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Thread: Economic impact of Covid-19

  1. #1
    Join Date
    Mar 2007
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    Default Economic impact of Covid-19

    Stuff is about to get more expensive.

    Supply and demand. It is being reported that China's factories may not re-open until May 1.

    Cheap imports will vanish from the marketplace, replaced by more expensive domestic products.

    That may sound good on the surface but understand that very few industries have the ability to ramp up to replace the market vacuum left when the imports halt.

    As we learned from the Obama era ammo shortage, supply cannot be infinitely elastic because you can only run 3 shifts a day before you need an extra production line. That involves buildings and machinery and employees that will take many years of production to amortize their costs and make the investment feasible. If the plant owner believes he has possibly only a few months or a year to recoup costs and has any sense, he won't make an investment guaranteed to run him into the ground when cheap imports return and flood the market. Keep in mind, this manufacturer is now paying more too, for everything that goes into their product and everything required to keep the business operating.

    Because of shortages, the already higher cost of domestic products rises even more, be cause people who really need the product will have little recourse but to pay it.

    So even if you personally buy NOTHING stamped "made in China" my hunch is a prolonged shutdown of Chinese production and shipping will be felt by you in some way... probably a very uncomfortable way.

    We derisively call Walmart "China mart" but think for a sec about how many Walmarts in smaller communities have put all the independent local stores out of business. Those Walmarts are now not uncommonly the only point of general supply for a significant distance... with the next nearest town often in the same situation. Are those Walmarts going to be able to keep the doors open long without re-supply? What happens if they close or simply run out of commodities? I would wager that will get some people's attention, quite an unwelcome surprise.
    "The thing about smart people is they seem like crazy people to dumb people" - Stephen Hawking

  2. #2
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    ^^ I think to a degree you’re right, May? The Chinese won’t have it, they’ll figure a way, their way of life depends on it. To them, as cruel as it sounds, those workers are expendable. There’s also the fact that as far as pacific rim manufacturers China isn’t the only game in town, Microasia, Vietnam, S Korea etc are their competitors.

    China has near 1.4 billion people to feed, the machine must work or China dies.

  3. #3
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    U. S. Manufacturers had better re-evaluate how they do things. It's one thing to move all your production to a foreign country (a hostile and/or incompetent one at that) but what happens when things go sideways there???

    They ought to maintain some expandable production facilities here!!!!!

    This should be a lesson.

    Will anyone learn it?

  4. #4
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    There are several foreign (Asian) owned factories nearby me. Funny huh. I'm in middle Tn.
    Don't bring skittles to a gun fight.

  5. #5
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    Yeah, my Toyota, Nissan and Isuzu were made in U.S.A. and my friends GMC was made in Mexico, Canada, China and finish assemblies in Mexico. But mine is a "foreign car" and his is a "domestic product." smh.
    Approach with a calm resolve, attack with reckless indifference. Gladius Republicae!
    "...use Gold like it's gunpowder..."

  6. #6
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    probably won't notice much for this spring - but the overall supply will be shortened - if you see a piece of clothing >> buy it then - the entire PO wasn't delivered from China ....

    if the China factories kick in May-June-July they'll be automatically be shifting gears for the retail fall POs ...

    unless you want a vehicle that is a special order - I doubt if the car backlog inventory craps out - probably do it good to be cleaned out ...

  7. #7
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    IMHO this is going to be a major major disruption to the entire world's supply chain.

    Short term will be shortages of items primarily manufactured in China, until other suppliers can ramp up.
    Also already being reflected in reduced demand for petroleum as millions of Chinese are basically under house arrest.

    Longer term China is in big trouble for lots of reasons.
    1. Trump's tax cuts make it far less profitable to manufacture overseas (anywhere) vs making here in the US. That has already started movement of manufacturing back to the US.
    2. TRUMP's tariffs have made Chinese goods more expensive vs domestic production and also caused many companies to move production to Vietnam, Malaysia, Thailand, Taiwan, etc (our trade w China dropped 17% last quarter - first decline in 4 years)
    https://www.msn.com/en-us/finance/ma...ina/ar-BBZYLWY
    3. Reports are that even when they tried to re open factories too many people stayed home for fear of the virus.
    4. Their real estate market is as frothy and overbought as ours was in 2006
    Last edited by explo72; 02-17-2020 at 07:47 AM.

  8. #8
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    lots of updates here - not looking good
    https://www.cnbc.com/2020/02/18/coro...ina-death.html

  9. #9
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    I don't dispense investment advice...

    But I have moved all my retirement savings out of stock funds and into bonds.

    Will.probably re-evaluate after the November election.
    "The thing about smart people is they seem like crazy people to dumb people" - Stephen Hawking

  10. #10
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    I mostly did the same back at the start of October.
    Greater love hath no man than this, That a man lay down his life for a friend.
    John 15:13

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