This is a collection of all the coronavirus coverage I’ve done, most recent first. Content taken from my podcast, Fundamentals Report, and the members’ Bitcoin Pulse.
My first mention was on a podcast on Jan 24th saying that this virus has the potential to cause an economic collapse. Since then I’ve written about it on almost every newsletter issue, keeping you up-to-date.
The only countries that we can be somewhat confident in their numbers are Singapore and Taiwan. They seem to have the virus under control for the moment, but it could still be purposeful under reporting. We can be very confident that the CCP numbers are at least 10x lower that the real numbers, and that same multiple might be useful to apply to all official virus numbers from central regimes around the world. Watch what they do, not what they say.
My twitter thread of the #EconomicContagion is getting very long. Tweets added the last few days are: 1) Xi admitting the Chinese economy has been crushed and promises massive money printing, 2) Samsung closing their factory in South Korea because an employ has the virus, and 3) Chilean and Peruvian mining sector getting squeezed hard.
(Included the prepping list below again)
Lastly, the macro situation is devolving quickly due to the economic contagion from the CCP coronavirus. The lock downs haven’t lifted, in fact they are expanding in China and now in South Korea and Iran. A big development over the last few days about the virus spread itself is that Iran is likely very badly infected at this time. 4 are now confirmed dead from the virus and many more in the hospitals. They weren’t testing anyone until a relative of a high government official was dying. One doctor claims more than 20 patients in his hospital have died from unknown pneumonia.
Troubles continue to spread and get worse. An Fortune article just today states, 94% of Fortune 1000 companies have direct exposure to Chinese supply lines. The Chinese February PMI, a measure of the manufacturing and service sectors in a country, is estimated to hit 30, where zero growth is 50. This is the lowest reading in the history of this measurement. The CDC is showing itself to be either incompetent or as bad as the CCP at keep information secret. But more on that in an upcoming podcast episode.
Two Iranians died today after testing positive yesterday. This is huge news. The patients likely suddenly worsened and were tested, but nothing could be done. This virus is world wide. Be safe, wash your hands, and get some extra preps going. Page 5 has a list of basic prep items.
The economic contagion is ramping up. Small businesses are being told delays out of China could last until a minimum of June, Apple has cut guidance, and much more.
Remember, wash your hands excessively, avoid crowds, reduce touching your face, and get plenty of sleep. This is a great excuse to get healthier in general as you prep.
Coronavirus news slows to a crawl on Sundays. Most headlines are concerning the social crackdown in China being used to stop this virus. Still nothing seems to work. China is showing its true colors as one of the worlds worst authoritarian regimes. If they haven’t yet, China bulls should start singing a different tune.
The Chinese miracle has been over for more than a year. Their ongoing banking crisis and lack of real growth was only hastened by the Wuhan virus. I don’t think the West is better or ultimately going to escape the same fate, but I’m pointing out that the more authoritarian/Statist your system is the faster it fails. The answer is more reliance on the market and less on central planning.
We see here a decoupling between Chinese trade and the US markets. Of course, China is still a huge player in global manufacturing, which this Wuhan virus is disrupting as we speak.
China was on the brink of a financial crisis before the Wuhan coronavirus forced the lock down of 80% of the Chinese economy. They had a record number of bank failures in 2019, their GDP growth was slowing, and monetary stimulus had lost effectiveness.
China is only the worst off, but they definitely not alone in their financial troubles. The entire global economy has been living on the edge for years. The fiat-based financial order has resulted in the upside-down world of trillions of dollars in negative yielding bonds and unpayable debt. Just in the last week, some analysts are starting to ask if China will cause a global recession. Wake up, it’s here.
Right now, the plan from the PBoC and other central banks is to continue to flood the world in liquidity. They will return to their old tricks, but this time is different.
This time the supply chains are severed, production halted, the economy is standing still. Sure, stimulus can fool the equity markets for a very short period of time in these conditions, but QE, REPOs and direct “loans” to businesses cannot magically create actual goods in the supply chain or actual demand for raw materials. The second and third order effects of this disruption are massive. The Chinese super tanker hasn’t just slowed to a stop, it’s run aground, damaging the hull and injuring all the crew. How do central bankers plan to refloat the economy? Print baby. What happens when you print money while the economy is stalled? Inflation.
High inflation will soon take hold in China. That might sound good to a central banker, they are all in a race to debase in a pseudo-mercantilism competition. They never expect runaway inflation. This dovetails with my strong dollar thesis. Money will flee emerging markets, China and Europe into US stocks, debt and USD.
(Here is a great place to follow the economic impact of the Wuhan coronavirus.)
Released episode Wuhan Coronavirus and Bitcoin Mining and Price – E201 on Patreon first.
A new phase of this outbreak is occurring. We’ve known for several weeks that the Chinese numbers were off by an order of magnitude, but now every source of official statistics will be off as well. While that is highly likely corruption in the CCP didn’t help reporting, it’s not the only reason. In this new phase of the outbreak no numbers will be trustworthy. People will start to lose confidence in their governments. There’s simply too many cases and the testing too slow and expensive.
Example: 135 cruise ship passengers in Japan have the virus and they will not be testing anyone else, unless they get severe symptoms. Why?
It’s possible most of the passengers will test positive and there’s nothing to gain from that. The quarantine will continue, serious cases will be treated when they appear, it doesn’t matter the results of the tests. Announcing more positive cases everyday will only serve to panic the public in general. National public health officials are not interested in transparency. That’s not their mandate.
A market based approach to disease control would be superior to a centrally planned one. We see pockets of this already in this crisis as small villages have set up makeshift barricades and post guards at entrances to the village. Also, several subreddits have popped up discussing this outbreak and have been able to keep it on topic and productive. I will be fleshing this out in future content.
I’ve been tracking the economic headlines related to this for days now. I’ve started a small thread on Twitter from @btcmrkts account. Here’s a list of some important points:
Issues 31 and 32 of the Bitcoin Pulse had extensive discussion of the Coronavirus situation its economic impacts. Some non-Chinese companies, like Hyundai, are closing factories in their home countries based on not getting parts from their Chinese suppliers. Large cargo ship deliveries of raw materials like LNG and copper are being turned away at Chinese ports and their contracts broken, because the Chinese factories are closed. Now up to 400 million people are quarantined in lock down across China. The ripple affects are just getting noticed.
Lots of people are talking about altcoin season. The “dominance index” for bitcoin has been decreasing again. But think about it, the last altcoin season was driven by an insane ICO mania driven by speculative demand from China, South Korea and Japan. That era is not coming back, especially with the Coronavirus wrecking havoc in those exact locations. Do you really think this altcoin pump is sustainable? Who is speculating on altcoins? Americans? The same old altcoiners that were rekt?
There is no altcoin season. You might be able to scalp 25-50% gains relative to bitcoin over the very short term, but bitcoin is dominant, and the new speculators are sophisticated investors coming into bitcoin. All these altcoin bagholders are going to dump and buy bitcoin with it in the next few weeks. Be careful.
The spread of the virus is continuing to accelerate inside and outside China, moving quickly to places like Japan, Korea (SK and NK), and Singapore. Other countries in the region are likely as bad or worse, but just don’t have the level of medical reporting and information sharing as these countries. Africa and India are scary to think about.
China remains on lock down. At least 2/3rds of their economy has completely stopped. This is a financial disaster on a level that is hard to comprehend. It’s not just the Apple and Tesla factories that are closed, it’s everything. Banks, shops, everything. How are companies/people supposed to pay off debt if they can’t work or they’re dead? Financial talking-heads will start to realize, without a functioning economy in China, the entire world economy is going to default, especially since the global economy is run on DEBT and CREDIT.
The dollar is going to explode higher as people default on USD denominated debt. Dollars are created in these loans, then pyramided on via fractional reserve. When loans are defaulted on, that money is destroyed. The supply of money declines exponentially compared to the value of the loan defaulted on. Dollar short squeeze.
Central banks are already trying to get ahead of this, especially the PBoC and the Fed with REPOs and money printing, but the numbers are simply too big.
This is 100x larger than Lehman in 2008. The Chinese economy has $300 trillion in debt. Even if the nCoV clears up in a month or two and people can get back to work in China, defaults will continue to escalate. A current estimate I saw says the retail sector alone in China is losing $140 billion/week. The entire Chinese economy is likely losing $500 billion/week. The global economy, trillions/week. We just haven’t realized it yet.
Watch for central banks to slash interest rates and turn on QE shortly.
Many countries across the Asia region are starting to suffer from the outbreak. Japan is in the direct line of fire of this thing, already with 45 known cases (probably 450). What will happen when cities in Japan/Vietnam/Thailand/Malaysia/etc start closing up shop? Thinking this will stay limited to Chinese supply chains is near-sighted. All these countries and companies have debt that won’t be repaid. No debt is safe.
This hasn’t seemed to bother the stock markets, yet, but it will. After a violent sell off in markets this last Monday, pumping liquidity into the system has saved it for now. Share prices continue to be disconnected from reality. They feed off free financing, buybacks, and opaque plunge protection teams.
You are ahead of the curve here and the rest of the financial world is just realizing how big of a deal this really is.
Stocks should do very poorly in a deflationary spiral driven by defaults. If the dollar short squeeze happens, bonds are worst, stocks are bad, commodities are lightly better, cash is best. Cash is USD, gold and of course, BITCOIN.
Also, be watching the news and join my discord and get into the ncov channel. Stacking some cans of food, bottles of water, or putting 10 lbs of extra meat in the freezer probably isn’t a bad idea. Stock up a little on some basic sanitation and first aid items like toilet paper, Lysol spray and wipes, vitamins, band-aids, latex gloves, whatever. Think about buying some face masks and goggles if you can. Most importantly, learn how to avoid this virus.
Price analysis for bitcoin is below, but first I have to address the spread of the Coronavirus (vCoV). It’s picking up outside China and has started wrecking markets. I’ve set up a room on the Discord server #ncov for links to follow the developments together. I don’t want to be alarmist, so let’s look at the charts.
Why is this important? It’s a black swan type event. It’s very likely, if you are reading this, you won’t be physically affected by this virus (you might know somewhat who gets infected), but you will certainly be affected financially.
The Chinese markets finally opened today and immediately went limit down, tripping circuit breakers for most individual stocks. The Shanghai Composite limped along until close with most of their trading shutdown. Also, the CCP has banned short selling, which is a dead giveaway that fair market value is much lower. The PBoC also juiced $170 billion in liquidity today. So my prediction on the Chinese economy being massively affected is playing out, but what about the rest of the world?
The Baltic Dry Index (BDI) is a proxy for bulk shipping as well as a general shipping market bellwether. It’s down 80% since Sep. Shipping rates in general have collapsed from $35,000 for capesize ships to now $4,000/day.
Oil tankers (VLCC) is also suffering. Chinese demand has reportedly dropping by 3 million barrels a day so far, 20% of their total demand!
The virus is still spreading! It might take several weeks to be seen in other sectors like mining.
I’ve been talking about the deteriorating financial situation in China long before this Corona Virus disaster. At this point, everyone knows we can’t trust the numbers out of China of the true impact or death toll. Their lack of transparency and iron grip over the economy is on full display. It’s reminiscent of the USSR in so many ways.
It’s likely this will be a major economic and political event. They could easily slide into total authoritarianism like NK to preserve the CCP’s grip on power.
China is in trouble. Its debt levels would make any Western country blush. The entire China Miracle is fake; it’s a Ponzi. I don’t have room here to detail everything going on economically in China from ghost cities to sneaky defaults, I just have a few stats and I recommend watching this Real Vision video from Nov. Keep in mind these are official numbers, so they are much worse.
I think it’s unlikely that this virus will be on the scale of the Spanish Flu of 1918 that killed up to 50 million globally, but what I am concerned about is the economic affects of quarantine on an economy already on the brink of crisis. And since China is the largest trading country in the world, you get the making of a global recession. Imagine a Lehman Brothers collapse the size of China!
How will this affect bitcoin? The Chinese have no choice but to let the Yuan weaken dramatically and start the melt up in the dollar.
Scenario 1: With a weaker Yuan the Chinese will not be able to buy as much bitcoin and especially not altcoins. The altcoin bubble will not return anytime soon, and global demand for bitcoin could soften.
Scenario 2: the global flight from the financial system in general increases demand for bitcoin.
If bitcoin can pump enough in the near term to be taken seriously before a recession, along with the halving, there’s a good chance at Scenario 2.
Some manufacturers of bitcoin mining equipment have delayed “production, delivery, after-sales service” in China due to the epidemic. It’s amazing that hash rate continues to grow despite this. It means that after these quarantines are lifted, we could see an even greater surge in hash rate.
At the 5:00 mark I speak briefly about the Coronavirus. “A shutdown of 10 cities in China could cause an economic collapse.”
© Copyright 2020 Bitcoin & Markets