“The Mood Is Getting Uglier” …And China’s Not Helping

“The two aims of the Party are to conquer the whole surface of the earth and to extinguish once and for all the possibility of independent thought.”

40 million unemployed Americans. Pretty powerful piece of BBC reporting last night on 5-hour queues for upstate NY middle class food banks. “These people have now missed 5 or 6 paychecks and they need to eat”, said a charity worker. A protestor demanding reopening screamed into a microphone: “What is the point in saving people from coronavirus and then letting them starve instead?”  America looks divided. 

It’s not just them. The mood is getting uglier. A chum at a leading investment firm has just been quietly told he won’t be getting paid the bonus he expected – it been worded as deferral, but looks permanent. He says he puffed up and cited his rights but got brutally slapped down: told he’s lucky to have a job, and if he complains or says anything he’s on furlough and out the door immediately thereafter. He’s terrified. He’s highly levered, has school fees to pay, and feels trapped. It’s made a bad social situation worse, stuck in a small London house with kids and a now very unhappy wife. 

Repeat the same scenario some 20 million times around the globe – as the upper middle classes are “disciplined”.  Job losses are accumulating across the global economy. But don’t worry, your Pension plan, Super or 401 is doing just fine… for now…

A particularly cynical client reckons rising fear and job losses are as positive a reason to buy stocks as any he’s heard. Companies are grabbing the virus opportunity to rationalise, cut headcount, cut wages, and axe extraneous departments. As a result; bottom lines are improving as they become more efficient and productive! Everyone expects 2nd and 3rd quarter earning wipe-outs, but this is “capitalism in action” and earnings could surprise to the upside as costs as slashed. 

When I commented y’day about the importance of “Social” in ESG investing I was branded a communist on the website. You can call me a complete Bolshevik; but companies planning to slash payroll to increase dividends in this landscape deserve strung up. Sadly.. it will happen. I guess we better get used to it…. Have you read 1984?


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