A 'black swan' event is something out of the blue - that creates systemic risk. The 2019-nCOV (virus) is potentially one such thing.
The markets have not been prepared for this - at all. Could it be the pinprick that pops the 'tech bubble' that influences markets globally?
The shock waves of this itty bitty virus are totally unexpected. I go into some price action in the last few days, on the DJI and explain some of the dangerous features of nCOV.
China has basically been quarantined by the international community. This is certainly not good news. It's an unofficial quarantine. Lots of nations have limited contact or isolated China in various ways.
The virus is one of the most spreadable in history of all viruses but with a low lethality. That means millions of people could be infected but only about 2% killed by it. And that means the death toll could be serious over weeks, months or years.
There is no treatment at this time and no vaccine. Even if a vaccine is developed, vaccinated the whole world is not a workable option. In addition the wide spread of the virus means that it can mutate - rendering any vaccine developed, as ineffective.
The next big question is when will this quarantine on China be lifted. It could take months, or probably years - depending on what the nCOV virus does next.
There is chatter in the blogosphere that the FED will come to rescue the markets from the virus.. like pfffft! The FED has a lesson coming to them.
Disclaimer: This screencast is not intended to advise on taking a position in the markets or making transactions. If you lose your money in the markets, kindly sue yourself.
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The nCOV virus situation continues to unfold. At 31st January 2020, 9,692 cases confirmed in China. There have been 213 deaths, a jump of 43, the highest increase so far. 1,527 were in serious condition.
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Updates - On weekend Wall Street (DJI): Close on Friday was 28280.7 Price at GMT 15:20 2020-02-01 (Saturday) is approx 28105 - making that a retreat of approx 175 points (south).
On the virus - news continues to flow in. At 15:24 2020-02-01 nCOV has infected over 11,700 people and killed 259 so far. Yes figures are rising fast by the minute almost.
China has reassured everybody that it's on top of the situation and and assuring investors that its USD 45 Trillion market economy is sound. This is in the face of what could be Black Monday all over again.
I don't know what China is trying to pull - it's like shouting "Don't panic!" Seriously? My advice to China is to stay quiet but be truthful.
Expect trouble from the open on Sunday night. I won't be surprised if I see 500 - 1000 pts further south (not a prediction). Investors will not trust China.
Expect JPY currency pairs to head further south. AUDJPY is usually most affected cuz AUD follows DJI mostly south and JPY tends to appreciate as a safe haven in times of DJI troubles.
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Reliable reports are coming in fast about people discriminating against anybody who looks 'Chinese'!
Half a million South Koreans have launched a protest to ban Chinese people from entering their country.
Some people who may look Chinese (but are not) have resorted to wearing T-shirts and carrying signs saying 'We're not Chinese'.
Some businesses in Japan have put up signs outside, "No Chinese". What the hell!
All this is a terribly sad state of affairs. People are gripped by fear and are reacting like animals.
Expect the same fear responses in the markets.
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Queen's University (Belfast) has stopped travel of students and staff to China.
Australia has stopped foreign visitors from China.
Join the dots. The international community is effectively quarantining China. Expect to read the same opinion in mainstream media in 48 hours. But you read it here first.
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2020-02-02 09:49 GMT Based on death rate of 259 out of 11,818 in China alone, the rough case fatality rate is 2.19%. This low rate does not mean the virus is insignificant. How? In terms of the deaths to be expected, the total number of people infected globally is yet unknown. It would be 2% of that figure - which is changing and likely to rise.
In the news this morning is: 1. Two people from the same family in the UK have contracted nCOV. One is a student of York University. 2. One death from nCOV in Philippines. 3. Spain confirms one case in the Canaries.
Case counts by country are as follows: Asia: China (11 818), Thailand (19), Japan (15), Singapore (16), Taiwan (10), Malaysia (8), Republic of Korea (12), United Arab Emirates (4), Vietnam (5), Cambodia (1), Nepal (1), The Philippines (1), India (1), and Sri Lanka (1). Europe: Germany (7), France (6), Italy (2), United Kingdom (2), Russia (2), Finland (1), Spain (1) and Sweden (1). America: the United States (7) and Canada (4). Oceania: Australia (10).
RAPIDLY UNFOLDING PICTURE The total of coronavirus infections in China went up 22 per cent on 1st February, to 14,380 cases and 304 deaths. 2,590 new cases was the largest increase since the start of the outbreak.
CHINA is expecting Black Monday - and has responded with liquidity measures to the tune of USD$173 Billion. In addition the cap on some insurers has been lifted above 30% for those in equities. (DON'T ask me how this works). Other sources are expecting the FED to weigh in with analogous counter measures. All this basically - in trading terms - is about throwing money in the opposite direction to a big trend. Not a good idea.
As some may know Russia has closed 4000km of its border with China and imposed travel restrictions on those who have been to China and returning.
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Weekend Wall Street is now at 28075 (@ GMT 11:21 on 2020-02-02). This is 225 points down from the Friday close.
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11:41 2020-02-02 It's emerging this morning that 8 medics in China who spoke up about the breakout of a SARS-like virus in December 2019, had been muzzled by 'the State'. They were given 're-education' and 'criticism' for 'scare-mongering'. One of these was a doctor who later contracted nCOV infection.
The Chinese Supreme Court criticised Wuhan's police for their totalitarian actions.
What's the point? Can you trust anything China says now? I don't think so - but the choice is ultimately yours. In effect China is doing a version of what they did with SARS. They're basically pretending to be transparent.
We know this because of reliable other sources coming out of China on the seriousness of the disease caused by the virus. Yet you have China reassuring everybody with much conviction.
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11:51 GMT 2020-02-02 Gosh - stuff is happening so fast! New Zealand will bar all foreign nationals arriving from mainland China from Monday - following the US, Singapore and Australia. South Korea will bar people who have visited Hubei province from Tuesday. Vietnam has suspended all flights to and from China. And keep in mind that Russia has taken a similar course.
So despite WHO advising no travel or trade restrictions, effectively that is exactly what is happening. In other words China is being QUARANTINED!
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There is potential trouble ahead for all stock indices. Virus infections have risen to about 35,000 and deaths at 806. The rate of spread and deaths seems to be following an exponential curve up. The markets are not gonna like this. Expect Central Bank interventions in round 2 of the fight.
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14 countries so far have imposed travel restrictions to or from China. This is in defiance of WHO advisory.
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There are more problems ahead in China. Among a group of 138 patients, 26% required intensive care and 4.3% died, higher than other, broader estimates of fatality from the virus. This could mean that there is a mutation of the virus to a more dangerous strain.