Why A V Shaped Recovery Is Assured! CoronaVirus and Property Investors

Spent the morning researching Economists that I follow and their thoughts on recovery and I was mildly surprised how these lot of normally doomsaying and hardcore number crunchers were actually very upbeat for the UK.

But what are the risks? and what does it mean for you?

For all Brett's Coronavirus resources https://www.gladfish.com/recession/

Video Transcription:

hey guys so welcome to coronavirus and property so today what I thought I'd kinda like I spent the morning today just going through economics and specifically looking at economists so not the media I wasn't going to media outlets what I was looking at was
economists that I've been following over the last two decades and that I respect their opinion whether they're being right or wrong all the time because obviously the one thing you know about economists is they follow models and they do predictions based on models and the thing is you're only as good as the model you attach yourself.

It's an interesting thing but you know looking at money supply looking at government stimulus looking at inflation looking at QE you know look at you know just realistically to get a real sense for whether we're gonna have a V shape or a U shape to be fair I think not having any form of you know the slowdown isn't really an option I think you know the reality that is happening and has happened and I think the ever there's enough evidence out there you know you just don't stop an economy and then press play again and starts like a movie it would be nice but I'll tell you after today it's an interesting thing that you know really just the data and the economist out there that are really producing good material and good modelling to show why actually we're more likely to go through to a through V rather than a U which is great news for us.

And I think if you don't want to watch the rest of the stuff that I'm gonna go through bottom line is V shape we should be in good shape by the end of the year prior bout six months after lockdown and you're interested because you know been saying this for a while and I've been sort of up and down and you know as you read different things and you bring different models and you do this but realistically this is what these are saying and what the overall is saying is V shape it'll be this year and then next year we'll be back into growth figures which is actually what most including the IMF and I had to go to the IMF the other day but you know looking at around 2% growth next year so that's good news.

It's good news as you could survive this next six months yeah so if you're in business right now that can't survive the next six months you really got to look at how your cash flows but the good thing is is that there are lots and lots of government stimulus there are lots of banks you know lending lots of things happening you know and I think that's really the issue.

What it comes down to is in 2008 there was spending and an income issue okay, in other words, there was wasn't enough income and so, therefore, spending dropped and we went into a recession which is normally how it goes yeah the income levels get you know get to squeeze and the debt you know gets too high and so we have a debt bubble and so actually that deflates that stop spending and you know as spending tapers off we go in a recession it corrects itself and we get going again that's normally how things happen and there's normally a reason whether it be calm or whether it be you know bank mortgage collateralized debt obligations whatever it is there's a reason for going in for it.

This times a little bit different because there's not an income issue yeah there's a spending issue a massive spending issue because if we can't go out there and spend so because of that and that's why it's fundamentally different and while a lot of the rules and a lot of things that apply the don't apply any at the moment because actually the other side of it is so there's that side which is that there isn't an income issue,  you know through furloughing and things like that the income is still up there there's just a spending issue so what's actually happening now and you know I've been chatting to a few mates and things like that which they're actually in a better position they were because they're not going out spending their money but their income hasn't been hit as much now some people's income was being it absolutely you know so I'm not talking about those people and it is you know there is a percentage of population that will beunemployed and there will an unemployment issue but I've said for a while look at the unemployment of a country and if their unemployment rate isn't too high then that V-shape is possible.

I think the UK that's definitely possible interestingly and this is what I think where the US. really and Trump is really lost and it's not just Trump it's a whole Republican you know and that system that they've got there are stuffed you know I think they're really gonna they'll be the u-shape and I think that's almost definite I don't see what they're gonna do to recover from that there are too many people unemployed and really they've been hesitant to put the stimulus in quick enough everything has been you know taken ages but the other side of it is they've been so slow to make decisions but also the decisions are based on politics not on health and not on people you know so they've got a lot of issues but anyway that says this is not about the US is more about the UK and the
rest of the normal world would have normal people in it you know normal leaders and politicians anyway.

The bottom line is this is another reason why it's very because I see lots of these things about or there's gonna be a little quiddity issue and you won't be able to get mortgages and you know that's actually that is not the case now you know we went into the 2008 recession where banks core capital is about 1.8 per cent yeah now going into this it's about 15 per cent if you remember had the Basel 8 they reject the Basel Accord and effectively said right banks you need to be able to ward off shocks, yeah they have successfully done that since the last recession and that has been successful or so if anything they've got more capital than they need and so what's happening is some of that capital is being freed up and lent out and they're willing to lend it and it is getting lent to businesses you know in the UK we're just about to put our C bills in you know our loans because what I've done I've worked out with the cash flow for next six months is and I'm just going to go right that's what my assumptions are that's what my model is and this is how much I want to borrow.

I think that's a great opportunity because otherwise my decision rather than growing my business which you know it's amazing that I'm sitting in here in the current circumstances looking at how I can grow my business over the next year two years, three years, four years rather than sitting there going okay what cutback so I need to make to survive this recession and things like that it's a totally different perspective and if I'm doing that and other people are doing it absolutely you know one of my mates in Kiwi you know New Zealand you know he's got I think he got $700,000 as a payment not as a grant not this alone a grant they actually granted so basically that's enough to pay his payroll for six months you know it's amazing and so he's in a totally different way he's looking at now employing more people you know because why the hell wouldn't you if you can employ more people and and you've got the funding there that sort of stimulus is not just the government stimulating it's actually getting down to where it needs to be which is in small business I mean I think it's sixty five percent of people are small are employed by small businesses under two and a half million turnover every year sixty five percent people that's where the cash needs to get, not into the big bailouts the big massive companies who can get other funding and other you know they've got lots of different choices whereas it's the individual small businesses we get the money to them everyone survives we have a V-shape recession and that's why I think that we are going to have a v-shape recession I think looking at everything right now.

There are some maybe some problems number one the media right now you know favour the media but the bottom line is if they keep continuing to talk the negative and talk everything down and oh it could be as bad as a recession which they aren't going to do they're not going to change but you have to change you got to realize that and things are changing is the reality is you know we're off most of us aren't watching the
BBC anymore we're watching Netflix you know so we're not getting a constant bombardment of news and apps but what we are doing now is are watching YouTube and of course YouTube is full of you know news and apps because all of those media companies have now taken to producing it there but then actually publishing it onto YouTube and the like so you just got to be really careful about what you're watching because there is so much negativity out there I mean it's an interesting situation because if you were the central bank's you know the central banks lent into governments to the tune of about ten percent of the global GDP so it's a mess amount of liquidity injection around seven trillion dollars okay that will enter the market in the next six to 18 months yeah and you know so that is gonna have a nice thing in the tail and the sting in the tail is inflation which you know look I'm making this up and I you know based on my reading and that somewhere between three and five percent inflation we're gonna hit probably about two years time which isn't too bad I mean if we target two percent three to five percent would double that three to five sort of say one percent either side maybe you know one half two percent other side but I think we're definitely going to get that sort of four percent mark I'll be where it's at depending on how long and if there's second waves and things like that.

There is going to be inflation interest rates are going to go up to accommodate that so we're gonna be prepared for that you know but we've got time you know we've probably got the next two years before that's going to start to kick in and before governments will want to pull out that stimulus yeah so you know if we look at what's happening you know this year look at the exchange rate exchange rates I think will stay around the same because what normally happens and what would happen the Brexit yeah we will wherever we're in relation to everyone else and all the sudden had Brexit which devalued our currency against your house because it happened to the UK yeah but remember coronavirus is happening to everybody yeah so it's gonna keep the currency exchange rates are relatively same.

It will hit some countries more than others countries that have been hit a lot harder that have had to stimulate a lot more they will devalue their currency more and their exchange rates will drop against other currencies you know so that potentially will happen but it's more likely the major currencies will stay there are they're about yeah but I think you know the US as I said I think and India because they just didn't get hold of the virus it's going to sweep through that's really gonna have an effect but the other side of it.

With India that I think is the real problem is not the actual virus it's the fact that they
don't have any income support so all of these people will have had to be locked down and there just isn't any income flow by no income flow what do you do where do you go you literally don't have any full down position so I mean massive unemployment massive issues yeah South Africa I mean it's interesting suppose I was chatting to amass a fan-made of mine I've done virtually nothing there I'm not even I mean they're gone for the herd mentality hard you know now that's not a good thing necessarily I mean the UK started that and look at our figures you know we change tact relatively quickly thank
goodness but you know South Africa hasn't really done a lot so far so yeah it's an interesting one.

But you know most other countries I mean Sweden is an interesting one Sweden didn't do a lot but now Sweden's had to Singapore even Singapore didn't do a lot and felt it didn't need to but then they didn't realize that all these guys that are working on the big major projects and living in dormitories they hadn't checked them and they got away from them so our figures went you know you've got the locals the local citizens and you know permanent residents in that that are getting twenty or thirty a day but then we're getting our numbers of like eleven hundred a day so the rest of those are the guys in the dormitory so they've had to actually quarantine all the dormitories, yeah it's you know it's
an amazing thing so you know governments really have to learn that they've got to get on top of this stuff really quickly and you know we're gonna watch for the second wave which potentially you know Septemberish I think the second wave knowing what
we know now most governments will be able to cope with that most health systems will be able to care for that and will be fine.

Looking at today I'm actually you know a lot more confident in a V-shape thing but I think what you're gonna do is look at your individual industry because I think you know if you're running conferences if you're in airline industries if you're in the non-local transport intimacy and what I mean by that is sort of transport tourism industry so if you're in that industry if you're in the UK hotels I think that'll be fine because people will be happy to go around the UK but they won't necessarily be happy or won't necessarily be allowed to go to Thailand and places like this possibly you know you may find that Thailand opens up irrespective but their people might not want to travel if you know if coronavirus is still rampant but then again if you've had it you know maybe you think well actually it's not drama so you know.

I think overall you know it's I'm more confident now and it's been interesting data to read the articles and watch these videos and you know to speak to the Economist in that and really get a sense for what they think is going on it and by far the majority of them is it's not actually a normal situation you know I've always said it's the same but different you know and it's same in other ways but it's very different in a lot of ways you know and I think that the bounce-back can happen it happened in China and potentially you know it could happen here too which is good news so anyways that's it for today I'll see you again tomorrow see you later bye

Brett Alegre-Wood
April 22, 2020

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