Ricochet News

Moody's axe falls as COVID-19 lockdown grips the globe

By James Paynter - Mar 30, 2020
Moody's axe falls as COVID-19 lockdown grips the globe

Whew...the rollercoaster just doesn't stop, does it?! We are living in some of the most unique days that man has faced - at least in recent times, with lockdowns across the world ... perhaps on a greater scale than what was seen during world wars.

No one is immune.

Some aerial shots showed just what a global change had come in over the last few weeks.

With SA now just at the start of uncharted waters with the 21 day lockdown, we are never quite sure what tomorrow holds....

...especially after a week that culminated in Moody's downgrading South Africa's sovereign credit rating to junk status.

Eish!

But let's get into the full review - and see what we clues we can find when it comes to the financial world.

(And please read to the end - got something special for you this week)

 

Key Moments (Mar 23-27 2020)

 

Here were some of the biggest talking points from the 5 days:

  • Global lockdown- it was now not just one city, one province, one country, but globally, each country was going bit by bit into full shutdown from Covid-19...
  • Stimulus packages- governments around the world pulled out ALL the stops to try and stop the global economy going underwater...
  • Moody's countdown - the end of week deadline was bearing down on the Rand like never before...a downgrade to junk would be the last thing the country and the Rand needed...
  • Quantitative Easing- in what is going to be one of the biggest decisions of this century, the Fed announced UNLIMITED quantitative easing...(confirming it is not a case of if, but when a complete fiat/economic collapse will follow)

The Rand opened the week very much on the back foot against the Dollar, having closed around R17.55. It was a week of the unknown beginning, once again, and all too quickly the market was up, touching R17.89 in early SA trade…

...this was now the weakest EVER level for the Rand, surpassing #Nenegatewhich sent the market to R17.81 briefly!

It also broke above all time record levels against other major currencies such as Euro, Yen, Swiss Franc and others.

You could almost smell the panic and fear in the markets...

...but this may still be some way off desperation and despair.

It is tough to encapsulate all that has happened in just a few days, but the most critical of all for South Africa was Ramaphosa's announcement on Monday evening that there would be a 21 day lockdown countrywide.

This would halt travel, most business and stop purchases of items such as alcohol - while even limiting persons walking their dogs about the streets or going for a run...

...a drastic measure, but one for which Ramaphosa was widely lauded for his efforts. It does seem the only way to "flatten the curve" of exponential spread is to take as drastic measures as possible.

But only time will tell, as businesses despaired over the Thursday (26 March) shutdown...

Thankfully, while a little choppy, the Rand took this news well, as we saw the market break lower toward R17.50 over the next couple of days.

And then we were onto the second major news event of the week...and we are calling this one as being the biggest financial one of this millennium so far:

The Fed announced UNLIMITED QUANTITATIVE EASING!

(just one week before, they had announced a limit at $700bn

...now they have realized this is not enough)

This basically gives them the ability to print unlimited cash, to buy in to stocks/bonds/markets to stop them from collapsing.

It is virtually legal market manipulation...but it ultimately WILL NOT work!

It is time for us to take a step back in the midst of all this turmoil, and take account of what is actually happening - this is one of the biggest building blocks being put in place for a COMPLETE fiat collapse, taking most of the financial system with it.

The Fed may believe they have unlimited cash - but such is not the case, case in point so many different countries who thought 'printing money' would solve any crisis.

Save the date of 24 March 2020. It will go down in the history books.

On Wednesday, SARB followed suit to a lesser extent and announced that they are going to be doing QE, and will be starting to buy government bonds

...expect this trend to continue across the globe.

Treasury Bills are now negative, so do not be surprised to see US interest rates go below zero in the coming months as the Fed follows the markets...we are in for one heck of a ride.

 

 

And then in other news:

  • During the course of the week, US Congress fought backwards and forwards over different facets of the $2 trillion stimulus package that they were urgently needing to be passing. This package would include assistance for small business, cash payments for individuals, funding for different institutions and medical facilities and much more. It was more a case of stemming the tide though, as expectations were for far more stimulus being necessary to stave off a depression.
  • Trouble continued for the debt-riddled SAA, as they cancelled all domestic flights following the lockdown which began on Thursday evening. From March 27 through to 16 April, there would not be a single domestic SAA flights. Among many others, mining companies were going through much trauma trying to prepare for the lockdown, as well as other companies such as Edcon showing massive losses due to the shutdown period.
  • Which leads to warnings from economists (which seem to be increasing every week) of an up to 10% GDP contraction in 2020 for SA. While these figures are very up in the air, and will only become clearer as time goes on, the very fact that numbers like these are suggested is quite frightening. Bloomberg did a small analysis on the firepower that was there when SA was faced with the 2008 Financial Crisis compared to today, and the difference is stark. The resources to deal with a global meltdown are not like they were back then, and it does not bode well for the coming months.
  • Ramaphosa has got some ideas for how to stave off business and consumer collapse with a number of quick and targeted economic interventions, and South Africans will be looking to him this next week to see what comes into reality and how quickly it can be mobilized.
  • And then we come to Moody's decision on South Africa's investment grade...and what a time for it to happen. No one could have imagined that it would be in the midst of this turmoil that the D-day would arrive. But so be it, that was the way it worked out! Some had hoped that current events would make Moody's delay the inevitable...

Over the back end of the week, we saw stocks rebound (just a classic Elliott Wave case of when everyone says it can only go lower, then it rebounds) and the Rand traded stronger until Friday...

...and in what has become the norm, we saw a jump from R17.23 on Thursday afternoon, to R17.60 by close of trade on Friday.

And then, after the market closed, Moody's axe finally fell...

South Africa is now officially junk status....

What does that mean for the country going forward?

And what effect on the Rand?

Well, for now, the fact is that it has likely been discounted in the market already, based on how the Rand has capitulated the past couple of months.

But the long term effects are likely to be painful from a socioeconomic point of view

Either way, we are going to be trusting our charts to show us what is coming over the next few days, weeks, months and years according to the Elliott Wave Principle.

Take a look at what we are seeing over here

Don't expect the volatility to end anytime soon!

But we have got something special for you this next week to give you the information you need to get through these tough times...read on to find out.

 

The Week Ahead (30 Mar - 3 Apr 2020)

 

And now for the good news for you, as you face this next week.

We are teaming up with Property & Blockchain expert Scott Picken of Wealth Migrate and a panel of experts across multiple different markets and fields to give you a complete Global Update Webinar on all the following points:

  1. Currencies– they are in turmoil around the world. Do you want to buy foreign currency, do you hold or do you take advantage of the current situation? What is going to happen?
  2. Markets– Markets were in freefall last week with over 50 countries having dropped interest rates and provided stimulus packages. What does this mean to the global economy and the stock markets worldwide? Is it time to get out the markets, sit and wait or time to take advantage?
  3. Property – what is happening in property in America, England, Australia and South Africa? What can we learn from past crashes to protect ourselves and how do we use this situation to our advantage?
  4. Cryptocurrencies– massive volatility has occurred in this space and some have been saying that this will be the societal change needed to create the move to crypto? Where are we in the cycle and what do you do about it?

The experts who will speak:

  1. Myself, James Paynter,a financial market forecasting expert who has had a consistent accuracy in his predictions of currencies and other financial markets for the last 15 years. James will share his insights on how he does this and where global currencies and other financial markets are going.
  2. Scott Picken, Founder & CEO of Wealth Migrate, published author, Wealth Movement pioneer and serial Fintech entrepreneur. Backed by more than 19 years’ global real estate investment, technology and business leadership experience, he is passionate about providing investors access to global markets with the transformative power of financial technology and blockchain
  3. Ken Williams, an Investment Banker from London with more than 25 years’ experience in the markets. What a Black Swan event is, what is happening in markets and what you can do about it.
  4. Alex Impy,a property developer in the UK. What is currently happening in the UK market and what investors can expect going forward.
  5. Brendon Brown, an investor in America who is managing a portfolio of over US$250m of American Real Estate. What the banks, investors, partners and tenants are saying about the market and where he sees the markets going.
  6. David Orban, a venture capitalist from New York and Italy who specializes in exponential technology, future trends and crypto. What is happening in this space and where he sees the world going from here?... (including what we can learn from Italy about Corona…)

The details are as follows below:

I will be sharing all of my best information - and showing you where I think things stand right now in the global markets, economy and world as a whole.

Looking forward to seeing you there!

 

To your success~

James Paynter