David Shapiro on coronavirus: SA has gone mad, but so has rest of the world

On another day when share prices on the JSE took a pummelling and panicking South Africans emptied shop shelves, SA's favourite market commentator David Shapiro applies his mind to the root cause, the ever spreading coronavirus. His conclusion: the world has gone mad, with people dumping assets as though Armageddon had arrived. Fear has replaced whatever sanity was left after last week's turbulence. Shapiro's message: this too shall pass – but exactly when remains an open question. – Alec Hogg.As always, here's David Shapiro. I'm glad you came into the studio. We've had quite a fallout today from our studio guests. I suppose John had no chance because he came from Port Alfred but coronavirus is spooking everybody..___STEADY_PAYWALL___.And how? I don't think it means no social interaction at all. I think you just have to modify it and just be a little cautious about it – not gather in big crowds. I think the whole aim is to really flatten the curve. The curve's going to be there but if you flatten it, obviously, it's going to be to the benefit of society but I don't think we're cutting out all kinds of engagements..It would kill the economy, wouldn't it?.Totally. We're already being killed, Alec. To see the destruction of value that's taking place is something that's unprecedented and just to see the way that people are chucking their assets away… this will pass. When I say 'this will pass' yes; we're going to have a month, maybe two months, or maybe three months of pain, but they'll recover fast. It just seems that people are losing all sense of rationality but I can't stop that. Whatever I say or whatever you say is not going to stop it but people are just kind of building in the absolute worst thing that's going to happen – almost a kind of Armageddon-type attitude..Dave, on Friday, we had the massive injection of cash by the US government. Wall Street up 10%. This morning, the JSE's down another 6%, so we didn't benefit from the Wall Street uplift and we are now going even further down even though we came off a much lower base..Yes. On Thursday, we fell 10%, up 10% on Friday and probably, down another 5% and 6% so when you think about it, is Disney going to close Disneyland forever? Is no-one ever going to fly in an aeroplane anymore? Those are the kinds of values that the markets now are discounting – that economic trade as we see it is not going to happen again so you've got to be very cautious about what you do with your assets. The best is to sit it out but when you watch it happening in front of you, it can be very, very frightening..So, Dave, why would the JSE have reacted in such a way? What happened since Friday evening (our time) on Wall Street where it appeared as though the stimulus packages are going to work or people believe it?.I suppose it's the lockdown. The world's locked down. You heard President Ramaphosa last night. South Africa is locking down. We're closing our borders. New York has locked down. People are remaining inside. They're working from home. No-one's going out to restaurants. No-one's going out to theatre. Broadway's closed down. Now, this will hurt for a month or two, particularly those businesses that rely on monthly income to get through to the next month but that's where governments come in and that's what government are trying to ensure that they've got enough liquidity. In other words, liquidity means money to give to those companies to tide them over this very difficult period. Yes, airlines are going to be under a lot of pressure but we saw this with 9/11. Remember, there was a complete social lockdown after 9/11. People went into their houses, flats, or apartments and never got out and it took a couple of months before they felt that it was safe to fly again but we got over it. So, I'm not suggesting 'don't panic'; there's nothing nicer than a good panic for people. They love to panic and if you look at your WhatsApps or your messages on your phone, every kind of article that's ever been written. I've never seen so many experts appear from all over..And fake experts, as well. There was a long note that we almost published from Adrian Gore, except that when I got hold of Adrian Gore, it wasn't from him..Are you kidding?.No, and that's been distributed..That's going viral..That's gone viral, yes. It's probably someone who's gone short on the markets and says, 'Well, here's a reputable guy that we can now use.".You know, you're telling me something that I'm learning for the first time now because we've seen this being published. In fact, it's been circulated around our firm. That's a very interesting….That's the best fake news – that, which is 80% true but the one who's put it together has got an agenda..Why would someone do that?.The agenda is to go short because if you read through that, it's definitely not helping markets this morning. If you read that Adrian Gore of Discovery would have put something along those lines out that 20 times more people would die than Flu; that was immediately a tip-off because outside of Wuhan Province, the death rate's 0.14% so suddenly, now 'Adrian' is saying it's 1% and it's 20 times the Flu rate, which is 0.1%..That's criminal..Of course, it is..That is criminal. That's not even fake news. That should be investigated for criminal charges because to do something like that at a time like this… It's like the picture we saw of one young man who bought (I think) 70,000 bottles of sanitiser and Amazon stopped him selling it because he was there to profit, so you get these kinds of people in these times of stress. I think going forward, the world's not going to be the same. Why I say that is when you think about… Alec, first of all, if you think about President Trump, what did he do? He killed Obamacare. In other words, 28-million people in the US do not have access to free medical care. You can't have that because those are the people who are going to hide the symptoms or keep going to work as Andrew said, so you've got to look at that side of it. The other side of it is there's been a massive attack on drug prices and why specially, the ethical drug producers – the big drug producers are charging too much… Will they use those margins for R&D (Research and Development)? At the moment, by taking away their margins – and this sounds like I'm a right-wing capitalist, but I'm thinking this thing through – what happens is that all that money that they produce normally, goes into looking for all kinds of diseases. In the meantime, what's happening now is they concentrate on chronic… like lung cancer or those (when I say "popular" then you know what I mean), prostate cancer, or breast cancer rather than looking at broader symptoms and broader diseases..So, things people can pay for. So, people who have deep pockets..Dead right..What bothers them? Alzheimer's, etc rather than a broader… so, unintended consequences..Right, so we're going to have to go back and say, "Listen, we need the skilled people. We need the scientists to look at all kinds of diseases". The other thing is, you can't test people twice. You have to have the right kind of equipment, so we're going to have to go into the equipment-makers, whether it's Phillips or whoever does i.e. General Electric to start looking at diagnostic machines that make… This is going to re-occur. Somewhere along the line, we're going to have it again. We're going to have to have a whole new investment in those kinds of machinery/diagnostic machinery to look at these things. South Africa's not the only country that's gone mad. I mean, it started in Australia with people accumulating toilet paper and tissues, and the US as well. All their pre-prepared meals are all gone. Everyone's going into hibernation. I don't think it's unique to South Africa. The only thing that worries me is the employment/the payment where businesses, because of something like this, shut down and say 'well, we can't pay you and therefore, you're not going to get anything. I think this is where governments… I think there has to be some stopgap. This is the worry. This is why markets are responding the way that they are because there are going to be so many businesses in similar situations and hopefully, governments will come out with some kind of policy to bridge this. And, it will be funded by government because you can't go to the banks and say this. Banks, being bankers; they're not going to give money where there's no chance that they might not get it back but you've got to save the economy by having some kind of institution that's going to cover that.

David Shapiro on coronavirus: SA has gone mad, but so has rest of the world

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