David Shapiro, Alec Hogg read POSITIVE signals driving markets in Covid-19 crisis

Microsoft founder Bill Gates, who has spent much of his time and philanthropic funds on fighting diseases like malaria in Africa, warned the world that one of the greatest risks to humankind was an infectious virus. In a TedTalk in 2015, he outlined how the world was not ready for an epidemic and would end up in debt to the tune of at least $3trn. His objective was to encourage world leaders to prepare. We are now in the midst of an attack by microbes, but there are glimmers of hope that the end is in sight. Stock market expert David Shapiro picks up on this theme with BizNews editor-in-chief Alec Hogg, identifying the signals that are positive for investors. He also delves into the human side of the Covid-19 disaster, sharing how he believes the private sector can help the poor and financially distressed. – Jackie Cameron.As usual David Shapiro, David let's start off with the markets. I see that today you could have made a lot of money if you bought some gold shares or something like Transaction Capital and Sasol, which keeps going up – another six and a half percent today. So, what's your take?.___STEADY_PAYWALL___.Dramatic, right. Well, global markets are up and what's driving markets up is that the news and the narrative is starting to turn positive or, let's put it this way – less negative is a better way of saying it. There are still deep concerns in the market but at least we're hearing stories that infection rates are peaking in Europe or certain parts of Europe – they expect infection rates to start peaking even in the US. The rate of deaths is not increasing, so that's flattening of the curve. It's too early to call an end to it but the flattening is giving a little bit of encouragement to markets. So, already we're starting to look beyond the Covid-19 and start positioning ourselves there. I hope it's signs of a bottoming and I hope that nothing else happens in the near term that's going to set us back again and that from now on, we just get little bits of better news to help us along. So I think that's what's driving markets..How far ahead do they look?.They would look three to six months ahead and I think that's what we're starting to build in. But you've got to be very careful – we'll go through this as we talk because there are certain steps that markets will see before they really start to build in a recovery. If you want me to go through what I think we need to go through now – with pleasure..I think that's important – just to lay the foundation. The all share index today is up 2.5% but if you have a look at a graph of three to four months it's still very far from where it was..I think the South African economy is in a different situation and we've got to discuss that separately from what's happening in the rest of the world because I think, in emerging markets, there is still a very deep concern that the strength of the economies are not the same as in developed countries and they don't really have the fighting room or the ammunition to fight back as strongly as some of the developed economies. So, we'll look at both the economies differently. What we look for now, what's going to turn markets, is the kind of news we are getting now – that lockdown will end somewhere down the line and in Europe they're already starting to release plans of how 'normalising' will take place. It's not going to say, 'okay doors are open – everybody rush into the streets', it won't be like that. They've got to monitor it very carefully and there's still a lot of things that have to be done. So, that news is encouraging. The other thing is that you've got to believe that all these programs that have been released by the authorities, and I think they've done everything they can do and they've been very inventive in this respect, that the money that they've released is getting into the system. And how will you know that? You'll start to see what we call spreads coming down; spreads mean that the yields on bonds – yields on corporate bonds – in other words, the yields that people are paying for money starts to come down. In other words, when you go into a bank – you're going to borrow at a lower rate than you did two or three weeks ago. That means that money is coming into the system. Simply, when we see the cost of money coming down that means that all these programs are starting to meet. Volatility as well – when we start to get comfortable with what's happened, we don't feel insecure when markets go up 1 percent, down 1 percent and so on – we get used to the volatility and become much more comfortable. But the main factor is to make sure that the programs that have been introduced by governments – and around the world – are starting to work and that the money is reaching those businesses that desperately need it – and then we'll see it. So, there are those factors..In the formal economy then we see the stock markets taking their lead pretty much from the United States; this morning the JSE up by nearly 3 percent, dow futures are up more than 3 percent and a similar thing in Europe etc. You know you said; 1 percent moves – they seem to have been forgotten. Now, 1 percent is a very quiet day, isn't it?.Exactly. Historically, to see 4 or 5 percent – it's staggering in a day. And even as I look now; the futures – in other words just pointing to the opening in the US which happened three thirty our time – it looks like that's going to be up 3.5 percent today. Now, that's a big move – it's a massive move. It gives you an idea of how we are going to see a turnaround in the US and that's spreading through to the rest of the world. Europe market's up 3.6 percent. The Euro stocks 50 – so there is quite a big turnaround and it's an encouraging sign but let's not ring bells yet..The good thing is to keep the communication going so you release plans about how the – call it 'the day after the lockdown' – operates, because obviously you can't go back to full schooling and you've got to monitor people and you've got to monitor the businesses that can open. But from South Africa, I don't think we could have been caught at a worse time – from all fronts. Not only were we already starting to slow down, we were growing at a snail's pace but the lockdown has also decreased demand for commodities of which we're a big supplier – whether it's vegetables, flowers, iron or whatever it is – we've been caught on the wrong side of that as well. So there's every aspect that's killing us and to actually lock down our economy, from my point of view – is disastrous and there's got to be a way out of it. We've got to start thinking in those kinds of terms, but it's not that easy. But to get the informal economy going – to get the formal economy going – are absolutely imperative because otherwise, we don't know where this is going to take us..Having listened to everything – the practicalities of what is happening on the ground – there's no doubt that President Cyril Ramaphosa knows of all of this. He's not living in an ivory tower, as perhaps previous presidents did. So what does he do?.One of the problems that we're faced with is that we have very few administrators globally that are prepared for this. If you think of the politicians that are being put into power now – whether it's Trump, whether it's Cyril, they're not administrators. I think they probably get bored whenever you talk about health issues or stories like that..There's a certain element of a person who likes to do that – who likes organisation – and I think what's been exposed in the US, is just how ill prepared someone like Trump is. What it also exposes is that we have no plan for any kind of situation like this – emergency type situations – whether it's feeding the poor, taking care of them medically etc. We just don't have any kind of plan and that's my big worry. And I'm quite emotional about this in a sense that – I know that we need to get money to businesses to keep them ticking over. I don't know how you do it in the informal sector – that's the problem. But even in the formal sector, you've got to get the money. And as an exercise with my son we've been trying to get into the Rupert's funds and all different kinds of funds and say 'we need money'. The problem is that you have to fill out millions of forms – you've got to go through an extensive due diligence process to get the money to the businesses that need the money to keep paying their staff. That has become quite an issue with me – I cynically put a tweet out; I said 'when there's an earthquake, you don't ask the rescue workers to fill out forms to go and dig your family out – they do it'. And I think we need the same kind of approach. But I'm struggling to know how to do it with the informal sector; whether we do set up soup kitchen type places that prevent rioting or something like that – we've got the money. The private sector's got the money – that's one thing we've got. The banks have got the money, businesses have got the money. We've just got to part with it in a way and not expect it to be paid back or, if it is paid back somewhere down the line – without any conditions. And that's my deep concern as we've got to get money out there..I want to pick up on this point and weld the two together, but go back first to Bill Gates in 2015, founder of Microsoft and who's dedicated his life now to uplifting other human beings. In fact, most of the measures when they ask who's the most admired person in the world – Bill Gates comes out on top and not surprisingly. In 2015, he warned in a TED talk that this is going to happen; almost exactly as what has occurred – he warned about it. And he was on the TED program last week and he said now that he can see that the projection he made there – that a pandemic of this nature would cost $4trn – has actually come true. It was almost like their estimates, they weren't sure of the four trillion, but they put the four trillion out there. It has come true..Now, if you look at South Africa, the cost of fighting this pandemic is going to be a lot of money or you can allow the scenario that GG Alcock has described – where people actually say it's not going to – you're going to have rioting, you're going to have revolting and that will cost a heck of a lot more than pumping some money into the system..Yes – that's the whole point. But why didn't anybody listen to Bill Gates? My point is that if anything has been exposed; to see the city of New York – I cannot grasp how a city like New York or how America has been caught completely off guard; that they have to use the Javits Centre – which is twice the size of any convention centre that we have here (whether it's Sandton or whether it's down in the Cape or Durban or wherever it is) – that they've converted that into a hospital. That wasn't planned. There was no plan to do it. That was last minute – everybody's been grasping at the last minute, 'how do we do this?'. It's beyond me that no government globally has been prepared for this in any formal way. Now we're rushing trying to get masks, rushing to get this – nothing has been set up and I wish we could just leave politics to politicians – to those people who enjoy doing this kind of thing or are good at doing this thing – instead of the populist nonsense that we hear. So, I hope things change from now on..Yes, the formal sector is the one that looks like it's in the crosshairs here..It does – I think that's the big worry. And when we think about mining as well, I don't think we can continue to hold off too long. Somewhere down the line, within the next week or two or three, you've got to start mining again – you can't stop that. So, there's some very difficult decisions for the government – and whatever they do is probably going to be the wrong decision – sadly.

David Shapiro, Alec Hogg read POSITIVE signals driving markets in Covid-19 crisis

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