Virus a test of our prosperity nonchalance
Any premature death is a tragedy; it’s not just a numbers issue. It is, however, not possible that the 864 confirmed cases and 29 deaths resulting from Covid-19 in the US (as I write this) are the sole cause of trillions of dollars in value being lost on US stock markets.
Covid-19 has scraped off the thin veneer of certainty about robust and ever-increasing value in financial markets. In any case, I think listed equities are on their way out as a dominant asset class. It may take a decade, but the capital markets are going off the grid.
I’m not sure whether to shake hands with friends (I do, but no kissing!), breathe when in a crowd, get into the pressurised cabin of an aircraft (what goes in, stays in, and circulates among you until you open the doors on the other side, if they let you). You may not always want the door opened.
As of Wednesday, there were 118,909 cases of confirmed Covid-19 in 119 countries, with 4,270 reported deaths so far — a lot, but not by all measures. We have a flash mortality rate of 3.6%, albeit from a statistically insignificant sample. About 66,578 people have recovered.
About 58 people are murdered in SA every day. It’ll take us less than three months to overtake the total number of Covid-19 fatalities across the world. If only an equal amount of energy, urgency and effort were spent on our own plague.
Contagion is the order of the day in financial markets, and wild swings are bringing limit up and down “circuit-breaker” market shutdowns back into play — it’s like the 2008 financial crisis.
The virus has affected the fundamentals. Supply chains are disrupted, sporting events are being cancelled, international travel is a shambles and the oil-price crash has made it even worse. Sasol has lost about half its value, and that’s not chopped liver, as they say. The direct costs of incubation and medical attention and border controls must be enormous. Does this all add up to the market losses so far? I don’t think so.
At issue is something much deeper. Angst. Our take-forgranted-forever attitude towards economic prosperity and value accretion is being tested. Did we really believe the price-earnings multiples on the S&P? Do we really think negative interest rates are OK, or here to stay? Are all of the trade agreements and trade wars (pretty much between individual egos and nationalist agendas) appropriate foundations for global trade? Or have they already created parallel, informal economies?
The same herds and algorithms that chased the S&P up will bring it down, and up again — not without spillage, not without consequence, not without blood. Sell, what the hell! Is there any purpose to life without football in Italy?
Governments are stepping in, spending billions, as they should, on restricting people movement, containing the spread, and on research to find a cure.
In the financial markets, I’m less convinced of government strategy. I certainly don’t believe monetary policy, that blunt, old, worn, over-rated tool of interest rate cuts that’s at least partly to blame for our bursting bubble bath anyway, can be the answer. Yawn.
We need to attract capital into projects, not markets. Local, cross-border and even global incentives should instead be put in place by the US Federal Reserve, European Central Bank (ECB), IMF and others, to increase investment (instead of fuelling speculation and passive wealth creation) and the earnings potential and consequent purchasing power of the masses, particularly in emerging markets.
Let’s do that while our best scientific brains figure out this Covid-19 virus, and for that matter all its mutating cousins, once and for all. The solution, may I suggest, will be found not in chasing them but in ambushing.
Barnes, a former SA Post Office CEO, has had more than 30 years of experience in various capacities in the financial sector.