The Bankwatch

Tracking the consumer evolution of financial services

Banks’ considerations for the end of covid-19 lockdown – followup – 2

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Here is my follow up to April 5th, 2020 post.

My own non-scientific assessments as of April 5th, 2020. [it is remarkable how much information has been shared since that date]

Here are the available options that I can see.

- wait for the antidote (Q2 2021)
- wait for the antibody test (Months away)
- muddle through: slowly re-introduce working in the office for low risk staff. Possibly introduce random or systemic testing of employees who have returned (if such is available)
- UBC model featuring on/ off approach based on Government indication that hospital capacity, particularly ICU, is adequate to accept new cases. Other ICU options are at the Government policy planning level and probably beyond control, or meaningfulness for business options
** Much of the improved mood is because of the Fed, which has acted more dramatically than other central banks, buying up assets on an unimagined scale. It is committed to purchasing even more corporate debt, including high-yield “junk” bonds. The market for new issues of corporate bonds, which froze in February, has reopened in spectacular style. Companies have issued $560bn of bonds in the past six weeks, double the normal level. Even beached cruise-line firms have been able to raise cash, albeit at a high price. A cascade of bankruptcies at big firms has been forestalled. The central bank has, in effect, backstopped the cashflow of America Inc. The stockmarket has taken the hint and climbed.

Since then we have observed some amazing activity.

  • Limited Government support for individuals
  • massive and ongoing Government support for business particularly in the US where Quantitative Easing has far exceeded 2008 levels and is open-ended **
  • focus switches from number of covid-19 cases, switch to deaths, switch [still underway] to R factor less than 1.0 [Basic Reproductive Index – average number of people infected by transmitters].
    • [side story] acceptance of a number of deaths as an outcome which suggests some form of the Herd Immunity approach exemplified by Sweden. [Governor of Colorado]
  • pressure for untested drug alternatives to vaccines that will offer solutions that support systematic fading in an end of lockdown possibly calibrated and measured by R factor and pending vaccine earliest sometime in 2021. [I have not heard this measured action approach articulated by Government yet]

In short the target has been a moving one. These shifts in target reflect lack of knowledge, evolving facts and increased available data and finally political pressure to have an answer.

There is also what I will call the populist government factor (Trump, Ford, US States, UK) which focusses less on facts and more on voter acceptance.

There are macro economic trends such as  Emirates Airlines announcement to raise debt because they estimate Air travel not coming back for 18 months. Retail is experiencing an accelerated shift to a new and to be determined model, as large names go Bankrupt [e.g. J Crew, Neiman Marcus, JC Penney, Army and Navy,  + + )

One common theme in North America and Europe is the shift to mindless end of lockdown with politicians using commentary inferring we are at the beginning of the end of lockdown. This has the appearance of ready, shoot aim as a strategy.

Asia provides the appearance of control. But there is an undertow of information control even in normally systematic Japan which by my observation is drastically understating cases and deaths after the disastrous fiasco created by senior politicians (Mori San) to accept the demise of the 2020 Olympics. China and Hong Kong data cannot be trusted.

North American and European Governments have begun taking isolated actions which provide the appearance of opening the economy but do nothing to offer a clear understanding of what the measure of success will be. These actions have two possibilities of success and move to a second phase of lockdown end or reversion to a position worse than mid February or earlier.

It has to be said the approaches being taken offer no guidance to Banks or any business how they should address covid-19 unless you are a Garden Centre or Hardware Store which are the primary focus of many Government actions.

No disrespect to Garden Centres but this is hardly a cohesive end of Lockdown strategy.

Written by Colin Henderson

May 10, 2020 at 13:14

Posted in Uncategorized

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