"Buying low makes it a lot easier to sell high."
What the Swine Flu Panic Means for Your Portfolio
By Seth Jayson April 27, 2009 Comments (24)
It's a delicate subject, and people's lives are at risk, so I'll state right here, up top, that I do not intend to make light of this public health concern. I share the sympathies that we all have for individuals afflicted by the swine flu. (I've experienced a delirium-packed, 10-day version of the usual seasonal flu, and I wouldn't wish this illness on my worst enemy.)
That said, the reactions of the investing community already look ridiculous: "Markets Down on Swine Flu" read the headlines. Other writers will try to convince you to pile into vaccine names like GlaxoSmithKline (NYSE: GSK), or companies like Netflix (Nasdaq: NFLX), for which a simplistic, "stay-at-home" argument can be made. This is simply rank trend speculation in reverse.
How to really profit
If you really want to find opportunities relating to the swine flu story, I suggest you do the opposite of what most people are advocating. For instance, consider inverting one particularly brazen and short-sighted call that was reported by Bloomberg this morning: UBS downgrades Mexican stocks from "top pick" to "underweight" because of the swine flu.
Really? An entire country's strongest businesses will be permanently impaired because of this health crisis? Would you write off entire segments of the U.S. economy if the illness got worse here? Would you sell Procter & Gamble (NYSE: PG)? Ditch Home Depot (NYSE: HD)?
Sure, the Mexican economy is generally more fragile than ours, but most of the big-name firms trading on our exchanges are anything but weak. Beverage and minimart king FEMSA will likely sell fewer soft drinks and beers over the coming weeks. Will Gruma sell fewer tortillas, Industrias Bachoco fewer chicken chunks? Probably.
Will this matter for the long term?
Very unlikely If you are investing in strong names for the long term -- and that's how you should be investing -- these are the times when you should be more interested in buying stocks, not less. Flu epidemics are terrible, but they're also normal. So are economic cycles and (in Mexico) the occasional currency panic.
Buying good companies when the headline news is bad is the hardest thing to do (psychologically), but it's the simplest way to buy low. And buying low makes it a lot easier to sell high.
That's the takeaway from the two wealthiest investors in the world -- Warren Buffett and Carlos Slim, who made their fortunes buying companies with competitive advantages on the cheap, often during times of uncertainty. Despite recessions, oil shocks, currency convulsions, SARS, and bird flu, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), Telmex, and America Movil (NYSE: AMX) have made them very wealthy.
We've recently revamped Motley Fool Hidden Gems, putting real money into small-cap stocks, to enable us to take advantage of exactly this kind of short-term market craziness. At times like this, we're more interested in our favorite Mexican stocks: Grupo Aeroportuario del Sur and Grupo Aeroportuario del Pacifico. As monopoly airport operators with high fixed costs, both would see turbulence due to a temporary dip in air travel (one they're already getting thanks to the economy).
But in the long term, monopolies like these thrive and enrich shareholders. Ditto the major players I mentioned further up. So unless you think Mexico is forever on the wane, it's time to look at buying these stocks, not selling them.
Seth Jayson is co-advisor at Motley Fool Hidden Gems. He owns shares of Grupo Aeroportuario del Sur, FEMSA, and Berkshire Hathaway. Grupo Aeroportuario del Pacifico and Grupo Aeroportuario del Sur are Hidden Gems recommendations. Berkshire Hathaway and Netflix are Motley Fool Stock Advisor selections. Berkshire Hathaway and The Home Depot are Motley Fool Inside Value selections. Procter & Gamble is a Motley Fool Income Investor recommendation. America Movil and FEMSA are Global Gains picks. The Fool owns shares of Procter & Gamble and Berkshire Hathaway. The Fool has a disclosure policy.
http://www.fool.com/investing/small-cap/2009/04/27/what-the-swine-flu-panic-means-for-your-portfolio.aspx
Showing posts with label swine flu. Show all posts
Showing posts with label swine flu. Show all posts
Saturday, 2 May 2009
Friday, 1 May 2009
Markets infected by confidence pandemic
Markets infected by confidence pandemic
Imagine if swine flu had broken out on March 9. A health emergency would probably have thrown stock markets - then touching 10-year lows - into an absolute rout. But less than two months later, investors don't seem to care.
By Edward Hadas, breakingviews.com
Last Updated: 4:14PM BST 30 Apr 2009
The Dow Jones Stoxx 600 European index hit a 2009 high on Thursday. That followed Wednesday's rise in the yield on 10-year US Treasury bonds above 3pc. Investors won't cough up for risk-free assets, but will take commodities and emerging markets exposure in big doses. It's a kind of flight from safety.
Clouds become mere appendages to big silver linings. Investors overlooked worse-than-expected US GDP figures, focusing instead on the need to rebuild inventories. They rejoiced in a slowdown in the contraction of eurozone bank lending, without recoiling at the contraction itself. Even the likely bankruptcy of Chrysler has found a positive spin: uncertainty is lifted.
As for unequivocally bad news - a huge increase in eurozone unemployment, confirmation that UK house prices are still falling - it is simply ignored.
Investors seem to be on a mood-enhancing drug. And in a sense they are.
Governments and central banks have been issuing vast quantities of a stimulant that gets investors and markets high - cheap money. Some of the liquidity created by near-zero official interest rates, effectively unlimited financing for banks and gargantuan fiscal deficits is almost certainly leaking into financial markets.
Investors, like policymakers, are betting that the optimism will prove self-fulfilling. Confidence makes consumers and companies more likely to spend and invest. Also, the liquidity should ease the financial squeeze, increasing the supply of credit for trade and inventories.
The cure is working so well that it's tempting to believe the monetary floodgates should remain open forever. But there's a reason why these policies are exceptional. They are likely to have adverse side effects - too high inflation if money stays too cheap for too long, or another squeeze if interest and tax rates rise too quickly.
The money drug is still in trials. What's more, it may do little to combat the underlying disease of globally unbalanced production and consumption. A long and painful recession would do that. And markets may yet follow the economy rather than the money.
http://www.telegraph.co.uk/finance/breakingviewscom/5251575/Markets-infected-by-confidence-pandemic.html
Imagine if swine flu had broken out on March 9. A health emergency would probably have thrown stock markets - then touching 10-year lows - into an absolute rout. But less than two months later, investors don't seem to care.
By Edward Hadas, breakingviews.com
Last Updated: 4:14PM BST 30 Apr 2009
The Dow Jones Stoxx 600 European index hit a 2009 high on Thursday. That followed Wednesday's rise in the yield on 10-year US Treasury bonds above 3pc. Investors won't cough up for risk-free assets, but will take commodities and emerging markets exposure in big doses. It's a kind of flight from safety.
Clouds become mere appendages to big silver linings. Investors overlooked worse-than-expected US GDP figures, focusing instead on the need to rebuild inventories. They rejoiced in a slowdown in the contraction of eurozone bank lending, without recoiling at the contraction itself. Even the likely bankruptcy of Chrysler has found a positive spin: uncertainty is lifted.
As for unequivocally bad news - a huge increase in eurozone unemployment, confirmation that UK house prices are still falling - it is simply ignored.
Investors seem to be on a mood-enhancing drug. And in a sense they are.
Governments and central banks have been issuing vast quantities of a stimulant that gets investors and markets high - cheap money. Some of the liquidity created by near-zero official interest rates, effectively unlimited financing for banks and gargantuan fiscal deficits is almost certainly leaking into financial markets.
Investors, like policymakers, are betting that the optimism will prove self-fulfilling. Confidence makes consumers and companies more likely to spend and invest. Also, the liquidity should ease the financial squeeze, increasing the supply of credit for trade and inventories.
The cure is working so well that it's tempting to believe the monetary floodgates should remain open forever. But there's a reason why these policies are exceptional. They are likely to have adverse side effects - too high inflation if money stays too cheap for too long, or another squeeze if interest and tax rates rise too quickly.
The money drug is still in trials. What's more, it may do little to combat the underlying disease of globally unbalanced production and consumption. A long and painful recession would do that. And markets may yet follow the economy rather than the money.
http://www.telegraph.co.uk/finance/breakingviewscom/5251575/Markets-infected-by-confidence-pandemic.html
Swine flu: 'There are two weeks where it could go either way'
Swine flu: 'There are two weeks where it could go either way'
As the scientific community admits the world is overdue for a pandemic, will the outbreak of swine flu find Britain prepared, asks Neil Tweedie.
by Neil Tweedie
Last Updated: 1:30PM BST 28 Apr 2009
Comments 21 Comment on this article
Swine flu is a variant of the H1N1 strain which causes seasonal outbreaks among humans Photo: Getty
Buy shares in pharmaceuticals, sell airlines and travel operators – well, at least for the next one or two weeks. It will take about a fortnight for the threat presented by swine flu to become clear – the scaremongers can scare away to their hearts' content for the next few days but neither they nor anyone else knows if the outbreak in Mexico City represents the beginning of a global influenza pandemic.
"Flu is like fire," says Angela McLean, director of the Institute for Emerging Infections at Oxford University. "You have an outbreak and it spits out sparks. You then have to wait to see whether the sparks die out or start new fires."
Nearly 150 people in Mexico are thought to have died after contracting a new version of the flu virus, and yesterday two cases were confirmed in Scotland, as another 22 remained under observation in the UK. There are other confirmed cases in the United States, Canada and Spain; and suspected cases in New Zealand, Israel and Colombia. Meanwhile, the Russians banned imports of US and Latin American pork (for no good reason).
The version in question is a variant of the H1N1 strain responsible for seasonal outbreaks in humans but containing genetic ingredients from strains that normally affect birds and pigs. It is virtually certain that the new variant can be transmitted between humans – otherwise all those infected would have to have been in contact with pigs. Currently, that makes it more of a threat than the avian flu strain H5N1, which has killed scores of people in South-East Asia. Although H5N1 may one day mutate into a human-to-human strain, it has not yet done so – all those who died worked closely with birds.
Influenza is the most adaptable of viruses, constantly evolving to outwit human attempts to combat it. There were three flu pandemics in the 20th century: the "Spanish influenza" outbreak of 1918, which some scientists think may have evolved from swine flu and killed between 40 and 50 million people worldwide; the Asian influenza pandemic of 1957; and the Hong Kong outbreak of 1968. Between them, these may have been responsible for four million deaths. Received opinion has it that the world is overdue another one. So what could the Mexican outbreak mean for Britain?
The doctors, scientists and civil servants responsible for managing an outbreak have a problem: they can raise the alarm now and be accused of over-reacting if Mexican flu remains just that; or they can wait and be accused of under-reacting when the British economy, already in intensive care, goes into cardiac arrest as hundreds of thousands of workers take to their beds.
According to a Cabinet Office briefing paper, a flu pandemic could reach the UK within two to four weeks of an outbreak. Once here, the virus would spread to all major population centres within one or two weeks. Peak infection would occur seven weeks after its arrival.
The department states: "Depending upon the virulence of the influenza virus, the susceptibility of the population and the effectiveness of counter-measures, up to half the population could have developed the illness and between 50,000 and 750,000 additional deaths could have occurred by the end of the pandemic in the UK."
The latter is presumably based on the apocalyptic assumption that half the UK population of 61 million contracts flu and then suffers the 2.5 per cent mortality rate seen in 1918. This compares to mortality rates of 0.5 per cent in 1957 and 1968. Nevertheless, a flu pandemic could induce economic dislocation in the United Kingdom on a crippling scale, and the jitters have already begun.
The travel industry copped it first, with shares in airlines plunging and stocks in cruise lines sinking. Shares in British Airways, Carnival Cruise Lines, Intercontinental Hotels and Thomas Cook all headed south as the European Union commissioner for health advised against all but essential travel to affected areas of Mexico and the United States. That announcement was bound to drown out President Obama's expression yesterday of "concern rather than alarm" over the outbreak. The share movements could not be justified by available evidence, but then, when did that stop the speculators?
In an assessment of 2005, the World Bank warned that a pandemic could cause a loss of 2 per cent in global GDP over the course of a year, due to reduced productivity through absenteeism. Tourism and the restaurant and hotel sectors would be hit severely as people sought to stay away from each other, while health services would be overwhelmed by those seeking help. The Department of Health believes a flu pandemic would cost Britain up to £7 billion in lost GDP if a quarter of employees were affected, and double that if half went on sick leave at some point – a more likely figure. Hospitals and surgeries would be swamped: pneumonia cases could easily outstrip the 110,000 acute and 1,800 intensive beds available in England and Wales.
A specialist in acute medicine based in London told The Telegraph that he had made preliminary plans to quarantine himself from his wife and three children if the flu outbreak proves to be serious and he is treating patients.
Some 12,000 people die from influenza in England and Wales each year but because the overwhelming majority are elderly that fact tends to escape the general population. The outbreak of 1918 differed from the norm in that young adults and those in early middle age, the 25-40 age group, died in the greatest numbers. The theory is that their strong immune systems over-reacted to the flu strain with fatal results. Post-mortem examinations uncovered severe haemorrhages in lungs unlike anything seen before. Some 230,000 people in Britain are believed to have succumbed to the flu pandemic, a painful toll given the three quarters of a million claimed by the First World War.
"Even in an outbreak involving low mortality, there could be real problems in maintaining services," says Prof McLean. "Schools could close for extended periods, for example. Then there is the "milk in Tesco" question. The just-in-time ordering system of supermarkets may have made us more vulnerable to stoppages through illness. I heard one figure suggesting there are eight hours worth of milk in London at any one time."
The good news is that Britain is one of the best-prepared nations with regard to stocks of the anti-influenza drugs Tamiflu and Relenza, which would supply some protection against a new strain. And, of course, the Mexican outbreak could go the way of Sars and bird flu, viral outbreaks which claimed lives at an alarming rate initially but then failed to spread.
When swine flu broke out at a US army base in 1976, predictions of a cataclysm accompanied it. F David Mathews, the US health secretary, warned: "The indication is that we will see a return of the 1918 flu virus – that is the most virulent form of the flu. The predictions are that this virus will kill one million Americans in 1976.''
Thankfully, he was wrong. Only one person died and the outbreak spontaneously ceased.
"There is a difference between being able to transfer between one human being and another, and being able to do it efficiently," cautions Professor McLean. "This strain may not be very infectious. What matters is how much virus these people are shedding and for how long – for how long are they coughing and sneezing."
"We can't know for weeks what proportion of people catch it and what proportion die from it. This might turn out to be nothing – outside Mexico."
Even if the Mexican strain spreads to the UK, people are fitter and better fed than they were in 1918. And antibiotics mean the secondary infections that often kill flu sufferers can be seen off. Still, Prof McLean believes caution is the best policy.
"You could say that it is better to over-react and then retreat. Eating humble pie at a later date is preferable to reacting too slowly and too late because outbreaks are easier to control early on."
Even in 1918, when transport was slower and scarcer, Spanish flu managed to spread around the world, reaching – and devastating – the remotest Inuit villages in five months. The jumbo jet and the era of mass travel has made influenza's task much easier.
"If this is a pandemic, we should begin to see these newly seeded epidemics growing in different countries in one or two weeks," says Prof McLean.
"Are we overdue for one? I think I would agree that we are. It's been an awfully long time.
"These are the two weeks where it really could go either way. It's a question of watch this space."
http://www.telegraph.co.uk/comment/5232571/There-are-two-weeks-where-it-could-go-either-way.html
Related Articles
Swine flu: Fingers crossed for a forgettable epidemic
Swine flu: Five confirmed cases in Britain as child dies in US
Swine flu: Companies impose travel ban on staff
Swine flu: Pandemic 'would infect four in ten Britons'
Swine flu: Germany confirms first case
As the scientific community admits the world is overdue for a pandemic, will the outbreak of swine flu find Britain prepared, asks Neil Tweedie.
by Neil Tweedie
Last Updated: 1:30PM BST 28 Apr 2009
Comments 21 Comment on this article
Swine flu is a variant of the H1N1 strain which causes seasonal outbreaks among humans Photo: Getty
Buy shares in pharmaceuticals, sell airlines and travel operators – well, at least for the next one or two weeks. It will take about a fortnight for the threat presented by swine flu to become clear – the scaremongers can scare away to their hearts' content for the next few days but neither they nor anyone else knows if the outbreak in Mexico City represents the beginning of a global influenza pandemic.
"Flu is like fire," says Angela McLean, director of the Institute for Emerging Infections at Oxford University. "You have an outbreak and it spits out sparks. You then have to wait to see whether the sparks die out or start new fires."
Nearly 150 people in Mexico are thought to have died after contracting a new version of the flu virus, and yesterday two cases were confirmed in Scotland, as another 22 remained under observation in the UK. There are other confirmed cases in the United States, Canada and Spain; and suspected cases in New Zealand, Israel and Colombia. Meanwhile, the Russians banned imports of US and Latin American pork (for no good reason).
The version in question is a variant of the H1N1 strain responsible for seasonal outbreaks in humans but containing genetic ingredients from strains that normally affect birds and pigs. It is virtually certain that the new variant can be transmitted between humans – otherwise all those infected would have to have been in contact with pigs. Currently, that makes it more of a threat than the avian flu strain H5N1, which has killed scores of people in South-East Asia. Although H5N1 may one day mutate into a human-to-human strain, it has not yet done so – all those who died worked closely with birds.
Influenza is the most adaptable of viruses, constantly evolving to outwit human attempts to combat it. There were three flu pandemics in the 20th century: the "Spanish influenza" outbreak of 1918, which some scientists think may have evolved from swine flu and killed between 40 and 50 million people worldwide; the Asian influenza pandemic of 1957; and the Hong Kong outbreak of 1968. Between them, these may have been responsible for four million deaths. Received opinion has it that the world is overdue another one. So what could the Mexican outbreak mean for Britain?
The doctors, scientists and civil servants responsible for managing an outbreak have a problem: they can raise the alarm now and be accused of over-reacting if Mexican flu remains just that; or they can wait and be accused of under-reacting when the British economy, already in intensive care, goes into cardiac arrest as hundreds of thousands of workers take to their beds.
According to a Cabinet Office briefing paper, a flu pandemic could reach the UK within two to four weeks of an outbreak. Once here, the virus would spread to all major population centres within one or two weeks. Peak infection would occur seven weeks after its arrival.
The department states: "Depending upon the virulence of the influenza virus, the susceptibility of the population and the effectiveness of counter-measures, up to half the population could have developed the illness and between 50,000 and 750,000 additional deaths could have occurred by the end of the pandemic in the UK."
The latter is presumably based on the apocalyptic assumption that half the UK population of 61 million contracts flu and then suffers the 2.5 per cent mortality rate seen in 1918. This compares to mortality rates of 0.5 per cent in 1957 and 1968. Nevertheless, a flu pandemic could induce economic dislocation in the United Kingdom on a crippling scale, and the jitters have already begun.
The travel industry copped it first, with shares in airlines plunging and stocks in cruise lines sinking. Shares in British Airways, Carnival Cruise Lines, Intercontinental Hotels and Thomas Cook all headed south as the European Union commissioner for health advised against all but essential travel to affected areas of Mexico and the United States. That announcement was bound to drown out President Obama's expression yesterday of "concern rather than alarm" over the outbreak. The share movements could not be justified by available evidence, but then, when did that stop the speculators?
In an assessment of 2005, the World Bank warned that a pandemic could cause a loss of 2 per cent in global GDP over the course of a year, due to reduced productivity through absenteeism. Tourism and the restaurant and hotel sectors would be hit severely as people sought to stay away from each other, while health services would be overwhelmed by those seeking help. The Department of Health believes a flu pandemic would cost Britain up to £7 billion in lost GDP if a quarter of employees were affected, and double that if half went on sick leave at some point – a more likely figure. Hospitals and surgeries would be swamped: pneumonia cases could easily outstrip the 110,000 acute and 1,800 intensive beds available in England and Wales.
A specialist in acute medicine based in London told The Telegraph that he had made preliminary plans to quarantine himself from his wife and three children if the flu outbreak proves to be serious and he is treating patients.
Some 12,000 people die from influenza in England and Wales each year but because the overwhelming majority are elderly that fact tends to escape the general population. The outbreak of 1918 differed from the norm in that young adults and those in early middle age, the 25-40 age group, died in the greatest numbers. The theory is that their strong immune systems over-reacted to the flu strain with fatal results. Post-mortem examinations uncovered severe haemorrhages in lungs unlike anything seen before. Some 230,000 people in Britain are believed to have succumbed to the flu pandemic, a painful toll given the three quarters of a million claimed by the First World War.
"Even in an outbreak involving low mortality, there could be real problems in maintaining services," says Prof McLean. "Schools could close for extended periods, for example. Then there is the "milk in Tesco" question. The just-in-time ordering system of supermarkets may have made us more vulnerable to stoppages through illness. I heard one figure suggesting there are eight hours worth of milk in London at any one time."
The good news is that Britain is one of the best-prepared nations with regard to stocks of the anti-influenza drugs Tamiflu and Relenza, which would supply some protection against a new strain. And, of course, the Mexican outbreak could go the way of Sars and bird flu, viral outbreaks which claimed lives at an alarming rate initially but then failed to spread.
When swine flu broke out at a US army base in 1976, predictions of a cataclysm accompanied it. F David Mathews, the US health secretary, warned: "The indication is that we will see a return of the 1918 flu virus – that is the most virulent form of the flu. The predictions are that this virus will kill one million Americans in 1976.''
Thankfully, he was wrong. Only one person died and the outbreak spontaneously ceased.
"There is a difference between being able to transfer between one human being and another, and being able to do it efficiently," cautions Professor McLean. "This strain may not be very infectious. What matters is how much virus these people are shedding and for how long – for how long are they coughing and sneezing."
"We can't know for weeks what proportion of people catch it and what proportion die from it. This might turn out to be nothing – outside Mexico."
Even if the Mexican strain spreads to the UK, people are fitter and better fed than they were in 1918. And antibiotics mean the secondary infections that often kill flu sufferers can be seen off. Still, Prof McLean believes caution is the best policy.
"You could say that it is better to over-react and then retreat. Eating humble pie at a later date is preferable to reacting too slowly and too late because outbreaks are easier to control early on."
Even in 1918, when transport was slower and scarcer, Spanish flu managed to spread around the world, reaching – and devastating – the remotest Inuit villages in five months. The jumbo jet and the era of mass travel has made influenza's task much easier.
"If this is a pandemic, we should begin to see these newly seeded epidemics growing in different countries in one or two weeks," says Prof McLean.
"Are we overdue for one? I think I would agree that we are. It's been an awfully long time.
"These are the two weeks where it really could go either way. It's a question of watch this space."
http://www.telegraph.co.uk/comment/5232571/There-are-two-weeks-where-it-could-go-either-way.html
Related Articles
Swine flu: Fingers crossed for a forgettable epidemic
Swine flu: Five confirmed cases in Britain as child dies in US
Swine flu: Companies impose travel ban on staff
Swine flu: Pandemic 'would infect four in ten Britons'
Swine flu: Germany confirms first case
Swine flu: how will shares react?
Swine flu: how will shares react?
As fears grew over the economic impact of a flu pandemic, shares initially tumbled, with travel and airline companies bearing the brunt of the losses.
By Emma Simon
Last Updated: 4:13PM BST 30 Apr 2009
Fears that the swine flu outbreak could cause further stock market shocks around the globe have proved largely unfounded, although certain shares and funds have fallen in value on the back of this latest health concern.
As fears grew over the economic impact of a flu pandemic, shares initially tumbled on Monday, with travel and airline companies bearing the brunt of the losses.
But later in the week stock markets stabilised, although there was little positive news for those companies operating in the travel and tourism sectors. By Wednesday, British Airways, which was the hardest hit in a general sell-off of airline stocks in London, fell 7.7pc.
Others shares badly affected included Carnival, the Caribbean cruise operator, which saw its share price fall by almost 7pc at one point and Thomas Cook and InterContinental, both of whom saw share prices dive by more than 4pc midweek.
But while investors were nervous about the effect that swine flu could have on these travel firms, many were buying up pharmaceutical companies on the expectation that Government's would be forced to stockpile expensive viral treatments and flu vaccinations.
Two of the biggest beneficiaries were GlaxoSmithKline, which makes flu vaccine Relenz, and Roche which manufactures the drug Tamiflu – which has been proven to be an effective treatment against both avian and the new swine flu.
Market experts said that despite the economic turmoil, stock market were not overreacting to this latest scare. (Why?)
Anthony Grech, market strategist at IG Index, said: "After weathering the likes of SARS and bird flu in recent years, there seems to be an element of wait-and-see among traders."
During the Asian bird flu outbreaks in 2005 and 2006, airline, hotel groups, insurers and oil companies stocks fell heavily, while shares in drug, health care and cleaning product businesses soared.
"I think there will be a little bit of a lift for pharmaceuticals, but this may not follow through unless the situation gets out of hand," said Paul Kavanagh of stockbroker Killik & Co. "Governments will be looking at vaccines, but it's come at a bad time for the world economy and could be very expensive."
For investors that hold Isas, unit trusts and other investment funds, this latest market turbulence may be fraying already taut nerves. But financial advisers have pointed out that the volatility this week should be put into perspective.
Adrian Lowcock, the senior investment adviser at Bestinvest said: "Stock market has a nervous day on Tuesday following the spread of swine flue, but have bounced back as concerns ease. Unless this develops into something much more prevalent we don't expect to see any further impact. The volatile is insignificant when compared to recent events."
He points out that the road to recovery will be bumpy - but this latest jolt does not seem to have derailed the slight market improvements seen over the past month.
The focus on swine flu, may be focusing people's attention on pharmaceutical companies and biotech and healthcare funds. The former invest solely in companies involved in developing new drug treatments and therapies.
The latter have a broader remit, also investing in other health care related companies, such as the large pharmaceutical giants, and companies such as Smith & Nephew that manufacture medical equipment - be it surgical instruments or face masks.
Over the past 12 months, these funds have delivered reasonable returns for investors: Framlington's biotech fund is up 20pc, while Franklin Templeton's biotech fund is up 21pc.
The health care funds have produced more modest returns (Schroders Medical Discovery is up 3.5pc, while Framlington's Health care is up just 0.6pc) but given the wider market falls, anyone invested in one of these funds is no doubt delighted with positive returns.
However, Mark Dampier, of Hargreaves Lansdown says: "Up until a year ago the performance of these funds has been awful." He adds that investors should remember that these are high risk funds, where returns can be volatile. Many are largely invested in US-listed companies, so currency movements can affect returns.
http://www.telegraph.co.uk/finance/personalfinance/investing/5246672/Swine-flu-how-will-shares-react.html
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As fears grew over the economic impact of a flu pandemic, shares initially tumbled, with travel and airline companies bearing the brunt of the losses.
By Emma Simon
Last Updated: 4:13PM BST 30 Apr 2009
Fears that the swine flu outbreak could cause further stock market shocks around the globe have proved largely unfounded, although certain shares and funds have fallen in value on the back of this latest health concern.
As fears grew over the economic impact of a flu pandemic, shares initially tumbled on Monday, with travel and airline companies bearing the brunt of the losses.
But later in the week stock markets stabilised, although there was little positive news for those companies operating in the travel and tourism sectors. By Wednesday, British Airways, which was the hardest hit in a general sell-off of airline stocks in London, fell 7.7pc.
Others shares badly affected included Carnival, the Caribbean cruise operator, which saw its share price fall by almost 7pc at one point and Thomas Cook and InterContinental, both of whom saw share prices dive by more than 4pc midweek.
But while investors were nervous about the effect that swine flu could have on these travel firms, many were buying up pharmaceutical companies on the expectation that Government's would be forced to stockpile expensive viral treatments and flu vaccinations.
Two of the biggest beneficiaries were GlaxoSmithKline, which makes flu vaccine Relenz, and Roche which manufactures the drug Tamiflu – which has been proven to be an effective treatment against both avian and the new swine flu.
Market experts said that despite the economic turmoil, stock market were not overreacting to this latest scare. (Why?)
Anthony Grech, market strategist at IG Index, said: "After weathering the likes of SARS and bird flu in recent years, there seems to be an element of wait-and-see among traders."
During the Asian bird flu outbreaks in 2005 and 2006, airline, hotel groups, insurers and oil companies stocks fell heavily, while shares in drug, health care and cleaning product businesses soared.
"I think there will be a little bit of a lift for pharmaceuticals, but this may not follow through unless the situation gets out of hand," said Paul Kavanagh of stockbroker Killik & Co. "Governments will be looking at vaccines, but it's come at a bad time for the world economy and could be very expensive."
For investors that hold Isas, unit trusts and other investment funds, this latest market turbulence may be fraying already taut nerves. But financial advisers have pointed out that the volatility this week should be put into perspective.
Adrian Lowcock, the senior investment adviser at Bestinvest said: "Stock market has a nervous day on Tuesday following the spread of swine flue, but have bounced back as concerns ease. Unless this develops into something much more prevalent we don't expect to see any further impact. The volatile is insignificant when compared to recent events."
He points out that the road to recovery will be bumpy - but this latest jolt does not seem to have derailed the slight market improvements seen over the past month.
The focus on swine flu, may be focusing people's attention on pharmaceutical companies and biotech and healthcare funds. The former invest solely in companies involved in developing new drug treatments and therapies.
The latter have a broader remit, also investing in other health care related companies, such as the large pharmaceutical giants, and companies such as Smith & Nephew that manufacture medical equipment - be it surgical instruments or face masks.
Over the past 12 months, these funds have delivered reasonable returns for investors: Framlington's biotech fund is up 20pc, while Franklin Templeton's biotech fund is up 21pc.
The health care funds have produced more modest returns (Schroders Medical Discovery is up 3.5pc, while Framlington's Health care is up just 0.6pc) but given the wider market falls, anyone invested in one of these funds is no doubt delighted with positive returns.
However, Mark Dampier, of Hargreaves Lansdown says: "Up until a year ago the performance of these funds has been awful." He adds that investors should remember that these are high risk funds, where returns can be volatile. Many are largely invested in US-listed companies, so currency movements can affect returns.
http://www.telegraph.co.uk/finance/personalfinance/investing/5246672/Swine-flu-how-will-shares-react.html
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Thursday, 30 April 2009
Markets face 20pc fall if swine flu spreads
Markets face 20pc fall if swine flu spreads
World stock markets could fall by 15pc-20pc if the World Health Organisation (WHO) upgrades the swine flu outbreak to a "phase 5" crisis, a leading fund manager has warned.
By Alistair Osborne
Last Updated: 9:14PM BST 29 Apr 2009
Mark Bon, at Canada Life, based his calculation on the market reaction in Asia to 2003's SARS outbreak, which killed 813 people.
The WHO yesterday said it was "moving closer" to raising its six-level pandemic alert to "phase 5", which is characterised by human-to-human spread of the virus into at least two countries in one WHO region.
Mr Bon said that, as the crisis moves closer to a pandemic, "it alters the economic environment and people behave differently. They stop shopping in crowded areas and they travel less."
So far the markets have shrugged off the swine flu threat, with the FTSE-100 last night closing up 93.19, or 2.27pc, at 4189.59. However, Mr Bon said: "If the market is wrong-footed, the reaction could be quite severe."
Narim Behravesh, chief economist at IHS Global Insight, warned that a pandemic could cut GDP in developed economies by 2pc-3pc, exacerbating the world downturn. "For poorer countries, the impact would be devastating," he said.
http://www.telegraph.co.uk/finance/economics/5246131/Markets-face-20pc-fall-if-swine-flu-spreads.html
Related Articles
Swine flu: WHO raises pandemic alert level
Swine flu: 'inevitable flu pandemic' would be fourth in a century
Swine flu: What do the World Health Organisation's pandemic alert levels mean?
Swine flu: British tourists repatriated from Mexico as virus spreads
Swine flu: Border controls 'don't work' warns WHO
World stock markets could fall by 15pc-20pc if the World Health Organisation (WHO) upgrades the swine flu outbreak to a "phase 5" crisis, a leading fund manager has warned.
By Alistair Osborne
Last Updated: 9:14PM BST 29 Apr 2009
Mark Bon, at Canada Life, based his calculation on the market reaction in Asia to 2003's SARS outbreak, which killed 813 people.
The WHO yesterday said it was "moving closer" to raising its six-level pandemic alert to "phase 5", which is characterised by human-to-human spread of the virus into at least two countries in one WHO region.
Mr Bon said that, as the crisis moves closer to a pandemic, "it alters the economic environment and people behave differently. They stop shopping in crowded areas and they travel less."
So far the markets have shrugged off the swine flu threat, with the FTSE-100 last night closing up 93.19, or 2.27pc, at 4189.59. However, Mr Bon said: "If the market is wrong-footed, the reaction could be quite severe."
Narim Behravesh, chief economist at IHS Global Insight, warned that a pandemic could cut GDP in developed economies by 2pc-3pc, exacerbating the world downturn. "For poorer countries, the impact would be devastating," he said.
http://www.telegraph.co.uk/finance/economics/5246131/Markets-face-20pc-fall-if-swine-flu-spreads.html
Related Articles
Swine flu: WHO raises pandemic alert level
Swine flu: 'inevitable flu pandemic' would be fourth in a century
Swine flu: What do the World Health Organisation's pandemic alert levels mean?
Swine flu: British tourists repatriated from Mexico as virus spreads
Swine flu: Border controls 'don't work' warns WHO
Swine flu deflation
Swine flu deflation
Posted By: Ambrose Evans-Pritchard at Apr 28, 2009 at 19:20:44 [General]
The markets have been remarkably relaxed about the rise in the World health Organization pandemic alert Phase 4 (sustained human to human transmission) - and tonight perhaps to Phase 5.
They seem not to care that confirmed cases of H1N1 avian-swine flu have spread to Israel, Spain, France, New Zealand, and Korea.
This surprises me. The WHO alert is the best objective indicator we have of rising risk, and the potential implications of Phase 4 or Phase 5 are .. well .. awful.
We can all argue about the likely damage from a "severe pandemic" along the lines of 1918 'Spanish Flu' or the Neapolitan pandemic of 1775.
The World Bank has floated a figure of $3 trillion, or 4.8pc of global GDP. The US Congressional Budget Office has come up with something similar. These are arbitrary telephone book numbers.
But even if losses are less, we are still talking about a further deflationary shock to a world economy already tipping into debt deflation (though it might not be a uniform deflation, if shortages push up local food and fuel prices). It would certainly finish off half the global banking system.
It is too frightful to think about. That perhaps is why investors are doing exactly that: refusing to think about.
Over the last couple of days I have been deluged by notes from City analysts and economists suggesting that H1N1 avian-swine flu poses no great threat to the global economy because the authorities showed during the 2003 SARS epidemic in Asia that outbreaks can be contained.
This is a misreading of the threat we face.
SARS is a coronavirus. It is extremely hard to catch. Just 8,000 people were infected worldwide during the entire epidemic (10pc died).
Today's H1N1 outbreak is an influenza virus, which is far more contagious.
Dr. Keiji Fukuda, the WHO's assistant director-general, said it is already too late to stop the spread of the disease. “At this time, containment is not a feasible option.
It is entirely possible that we may see a very mild pandemic. I think we have to be mindful and respectful of the fact that influenza moves in ways we cannot predict.
The worst pandemic of the 20th century occurred in 1918, and it also started out as a relatively mild pandemic that wasn’t very much noticed in most places. Then in time it became a very severe pandemic, one of the most severe infectious disease episodes ever recorded.
Perhaps because so few market players studied science, or have a current link to science, they seem not to realize that the world’s virologists and flu experts are in a state of nail-biting, ashen-faced, fear.
Rob Carnell, chief economist at ING, is one of the exceptions. “We believe fear of infection will lead to drastically altered behaviour. It may be that swine flu does not tip the human fear scale sufficiently, but if it did, with the economy already in tatters, the results could be catastrophic,” he said in a note today.
We may be lucky. The virus may indeed prove mild - like the Hong Kong flu in 1968 - or burn out altogether as it mutates.
The early cases in the US and Canada give hope. So does the apparent fall-off in the fatality rates in Mexico.
But as Dr Fukuda said, nobody can pre-judge the virulence of this pandemic. Least of all the markets.
Full coverage of the swine flu virus.
http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/2009/04/28/swine_flu_deflation
Posted By: Ambrose Evans-Pritchard at Apr 28, 2009 at 19:20:44 [General]
The markets have been remarkably relaxed about the rise in the World health Organization pandemic alert Phase 4 (sustained human to human transmission) - and tonight perhaps to Phase 5.
They seem not to care that confirmed cases of H1N1 avian-swine flu have spread to Israel, Spain, France, New Zealand, and Korea.
This surprises me. The WHO alert is the best objective indicator we have of rising risk, and the potential implications of Phase 4 or Phase 5 are .. well .. awful.
We can all argue about the likely damage from a "severe pandemic" along the lines of 1918 'Spanish Flu' or the Neapolitan pandemic of 1775.
The World Bank has floated a figure of $3 trillion, or 4.8pc of global GDP. The US Congressional Budget Office has come up with something similar. These are arbitrary telephone book numbers.
But even if losses are less, we are still talking about a further deflationary shock to a world economy already tipping into debt deflation (though it might not be a uniform deflation, if shortages push up local food and fuel prices). It would certainly finish off half the global banking system.
It is too frightful to think about. That perhaps is why investors are doing exactly that: refusing to think about.
Over the last couple of days I have been deluged by notes from City analysts and economists suggesting that H1N1 avian-swine flu poses no great threat to the global economy because the authorities showed during the 2003 SARS epidemic in Asia that outbreaks can be contained.
This is a misreading of the threat we face.
SARS is a coronavirus. It is extremely hard to catch. Just 8,000 people were infected worldwide during the entire epidemic (10pc died).
Today's H1N1 outbreak is an influenza virus, which is far more contagious.
Dr. Keiji Fukuda, the WHO's assistant director-general, said it is already too late to stop the spread of the disease. “At this time, containment is not a feasible option.
It is entirely possible that we may see a very mild pandemic. I think we have to be mindful and respectful of the fact that influenza moves in ways we cannot predict.
The worst pandemic of the 20th century occurred in 1918, and it also started out as a relatively mild pandemic that wasn’t very much noticed in most places. Then in time it became a very severe pandemic, one of the most severe infectious disease episodes ever recorded.
Perhaps because so few market players studied science, or have a current link to science, they seem not to realize that the world’s virologists and flu experts are in a state of nail-biting, ashen-faced, fear.
Rob Carnell, chief economist at ING, is one of the exceptions. “We believe fear of infection will lead to drastically altered behaviour. It may be that swine flu does not tip the human fear scale sufficiently, but if it did, with the economy already in tatters, the results could be catastrophic,” he said in a note today.
We may be lucky. The virus may indeed prove mild - like the Hong Kong flu in 1968 - or burn out altogether as it mutates.
The early cases in the US and Canada give hope. So does the apparent fall-off in the fatality rates in Mexico.
But as Dr Fukuda said, nobody can pre-judge the virulence of this pandemic. Least of all the markets.
Full coverage of the swine flu virus.
http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/2009/04/28/swine_flu_deflation
Investors can learn a psychological lesson or two from swine flu
Investors can learn a psychological lesson or two from swine flu
We're all experts in epidemiology now and it is, therefore, with some trepidation that I add to the canon of knowledge on this subject.
By Tom Stevenson
Last Updated: 9:02PM BST 29 Apr 2009
Comments 0 Comment on this article
Like most people, I know nothing worth listening to about viruses or pandemics but the medicine is only half the story. Just as interesting, especially to investors, are the lessons swine flu can offer about human behaviour and psychology. Here are six:
1. What's in a name? A rose may smell as sweet by any other name but the tag we hang on an illness can have real economic significance. The World Health Organisation plumped for swine flu because the virus involved is more porcine than avian or human. Sorry pigs. And sorry the pig-breeding and rearing industry. A number of countries have already slapped a ban on Mexican pork exports, despite the fact that the flu cannot be passed on through meat. Previous flu pandemics have adopted the name of their country of origin but here too mistakes are made – the Spanish flu of 1918-1919 apparently started in Scotland. Fortunately memories are short and, even if this outbreak comes to be known as Mexican flu, the tourists will be back soon enough.
2. Heads you win, tails I lose. Which is worse, do you think, a high mortality rate or a high infection rate? As an individual, I'd prefer it if there were a good chance I caught the flu but a slim chance it would kill me. My employer might be less relaxed about high numbers of its staff staying in bed for a week. More broadly, business would suffer if a highly infectious strain kept people at home (and out of the shops) for fear of getting sick. But fear could be an even greater factor if, as in Hong Kong six years ago, it was relatively hard to get infected but relatively easy to die if you did.
3. History is bunk. Having already mentioned Spanish flu and SARS, I am hardly one to say that historical comparisons are of limited use. We can't resist them, though. Smack bang in the worst economic slump since the Great Depression, we're now facing the worst pandemic since the Great War. But the world was rather different in 1918 as millions of troops criss-crossed the globe on their way home from the front line. The Spanish flu may have killed more people than the First World War but that doesn't necessarily tell us much about today's circumstances. SARS, too, was apparently a completely different type of virus and it was restricted to Hong Kong, quite different from the rapid spread of today's outbreak.
4. The appliance of science. Investment banks have always picked up their fair share of physics PhD graduates – who do you think dreamt up all those complex derivatives? – but otherwise the City and science tend to keep their distance. Because investors do not understand science well, they either over-react to it or are complacent about it. If investors and regulators had had a better understanding of the way in which complex systems work in the real world (hurricanes, pandemics) they might have been less relaxed about the impact that a modest shock such as a decline in US house prices could have on the global economy.
5. Black swans and sick pigs. While we were all watching the oil price or the cost of chartering a freight ship, the end to the seven-week share price rally flew in unnoticed from a country few were keeping an eye on. Like the Australian black swan that ended the idea that all swans are white, the poorly Mexican porker was the "unknown unknown" that, perhaps temporarily, slammed the brakes on the nascent equity bull market. And, who knows, there may be worse to come. When HSBC announced in 2007 that it had problems at its Household subsidiary in the US, few imagined what it would lead to.
6. The final lesson from the last week is that markets react to unfolding events both very quickly and far too slowly. The usual suspects took an immediate pounding when the news broke – airlines, travel companies, hotels, retailers – so it is tempting to think that, having missed the first knee-jerk response, it is too late to react to a market-moving story. But selling banks was the right thing to do for months after it was apparent that they were in trouble. The reason markets sometimes move slowly is that they don't benefit from hindsight. If a pandemic occurs, with a further reduction in GDP hitting severely weakened economies, the market's apparent complacency today will seem odd. If the outbreak peters out, it will look like investors were right to ignore the media storm. Sadly, we won't know until it's too late.
http://www.telegraph.co.uk/finance/comment/tom-stevenson/5246246/Investors-can-learn-a-psychological-lesson-or-two-from-swine-flu.html
We're all experts in epidemiology now and it is, therefore, with some trepidation that I add to the canon of knowledge on this subject.
By Tom Stevenson
Last Updated: 9:02PM BST 29 Apr 2009
Comments 0 Comment on this article
Like most people, I know nothing worth listening to about viruses or pandemics but the medicine is only half the story. Just as interesting, especially to investors, are the lessons swine flu can offer about human behaviour and psychology. Here are six:
1. What's in a name? A rose may smell as sweet by any other name but the tag we hang on an illness can have real economic significance. The World Health Organisation plumped for swine flu because the virus involved is more porcine than avian or human. Sorry pigs. And sorry the pig-breeding and rearing industry. A number of countries have already slapped a ban on Mexican pork exports, despite the fact that the flu cannot be passed on through meat. Previous flu pandemics have adopted the name of their country of origin but here too mistakes are made – the Spanish flu of 1918-1919 apparently started in Scotland. Fortunately memories are short and, even if this outbreak comes to be known as Mexican flu, the tourists will be back soon enough.
2. Heads you win, tails I lose. Which is worse, do you think, a high mortality rate or a high infection rate? As an individual, I'd prefer it if there were a good chance I caught the flu but a slim chance it would kill me. My employer might be less relaxed about high numbers of its staff staying in bed for a week. More broadly, business would suffer if a highly infectious strain kept people at home (and out of the shops) for fear of getting sick. But fear could be an even greater factor if, as in Hong Kong six years ago, it was relatively hard to get infected but relatively easy to die if you did.
3. History is bunk. Having already mentioned Spanish flu and SARS, I am hardly one to say that historical comparisons are of limited use. We can't resist them, though. Smack bang in the worst economic slump since the Great Depression, we're now facing the worst pandemic since the Great War. But the world was rather different in 1918 as millions of troops criss-crossed the globe on their way home from the front line. The Spanish flu may have killed more people than the First World War but that doesn't necessarily tell us much about today's circumstances. SARS, too, was apparently a completely different type of virus and it was restricted to Hong Kong, quite different from the rapid spread of today's outbreak.
4. The appliance of science. Investment banks have always picked up their fair share of physics PhD graduates – who do you think dreamt up all those complex derivatives? – but otherwise the City and science tend to keep their distance. Because investors do not understand science well, they either over-react to it or are complacent about it. If investors and regulators had had a better understanding of the way in which complex systems work in the real world (hurricanes, pandemics) they might have been less relaxed about the impact that a modest shock such as a decline in US house prices could have on the global economy.
5. Black swans and sick pigs. While we were all watching the oil price or the cost of chartering a freight ship, the end to the seven-week share price rally flew in unnoticed from a country few were keeping an eye on. Like the Australian black swan that ended the idea that all swans are white, the poorly Mexican porker was the "unknown unknown" that, perhaps temporarily, slammed the brakes on the nascent equity bull market. And, who knows, there may be worse to come. When HSBC announced in 2007 that it had problems at its Household subsidiary in the US, few imagined what it would lead to.
6. The final lesson from the last week is that markets react to unfolding events both very quickly and far too slowly. The usual suspects took an immediate pounding when the news broke – airlines, travel companies, hotels, retailers – so it is tempting to think that, having missed the first knee-jerk response, it is too late to react to a market-moving story. But selling banks was the right thing to do for months after it was apparent that they were in trouble. The reason markets sometimes move slowly is that they don't benefit from hindsight. If a pandemic occurs, with a further reduction in GDP hitting severely weakened economies, the market's apparent complacency today will seem odd. If the outbreak peters out, it will look like investors were right to ignore the media storm. Sadly, we won't know until it's too late.
http://www.telegraph.co.uk/finance/comment/tom-stevenson/5246246/Investors-can-learn-a-psychological-lesson-or-two-from-swine-flu.html
Tuesday, 28 April 2009
What the Swine Flu Panic Means for Your Portfolio
What the Swine Flu Panic Means for Your Portfolio
By Seth Jayson
April 27, 2009 Comments (6)
It's a delicate subject, and people's lives are at risk, so I'll state right here, up top, that I do not intend to make light of this public health concern. I share the sympathies that we all have for individuals afflicted by the swine flu. (I've experienced a delirium-packed, 10-day version of the usual seasonal flu, and I wouldn't wish this illness on my worst enemy.)
That said, the reactions of the investing community already look ridiculous: "Markets Down on Swine Flu" read the headlines. Other writers will try to convince you to pile into vaccine names like GlaxoSmithKline (NYSE: GSK), or companies like Netflix (Nasdaq: NFLX), for which a simplistic, "stay-at-home" argument can be made. This is simply rank trend speculation in reverse.
How to really profit
If you really want to find opportunities relating to the swine flu story, I suggest you do the opposite of what most people are advocating. For instance, consider inverting one particularly brazen and short-sighted call that was reported by Bloomberg this morning: UBS downgrades Mexican stocks from "top pick" to "underweight" because of the swine flu.
Really? An entire country's strongest businesses will be permanently impaired because of this health crisis? Would you write off entire segments of the U.S. economy if the illness got worse here? Would you sell Procter & Gamble (NYSE: PG)? Ditch Home Depot (NYSE: HD)?
Sure, the Mexican economy is generally more fragile than ours, but most of the big-name firms trading on our exchanges are anything but weak. Beverage and minimart king FEMSA will likely sell fewer soft drinks and beers over the coming weeks. Will Gruma sell fewer tortillas, Industrias Bachoco fewer chicken chunks? Probably.
Will this matter for the long term?
Very unlikely
If you are investing in strong names for the long term -- and that's how you should be investing -- these are the times when you should be more interested in buying stocks, not less. Flu epidemics are terrible, but they're also normal. So are economic cycles and (in Mexico) the occasional currency panic.
Buying good companies when the headline news is bad is the hardest thing to do (psychologically), but it's the simplest way to buy low. And buying low makes it a lot easier to sell high.
That's the takeaway from the two wealthiest investors in the world -- Warren Buffett and Carlos Slim, who made their fortunes buying companies with competitive advantages on the cheap, often during times of uncertainty. Despite recessions, oil shocks, currency convulsions, SARS, and bird flu, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), Telmex, and America Movil (NYSE: AMX) have made them very wealthy.
We've recently revamped Motley Fool Hidden Gems, putting real money into small-cap stocks, to enable us to take advantage of exactly this kind of short-term market craziness. At times like this, we're more interested in our favorite Mexican stocks: Grupo Aeroportuario del Sur and Grupo Aeroportuario del Pacifico. As monopoly airport operators with high fixed costs, both would see turbulence due to a temporary dip in air travel (one they're already getting thanks to the economy).
But in the long term, monopolies like these thrive and enrich shareholders. Ditto the major players I mentioned further up. So unless you think Mexico is forever on the wane, it's time to look at buying these stocks, not selling them.
Seth Jayson is co-advisor at Motley Fool Hidden Gems. He owns shares of Grupo Aeroportuario del Sur, FEMSA, and Berkshire Hathaway. Grupo Aeroportuario del Pacifico and Grupo Aeroportuario del Sur are Hidden Gems recommendations. Berkshire Hathaway and Netflix are Motley Fool Stock Advisor selections. Berkshire Hathaway and The Home Depot are Motley Fool Inside Value selections. Procter & Gamble is a Motley Fool Income Investor recommendation. America Movil and FEMSA are Global Gains picks. The Fool owns shares of Procter & Gamble and Berkshire Hathaway. The Fool has a disclosure policy.
http://www.fool.com/investing/small-cap/2009/04/27/what-the-swine-flu-panic-means-for-your-portfolio.aspx
By Seth Jayson
April 27, 2009 Comments (6)
It's a delicate subject, and people's lives are at risk, so I'll state right here, up top, that I do not intend to make light of this public health concern. I share the sympathies that we all have for individuals afflicted by the swine flu. (I've experienced a delirium-packed, 10-day version of the usual seasonal flu, and I wouldn't wish this illness on my worst enemy.)
That said, the reactions of the investing community already look ridiculous: "Markets Down on Swine Flu" read the headlines. Other writers will try to convince you to pile into vaccine names like GlaxoSmithKline (NYSE: GSK), or companies like Netflix (Nasdaq: NFLX), for which a simplistic, "stay-at-home" argument can be made. This is simply rank trend speculation in reverse.
How to really profit
If you really want to find opportunities relating to the swine flu story, I suggest you do the opposite of what most people are advocating. For instance, consider inverting one particularly brazen and short-sighted call that was reported by Bloomberg this morning: UBS downgrades Mexican stocks from "top pick" to "underweight" because of the swine flu.
Really? An entire country's strongest businesses will be permanently impaired because of this health crisis? Would you write off entire segments of the U.S. economy if the illness got worse here? Would you sell Procter & Gamble (NYSE: PG)? Ditch Home Depot (NYSE: HD)?
Sure, the Mexican economy is generally more fragile than ours, but most of the big-name firms trading on our exchanges are anything but weak. Beverage and minimart king FEMSA will likely sell fewer soft drinks and beers over the coming weeks. Will Gruma sell fewer tortillas, Industrias Bachoco fewer chicken chunks? Probably.
Will this matter for the long term?
Very unlikely
If you are investing in strong names for the long term -- and that's how you should be investing -- these are the times when you should be more interested in buying stocks, not less. Flu epidemics are terrible, but they're also normal. So are economic cycles and (in Mexico) the occasional currency panic.
Buying good companies when the headline news is bad is the hardest thing to do (psychologically), but it's the simplest way to buy low. And buying low makes it a lot easier to sell high.
That's the takeaway from the two wealthiest investors in the world -- Warren Buffett and Carlos Slim, who made their fortunes buying companies with competitive advantages on the cheap, often during times of uncertainty. Despite recessions, oil shocks, currency convulsions, SARS, and bird flu, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), Telmex, and America Movil (NYSE: AMX) have made them very wealthy.
We've recently revamped Motley Fool Hidden Gems, putting real money into small-cap stocks, to enable us to take advantage of exactly this kind of short-term market craziness. At times like this, we're more interested in our favorite Mexican stocks: Grupo Aeroportuario del Sur and Grupo Aeroportuario del Pacifico. As monopoly airport operators with high fixed costs, both would see turbulence due to a temporary dip in air travel (one they're already getting thanks to the economy).
But in the long term, monopolies like these thrive and enrich shareholders. Ditto the major players I mentioned further up. So unless you think Mexico is forever on the wane, it's time to look at buying these stocks, not selling them.
Seth Jayson is co-advisor at Motley Fool Hidden Gems. He owns shares of Grupo Aeroportuario del Sur, FEMSA, and Berkshire Hathaway. Grupo Aeroportuario del Pacifico and Grupo Aeroportuario del Sur are Hidden Gems recommendations. Berkshire Hathaway and Netflix are Motley Fool Stock Advisor selections. Berkshire Hathaway and The Home Depot are Motley Fool Inside Value selections. Procter & Gamble is a Motley Fool Income Investor recommendation. America Movil and FEMSA are Global Gains picks. The Fool owns shares of Procter & Gamble and Berkshire Hathaway. The Fool has a disclosure policy.
http://www.fool.com/investing/small-cap/2009/04/27/what-the-swine-flu-panic-means-for-your-portfolio.aspx
Swine flu is a non-recurring event
Move Over Swine, The Bulls & Bears Are Back
Posted By:Bob Pisani
Topics:Swine Flu Wall Street Investment Strategy Stock Market
Companies:General Motors Corp
Stocks show only modest weakness, despite concerns over swine flu. Airlines, hotels, cruise ships and some food processors are down, but the overall market is only fractionally to the downside.
Why? Because after an initial panic Sunday traders have concluded that swine flu is a non-recurring event, which is unlikely to have a long-term impact on the economy.
This view, however, could change if the situation deterioriates dramatically.
Meanwhile, we are closing out the month in a few days, and stocks are up for the second month in a row:
S&P 500: up 7.9 percent
NASDAQ: up 10.3 percent
While most of the gains for the month came in the first half, both the S&P and the NASDAQ are on the verge of breaking out to multi-month highs.
This wasn't in the bears playbook; we were supposed to sell off in the middle of earnings season.
Remember this simple mantra: after the gains since the bottom on March 9th, sideways or up is a victory for the bulls.
Here's who would own what of GM's common shares under the latest GM proposal:
Government 50 percent
Unions 39 percent
Bondholders 10 percent
Current shareholders 1 percent
Two issues are on everyone's mind:
1) Will the bondholders accept an all-equity bond exchange?
The unions are on board, but 90 percent of the bondholders have to approve the deal by the May 26th deadline.
Many traders think it would be better to hold out for bankruptcy.
Why? Because bondholders feel they are getting the short end of the stick. Bondholders are being asked to exchange $27 billion in debt for 10 percent of the company; the unions are getting $10 billion in cash (half of the $20 billion they are owed) AND a 39 percent stake in the company.
Most analysts feel the same way. Brian Johnson at Barclays said "the offer is unlikely to be accepted by bondholders, who are in effect being asked to sacrifice most of their claims in order to help GM satisfy commitments to the UAW."
John Murphy at Bank of America/Merrill Lynch, who said back in November that bankruptcy was the most likely outcome for GM, repeated that assertion this morning.
2) Is the latest GM restructuring more realistic than the prior plans?
On the surface, it certainly appears to be: the last plan in February assumed they would be breakeven at 15 million in seasonally adjusted annual car sales; this one assumes 10 million would be breakeven.
Hardly discussed is whether the new core strategy of concentrating on Chevy, Cadillac, Buick and GMC will work; most analysts believe they should concentrate on at most 3 brands.
http://www.cnbc.com/id/30437791
http://www.youtube.com/watch?v=MdIfefLcdoU
Posted By:Bob Pisani
Topics:Swine Flu Wall Street Investment Strategy Stock Market
Companies:General Motors Corp
Stocks show only modest weakness, despite concerns over swine flu. Airlines, hotels, cruise ships and some food processors are down, but the overall market is only fractionally to the downside.
Why? Because after an initial panic Sunday traders have concluded that swine flu is a non-recurring event, which is unlikely to have a long-term impact on the economy.
This view, however, could change if the situation deterioriates dramatically.
Meanwhile, we are closing out the month in a few days, and stocks are up for the second month in a row:
S&P 500: up 7.9 percent
NASDAQ: up 10.3 percent
While most of the gains for the month came in the first half, both the S&P and the NASDAQ are on the verge of breaking out to multi-month highs.
This wasn't in the bears playbook; we were supposed to sell off in the middle of earnings season.
Remember this simple mantra: after the gains since the bottom on March 9th, sideways or up is a victory for the bulls.
Here's who would own what of GM's common shares under the latest GM proposal:
Government 50 percent
Unions 39 percent
Bondholders 10 percent
Current shareholders 1 percent
Two issues are on everyone's mind:
1) Will the bondholders accept an all-equity bond exchange?
The unions are on board, but 90 percent of the bondholders have to approve the deal by the May 26th deadline.
Many traders think it would be better to hold out for bankruptcy.
Why? Because bondholders feel they are getting the short end of the stick. Bondholders are being asked to exchange $27 billion in debt for 10 percent of the company; the unions are getting $10 billion in cash (half of the $20 billion they are owed) AND a 39 percent stake in the company.
Most analysts feel the same way. Brian Johnson at Barclays said "the offer is unlikely to be accepted by bondholders, who are in effect being asked to sacrifice most of their claims in order to help GM satisfy commitments to the UAW."
John Murphy at Bank of America/Merrill Lynch, who said back in November that bankruptcy was the most likely outcome for GM, repeated that assertion this morning.
2) Is the latest GM restructuring more realistic than the prior plans?
On the surface, it certainly appears to be: the last plan in February assumed they would be breakeven at 15 million in seasonally adjusted annual car sales; this one assumes 10 million would be breakeven.
Hardly discussed is whether the new core strategy of concentrating on Chevy, Cadillac, Buick and GMC will work; most analysts believe they should concentrate on at most 3 brands.
http://www.cnbc.com/id/30437791
http://www.youtube.com/watch?v=MdIfefLcdoU
Monday, 27 April 2009
Swine flu outbreak
April 27, 2009
Swine flu outbreak
The swine flu outbreak is more worrying than bird flu because it is spread much more readily between humans.
SYDNEY - THE swine flu outbreak is more worrying than bird flu because it is spread much more readily between humans, an Australian infectious diseases expert said on Monday.
Australian National University epidemiology specialist professor Paul Kelly said swine flu had a lower mortality rate than bird flu but warned this was a mixed blessing because it would help the virus spread more quickly.
VIDEO
Pandemic fears grow(2:02)
He said bird flu had remained relatively contained because human-to-human transmission was difficult, while swine flu was highly infectious.
'(Bird flu) has been limited - to a limited extent that has happened in Indonesia and other places, but it's never been on the sort of scale as this,' Ms Kelly told ABC radio. 'This is actually really more worrying.'
He said swine flu appeared to be a form of the virus that epidemiologists had feared for years - a combination of strains from various animals that was easily transmitted between humans.
'In terms of an epidemic, for the virus to be able to spread it's actually better for the virus for humans to remain alive because that can spread it more quickly and to a greater extent geographically,' he said.
Professor John Mackenzie, a biosecurity expert from Perth's Curtin University, said the latest flu threat appeared to be a combination of at least two types of swine virus and an avian virus gene.
He said the next few days would be crucial in determining whether the world was facing a pandemic.
'I guess we're at that 'grey' stage where we don't know if it is going to be a pandemic strain or not,' he said.
'We're certainly concerned but at the same time Australia is in a better position than most other countries to be able to withstand or cope with a pandemic.' -- AFP
Read also:
Global alarm as flu spreads
Asia acts against flu threat
EU calls urgent flu meeting
Swine flu outbreak
The swine flu outbreak is more worrying than bird flu because it is spread much more readily between humans.
SYDNEY - THE swine flu outbreak is more worrying than bird flu because it is spread much more readily between humans, an Australian infectious diseases expert said on Monday.
Australian National University epidemiology specialist professor Paul Kelly said swine flu had a lower mortality rate than bird flu but warned this was a mixed blessing because it would help the virus spread more quickly.
VIDEO
Pandemic fears grow(2:02)
He said bird flu had remained relatively contained because human-to-human transmission was difficult, while swine flu was highly infectious.
'(Bird flu) has been limited - to a limited extent that has happened in Indonesia and other places, but it's never been on the sort of scale as this,' Ms Kelly told ABC radio. 'This is actually really more worrying.'
He said swine flu appeared to be a form of the virus that epidemiologists had feared for years - a combination of strains from various animals that was easily transmitted between humans.
'In terms of an epidemic, for the virus to be able to spread it's actually better for the virus for humans to remain alive because that can spread it more quickly and to a greater extent geographically,' he said.
Professor John Mackenzie, a biosecurity expert from Perth's Curtin University, said the latest flu threat appeared to be a combination of at least two types of swine virus and an avian virus gene.
He said the next few days would be crucial in determining whether the world was facing a pandemic.
'I guess we're at that 'grey' stage where we don't know if it is going to be a pandemic strain or not,' he said.
'We're certainly concerned but at the same time Australia is in a better position than most other countries to be able to withstand or cope with a pandemic.' -- AFP
Read also:
Global alarm as flu spreads
Asia acts against flu threat
EU calls urgent flu meeting
World Markets Struck by Swine Flu Fears
World Markets Struck by Swine Flu Fears
By THE ASSOCIATED PRESS
Published: April 27, 2009
Filed at 5:49 a.m. ET
LONDON (AP) -- World stock markets fell Monday as investors worried that a possible deadly outbreak of swine flu, which has already killed more than 100 people in Mexico alone, could go global and derail any global economic recovery.
Airlines took the brunt of the selling amid concerns passengers could hold back from flying for fear of catching the virus, which has already reportedly spread as far as New Zealand.
''News over the weekend of a deadly flu outbreak is rocking financial markets,'' said Matt Buckland, a dealer at CMC Markets.
By mid-morning London time, the FTSE 100 index of leading British shares was down 48.53 points, or 1.2 percent, at 4,107.46, while Germany's DAX fell 81.11 points, or 1.7 percent, to 4,593.21. The CAC-40 in France was 44.15 points, or 1.4 percent, lower at 3,058.70.
Earlier, most of Asia's markets were hit by the pandemic fears, with Hong Kong -- one of the main focal points of the SARS virus concerns just six years ago -- closing down 418.43 points, or 2.7 percent, to 14,840.42. Japan's Nikkei 225 stock average managed a gain of 18.35, or 0.2 percent, to close at 8,726.34 in back-and-forth trade.
In Europe, Deutsche Lufthansa AG fell 10 percent, while British Airways PLC was down more than 7 percent. Earlier, Australia's Qantas Airways fell 4 percent while Hong Kong-based Cathay Pacific Airways slid 8 percent.
Travel and hotel companies were also heavily sold off, with British cruise line firm Carnival PLC down more than 7 percent and French hotel group Accor SA down more than 6 percent.
While airlines tanked, pharmaceutical companies enjoyed a modest rally in falling markets amid expectations that demand for anti-viral drugs would rise. Swiss drugmaker Roche Holding AG -- the maker of Tamiflu -- was up 4 percent, while GlaxoSmithkline PLC, which manufactures the Relenza drug, rose 3 percent.
Worries about the epidemic's spread will likely remain at the forefront of investors' mind over the coming days and overshadowed any hopes generated over the weekend by the announcement from the Group of Seven finance ministers that the worst of the world recession may be over and that recovery may emerge by the end of the year.
''It's really going to be a case of watching how this Mexican flu issue develops before deciding if these already bruised markets have another big fall coming up,'' said CMC's Buckland.
Hopes that a recovery of sorts is on its way has helped world stock markets rally off multiyear lows in early March. Despite some range trading over the last couple of weeks, stocks began to rally strongly again at the end of last week, with the Dow Jones industrial average, for example, advancing 1.5 percent to 8,076.29 on Friday.
Selling is expected to be the name of the game when Wall Street opens, with Dow futures down 124 points, or 1.5 percent, at 7,932 and the broader Standard & Poor's 500 futures 15 points, or 1.7 percent, lower at 851.50.
''At the moment we are expecting the Dow to open down around 90 points lower from Friday's close -- again on swine flu concerns,'' said David Jones, chief market strategist at IG Index.
Elsewhere in Asia, Australia's stock measure gained 0.5 percent while Shanghai's fell 1.8 percent. Markets in Singapore, Taiwan and India retreated.
Oil prices dropped sharply as investors mulled comments from OPEC suggesting the price was too low for companies to justify new investments in crude production. Benchmark crude for June delivery fell $2.78 to $48.77. The contract jumped $1.93 to settle at $51.55 last week.
In currencies, the dollar weakened to 96.55 yen from 97.17 yen. The euro traded lower at $1.3141 from $1.3161.
--------
AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.
http://www.nytimes.com/aponline/2009/04/27/business/AP-World-Markets.html
By THE ASSOCIATED PRESS
Published: April 27, 2009
Filed at 5:49 a.m. ET
LONDON (AP) -- World stock markets fell Monday as investors worried that a possible deadly outbreak of swine flu, which has already killed more than 100 people in Mexico alone, could go global and derail any global economic recovery.
Airlines took the brunt of the selling amid concerns passengers could hold back from flying for fear of catching the virus, which has already reportedly spread as far as New Zealand.
''News over the weekend of a deadly flu outbreak is rocking financial markets,'' said Matt Buckland, a dealer at CMC Markets.
By mid-morning London time, the FTSE 100 index of leading British shares was down 48.53 points, or 1.2 percent, at 4,107.46, while Germany's DAX fell 81.11 points, or 1.7 percent, to 4,593.21. The CAC-40 in France was 44.15 points, or 1.4 percent, lower at 3,058.70.
Earlier, most of Asia's markets were hit by the pandemic fears, with Hong Kong -- one of the main focal points of the SARS virus concerns just six years ago -- closing down 418.43 points, or 2.7 percent, to 14,840.42. Japan's Nikkei 225 stock average managed a gain of 18.35, or 0.2 percent, to close at 8,726.34 in back-and-forth trade.
In Europe, Deutsche Lufthansa AG fell 10 percent, while British Airways PLC was down more than 7 percent. Earlier, Australia's Qantas Airways fell 4 percent while Hong Kong-based Cathay Pacific Airways slid 8 percent.
Travel and hotel companies were also heavily sold off, with British cruise line firm Carnival PLC down more than 7 percent and French hotel group Accor SA down more than 6 percent.
While airlines tanked, pharmaceutical companies enjoyed a modest rally in falling markets amid expectations that demand for anti-viral drugs would rise. Swiss drugmaker Roche Holding AG -- the maker of Tamiflu -- was up 4 percent, while GlaxoSmithkline PLC, which manufactures the Relenza drug, rose 3 percent.
Worries about the epidemic's spread will likely remain at the forefront of investors' mind over the coming days and overshadowed any hopes generated over the weekend by the announcement from the Group of Seven finance ministers that the worst of the world recession may be over and that recovery may emerge by the end of the year.
''It's really going to be a case of watching how this Mexican flu issue develops before deciding if these already bruised markets have another big fall coming up,'' said CMC's Buckland.
Hopes that a recovery of sorts is on its way has helped world stock markets rally off multiyear lows in early March. Despite some range trading over the last couple of weeks, stocks began to rally strongly again at the end of last week, with the Dow Jones industrial average, for example, advancing 1.5 percent to 8,076.29 on Friday.
Selling is expected to be the name of the game when Wall Street opens, with Dow futures down 124 points, or 1.5 percent, at 7,932 and the broader Standard & Poor's 500 futures 15 points, or 1.7 percent, lower at 851.50.
''At the moment we are expecting the Dow to open down around 90 points lower from Friday's close -- again on swine flu concerns,'' said David Jones, chief market strategist at IG Index.
Elsewhere in Asia, Australia's stock measure gained 0.5 percent while Shanghai's fell 1.8 percent. Markets in Singapore, Taiwan and India retreated.
Oil prices dropped sharply as investors mulled comments from OPEC suggesting the price was too low for companies to justify new investments in crude production. Benchmark crude for June delivery fell $2.78 to $48.77. The contract jumped $1.93 to settle at $51.55 last week.
In currencies, the dollar weakened to 96.55 yen from 97.17 yen. The euro traded lower at $1.3141 from $1.3161.
--------
AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.
http://www.nytimes.com/aponline/2009/04/27/business/AP-World-Markets.html
Swine flu: the UK shares affected
Swine flu: the UK shares affected
Pharmaceuticals
GlaxoSmithKline: its shares rose as much as 44p, or 4.4pc to 1,050p. Glaxo makes a flu drug called Relenza, which could be bought up by governments seeking to treat and halt the spread of swine flu. Relenza has been shown to work against viral samples of the disease.
Roche: The shares rose in Swiss trading. Roche's Tamiflu drug can reduce the symptoms of swine flu and said it has an ample supply of the drug as the outbreak spread outside Mexico.
Shire: the drugs company’s shares rose in sympathy with Glaxo's.
Airlines:
British Airways: The airline has been hit along with others in the sector, on fear the swine flu outbreak will reduce demand for travel.
easyJet: The low-cost airline fell.
Ryanair: the Irish budget airline was also under pressure.
Travel companies:
Thomas Cook: The holiday company fell on concern the spread of swine fever will curb foreign travel. Mexico has been a popular destination for holidaymakers trying to avoid countries using the euro while it remains so strong against the pound.
TUI Travel: The Thomson holiday group also declined.
Carnival: the cruise operator, whose Caribben cruises take in Mexico, dropped.
Intercontinental: Shares in the hotel operator also fell.
Agriculture:
Cranswick: The food firm, which has just bought a Norfolk-based supplier of pork for Tesco and a number of other major retailers, fell on concern shoppers will avoid pork products as a result of swine flu.
Genus: The pig breeding specialist declined.
The outbreak of swine flu, which has killed more than 100 people in Mexico and spread to the US, Canada and New Zealand, has hit UK shares linked to travel and agriculture, and give a boost to pharmaceuticals companies. Some of the biggest companies affected are listed below.
By Amy Wilson
Last Updated: 10:26AM BST 27 Apr 2009
By Amy Wilson
Last Updated: 10:26AM BST 27 Apr 2009
GlaxoSmithKline
Shire
British Airways
Easyjet
Thomas Cook Group
TUI Travel
Carnival
InterContinental Hotels Group
Cranswick
Genus
Shire
British Airways
Easyjet
Thomas Cook Group
TUI Travel
Carnival
InterContinental Hotels Group
Cranswick
Genus
Pharmaceuticals
GlaxoSmithKline: its shares rose as much as 44p, or 4.4pc to 1,050p. Glaxo makes a flu drug called Relenza, which could be bought up by governments seeking to treat and halt the spread of swine flu. Relenza has been shown to work against viral samples of the disease.
Roche: The shares rose in Swiss trading. Roche's Tamiflu drug can reduce the symptoms of swine flu and said it has an ample supply of the drug as the outbreak spread outside Mexico.
Shire: the drugs company’s shares rose in sympathy with Glaxo's.
Airlines:
British Airways: The airline has been hit along with others in the sector, on fear the swine flu outbreak will reduce demand for travel.
easyJet: The low-cost airline fell.
Ryanair: the Irish budget airline was also under pressure.
Travel companies:
Thomas Cook: The holiday company fell on concern the spread of swine fever will curb foreign travel. Mexico has been a popular destination for holidaymakers trying to avoid countries using the euro while it remains so strong against the pound.
TUI Travel: The Thomson holiday group also declined.
Carnival: the cruise operator, whose Caribben cruises take in Mexico, dropped.
Intercontinental: Shares in the hotel operator also fell.
Agriculture:
Cranswick: The food firm, which has just bought a Norfolk-based supplier of pork for Tesco and a number of other major retailers, fell on concern shoppers will avoid pork products as a result of swine flu.
Genus: The pig breeding specialist declined.
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GlaxoSmithKline leads pharmaceutical shares higher on swine flu outbreak
Drugs companies prepare for swine flu epidemic
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Swine flu: what are the symptoms?
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Gold hits four-week high as swine flu fears grow and China builds reserves
Gold hits four-week high as swine flu fears grow and China builds reserves
Gold has climbed to its highest in almost a month as fears of a global flu pandemic prompted investors to seek safer assets, according to a report from Reuters.
Last Updated: 10:44AM BST 27 Apr 2009
Gold, which has registered four straight sessions of gains, has risen by 5pc over the past week
Fears of a global swine flu pandemic grew with new infections in the US and Canada on Sunday, while millions of Mexicans have stayed indoors to avoid a virus that has killed more than 100 people.
Gold hit an "intra-day" high (in other words, not a closing price) of $918.25 an ounce, its highest since April 2. The price had been boosted on Friday by the revelation that China had secretly raised its gold reserves by 75pc since 2003, confirming years of speculation that it had been buying.
Gold, which has registered four straight sessions of gains, has risen by 5pc over the past week and is just 8pc below an 11-month high above $1,000 hit in February.
Darren Heathcote of Investec Australia said: "I am not too sure how the swine flu will play out. The problem is the potential for this to explode to pandemic proportions, leaving a lot of people very wary. It may well benefit gold, as gold would be seen as a safe haven.”
Dealers expected gold to face resistance around $932 – an intra-day high seen in early April. "Ultimately, we could well be targeting that mid $960s again, which is that peak in the middle of March," added Heathcote.
http://www.telegraph.co.uk/finance/personalfinance/investing/gold/5229027/Gold-hits-four-week-high-as-swine-flu-fears-grow-and-China-builds-reserves.html
Gold has climbed to its highest in almost a month as fears of a global flu pandemic prompted investors to seek safer assets, according to a report from Reuters.
Last Updated: 10:44AM BST 27 Apr 2009
Gold, which has registered four straight sessions of gains, has risen by 5pc over the past week
Fears of a global swine flu pandemic grew with new infections in the US and Canada on Sunday, while millions of Mexicans have stayed indoors to avoid a virus that has killed more than 100 people.
Gold hit an "intra-day" high (in other words, not a closing price) of $918.25 an ounce, its highest since April 2. The price had been boosted on Friday by the revelation that China had secretly raised its gold reserves by 75pc since 2003, confirming years of speculation that it had been buying.
Gold, which has registered four straight sessions of gains, has risen by 5pc over the past week and is just 8pc below an 11-month high above $1,000 hit in February.
Darren Heathcote of Investec Australia said: "I am not too sure how the swine flu will play out. The problem is the potential for this to explode to pandemic proportions, leaving a lot of people very wary. It may well benefit gold, as gold would be seen as a safe haven.”
Dealers expected gold to face resistance around $932 – an intra-day high seen in early April. "Ultimately, we could well be targeting that mid $960s again, which is that peak in the middle of March," added Heathcote.
http://www.telegraph.co.uk/finance/personalfinance/investing/gold/5229027/Gold-hits-four-week-high-as-swine-flu-fears-grow-and-China-builds-reserves.html
Estimates of economic costs of a flu pandemic
Estimates of economic costs of a flu pandemic
If the outbreak of swine flu in Mexico becomes a pandemic, the economic consequences could be great. Below are estimates of the costs of such a disaster:
Reuters
Last Updated: 10:25AM BST 27 Apr 2009
* The World Bank estimated in 2008 that a flu pandemic could cost $3 trillion (£2 trillion) and result in a nearly 5pc drop in world gross domestic product. The World Bank has estimated that more than 70m people could die worldwide in a severe pandemic.
* Australian independent think-tank Lowy Institute for International Policy estimated in 2006 that in the worst-case scenario, a flu pandemic could wipe $4.4 trillion off global economic output.
* Two reports in the United States in 2005 estimated that a flu pandemic could cause a serious recession of the US economy, with immediate costs of $500bn-$675bn.
* SARS in 2003 disrupted travel, trade and the workplace and cost the Asia Pacific region $40bn. It lasted for six months, killing 775 of the 8,000 people it infected in 25 countries.
If the outbreak of swine flu in Mexico becomes a pandemic, the economic consequences could be great. Below are estimates of the costs of such a disaster:
Reuters
Last Updated: 10:25AM BST 27 Apr 2009
* The World Bank estimated in 2008 that a flu pandemic could cost $3 trillion (£2 trillion) and result in a nearly 5pc drop in world gross domestic product. The World Bank has estimated that more than 70m people could die worldwide in a severe pandemic.
* Australian independent think-tank Lowy Institute for International Policy estimated in 2006 that in the worst-case scenario, a flu pandemic could wipe $4.4 trillion off global economic output.
* Two reports in the United States in 2005 estimated that a flu pandemic could cause a serious recession of the US economy, with immediate costs of $500bn-$675bn.
* SARS in 2003 disrupted travel, trade and the workplace and cost the Asia Pacific region $40bn. It lasted for six months, killing 775 of the 8,000 people it infected in 25 countries.
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Asian markets retreat on swine flu fears
Asian markets retreat on swine flu fears
Asian stock markets retreated on Monday as investors worried the outbreak of swine flu in North America could grow into a worldwide pandemic that deepens the global recession.
Last Updated: 10:26AM BST 27 Apr 2009
Fears over a virus that has already made hundreds ill, and possibly killed more than 100 in Mexico, led investors to buy drug makers and dump airlines such as Qantas Airways (-4pc) and Cathay Pacific (-9pc).
In Asia, investors are painfully aware of the toll an epidemic can exact on companies and industries after SARS battered regional economies from Hong Kong to Singapore in 2003.
The markets were still more cautious than panicked, analysts said, yet mindful that the disease could derail what many believe are the beginnings of a recovery in a global economy reeling from its worst downturn in years. With the markets up sharply since March, the disease could cause more selling should it continue to spread.
"Investors are already sitting nervously looking for excuse to sell off and what better than swine flu," said Miles Remington, head of Asian sales trading at BNP Paribas Securities in Hong Kong.
In Hong Kong, the Hang Seng fell 413.63, or 2.7pc, to 14,845.22. Korea's Kospi lost 13.36 points, or 1pc, to 1,340.07, while Japan, the Nikkei 225 stock average dropped in early trading before edging up 18.3 points - or 0.2pc - to 8726.
Elsewhere, Australia's index shed 0.5pc, Shanghai's benchmark dropped 1.2pc and Taiwan's stock measure plummeted 3.2pc.
The outbreak offset optimism on Wall Street on Friday over the US Federal Reserve's announcement that 19 major banks won't be allowed to fail — even if they fared poorly on the government's 'stress tests' of banking health.
The Dow rose 119.23, or 1.5pc, to 8,076.29, after rising by as many as 170 points.
Oil prices slipped in Asian trade as investors mulled comments from OPEC suggesting the price was too low for companies to justify new investments in crude production. Benchmark crude for June delivery fell $1.28 to $50.25. The contract jumped $1.93 to settle at $51.55 last week.
Related Articles
Drugs companies prepare for epidemic
GlaxoSmithKline leads pharmaceutical shares higher on swine flu outbreak
Mexico swine flu deaths raise fears of global epidemic
Asian shares mostly higher but caution lingers
British passengers screened for swine flu amid fears that disease has spread worldwide
Asian stock markets retreated on Monday as investors worried the outbreak of swine flu in North America could grow into a worldwide pandemic that deepens the global recession.
Last Updated: 10:26AM BST 27 Apr 2009
Fears over a virus that has already made hundreds ill, and possibly killed more than 100 in Mexico, led investors to buy drug makers and dump airlines such as Qantas Airways (-4pc) and Cathay Pacific (-9pc).
In Asia, investors are painfully aware of the toll an epidemic can exact on companies and industries after SARS battered regional economies from Hong Kong to Singapore in 2003.
The markets were still more cautious than panicked, analysts said, yet mindful that the disease could derail what many believe are the beginnings of a recovery in a global economy reeling from its worst downturn in years. With the markets up sharply since March, the disease could cause more selling should it continue to spread.
"Investors are already sitting nervously looking for excuse to sell off and what better than swine flu," said Miles Remington, head of Asian sales trading at BNP Paribas Securities in Hong Kong.
In Hong Kong, the Hang Seng fell 413.63, or 2.7pc, to 14,845.22. Korea's Kospi lost 13.36 points, or 1pc, to 1,340.07, while Japan, the Nikkei 225 stock average dropped in early trading before edging up 18.3 points - or 0.2pc - to 8726.
Elsewhere, Australia's index shed 0.5pc, Shanghai's benchmark dropped 1.2pc and Taiwan's stock measure plummeted 3.2pc.
The outbreak offset optimism on Wall Street on Friday over the US Federal Reserve's announcement that 19 major banks won't be allowed to fail — even if they fared poorly on the government's 'stress tests' of banking health.
The Dow rose 119.23, or 1.5pc, to 8,076.29, after rising by as many as 170 points.
Oil prices slipped in Asian trade as investors mulled comments from OPEC suggesting the price was too low for companies to justify new investments in crude production. Benchmark crude for June delivery fell $1.28 to $50.25. The contract jumped $1.93 to settle at $51.55 last week.
Related Articles
Drugs companies prepare for epidemic
GlaxoSmithKline leads pharmaceutical shares higher on swine flu outbreak
Mexico swine flu deaths raise fears of global epidemic
Asian shares mostly higher but caution lingers
British passengers screened for swine flu amid fears that disease has spread worldwide
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