as there always are in a stock market cash.
The good news is that the world will come out the other side of this eventually, but it's unlikely that you'll miss out on the all this cycle's great opportunities by being patient.
Cases of the coronarvirus continue to multiply in Australia, with 281 new cases today taking total Aussie cases up to 1,354.
Total cases in Australia are still roughly on track to double every 3 days, with still little sign of the general public taking the issue seriously enough.
This leaves the government little choice but to step up the shutdown measures incrementally.
To date there are still only 7 deaths, but obviously these figures lag, and even measures taken today will take time to show up the trajectory of cases.
Source: FT (but credit to Grattan Institute for the chart concept)
Globally the total number of known cases continues to rise inexorably, up to 308,615, with the log scale suggesting that it won't be too long before that figures spreads to 1 million.
The success of Japan (and Hong Kong) in flattening the curve, where there is a strong social norm towards obedience and mask wearing, is striking, with vital lessons in acting decisively being learned from the SARS episode.
Shutdown begins
As expected New South Wales and Victoria are now shutting down schools and non-essential services, and the Australian Capital Territory has immediately followed suit.
It's not yet a lockdown at this stage, but large public gatherings will be dispersed, and official advice has been given to avoid non-essential travel.
Of the 8 states and territories, a majority has now closed their borders.
Queenslanders on the whole don't seem remotely bothered by the issue, with the Gold Coast beaches remained packed out across a long weekend of sun.
Perhaps the hotter climate up here will prove to be a saving grace for the state in fighting the spread of the virus, but I wouldn't bank on it.
The total of all stimulus is now said to be worth $189 billion or nearly 10 per cent of GDP.
However, much of that figure takes the form of funding facilities rather than actual cash payments.
More will be needed in due course as the shutdowns persist, and a third bailout package is doubtless in the post.
What will ultimately be needed through 2020 is a 'fiscal bomb' in the words of Macquarie's Justin Fabo.
For now stock markets can and will remain open, but even the rumour mill chatter about a possible market closure and the potential for stood down workers to access $20,000 of their super will trigger further rapid-fire rounds of selling this week.
Stock futures are pointing plenty lower in the US and in Australia.
