Warren Buffett doesn't believe in economic recovery

Weekly wrap

11:54  May 01, 2020

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Warren Buffett doesn't believe in economic recovery

foto: Yandex

Period: May 27 - 01, 2020

Main topic: Warren Buffett sold his shares in air transport companies. Practically, this means that he does not believe that the situation in this industry will recover. This is fully consistent with our structural model, which suggests that the underlying cause of the crisis is the discrepancy between the income structure of households and the structure of their expenses.

Macroeconomics

The Bank of Japan left the monetary policy unchanged, but expanded all bond purchase programs. Like the US Federal Reserve, ready to fill everything with money. Likewise the ECB, which has expanded and facilitated bank financing programs.

1_25

The profits of industrial companies in China in March fell by 34.9% per year, in general for January-March - by 36.7%:

2_28

Eurozone consumers are gloomy like at the peak of the 2009 crisis, the same picture is in the economic mood, in the business climate and in production industry. Record pessimism in the service sector:

3_21

Japanese consumers at the peak of gloom for 38 years of observation.

The mood of the South Koreans is the worst since the end of 2008, business confidence - from the beginning of 2009, and the annual dynamics of retail - from November 1998:

4_17

In Spain, retail is the weakest for all 19 years of observation. In Germany, the monthly dynamics are the weakest since January 2007 (-5.6%).

Household spending in France fell 17.9% per month - a record for all 40 years of review:

5_15

The UK retail sales balance repeated a record low of 37 years of observation:

6_8

The number of applications for unemployment benefits in France soared to a record peak, more than three times the previous record. The rise in the number of unemployed in Germany is a record: 7_8

Italy's PPI at the bottom for 4 years, and in Canada - for more than 10 years.

The approved mortgage in Britain in March is the weakest in 7 years, and consumer credit - for all 27 years of observation:

8_4

France's GDP fell 5.8% per quarter - the minimum in the history of the survey (over 70 years). In Italy, -4.7% - the bottom for 60 years. In Spain -5.2% for 25 years, the same situation in the eurozone as a whole.

9_2US GDP worst since late 2008:

10_3Incomplete sales of secondary housing in the United States fell at the worst rate since 2010, American’s income in March fell by 2% per month, and expenses - by 7.5%: a record low of 60 years of observation. Initial applications for unemployment benefits are growing rapidly, repeated applications - at a record pace.

11_5

12_4Texas Business Activity Worst in History, the same is in Richmond

13_2

ConclusionsDespite the massive support of business and citizens, a colossal emission, the negative processes in the global economy do not stop. However, most entrepreneurs, expert institutions, households, and politicians hope for the best and wait for the recession to give way to growth. Nevertheless, the most advanced investors (Buffett) are beginning to realize (perhaps not so much by calculation as by instinct) that there are industries in which the situation will not recover. Actually, this confirms our concept of a structural crisis, which suggests that the recession will not stop until the structure of the world economy (in particular, the imbalance of income and expenses of households, as well as debt processes) comes to an equilibrium state.


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