May 5, 2009, 5:00 am

The Swine Flu To The Rescue!

by: The Financial Blogger    Category: Investment, Market and Risk
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porkI think the media are like Cookie Monster; they just can’t get enough! Everyday the news need to feed the beast and journalists are praying to have something crunchy to write about. They made a lot of mileage on the recent economic crisis as they didn’t have anything else to say.

While it was important to know what happened on Wall Street, trying to find every single clue that tells that the end of the world is near was just ridiculous! Back in February (before March market rally), we were ready to say that the Dow Jones will plunge under 5,000 points. When we look at the market today, it seems that they were… a bit wrong 😉

The swine flu keeps people busy

For a strange reason, people like to fear something. Their basic instinct makes them love to “prepare for the worst”. So now that we were almost sure that the economy will be destroyed and nobody will work anymore, here comes the swine flu!

Don’t get me wrong, I am not saying the swine flu is just flu and that it will past like any other deceases (weren’t we supposed to have all died from the SARS a few years ago?). However, the fact that media and the population are busy taking care of the swine flu and watching how many people died today from it (I really wonder why, but a lot of people likes to know how many people die in such situation), they are far from Wall Street and their evil financiers.

Therefore, we may have a break where banks can keep cleaning their balance sheet, recapitalize and get back on track. We can see automakers taking care of their structure programs and becoming more productive. This is the perfect distraction to shove a few bad news while people don’t pay too much attention.

So the swine flu shook the market last week but it was nothing compared to the effect of bad economic news these days! On the other side, some companies will probably take great advantage of the swine flu in order to develop a vaccine, provide protection and disinfection processes. Therefore, if the swine flu is strong and is a real threat, we could even see some company profit soars in the upcoming quarter.

Maybe we will discover that the swine flu has been created by Wall Street in a few years ;-0

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I love my a good conspiracy theory, and I like where you took this one. The truth is Swine Flu has done a good job of distracting us. IF this is the recovery we’ve been waiting for, Swine Flu will forever be associated with it.

I hope you realize just what the financial implications for the hog industry are from Swine flu.
It’s basically a death sentence for the already struggling hog industry.

First off, Canada is an export dependant market. When the pandemic hits level 6, immediately trade restrictions are put in place – that is, if they aren’t already. China has already banned pork from Canada and Mexico, and they were one of the biggest importers of our hogs.

When the trade restrictions hit, what happens? A backlog of pigs, who have essentially nowhere to go. Slaughterhouses have limited capacity and limited need for the end product, so basically they have to be culled at the cost of the producer. (gov has no plans yet to help and insurance doesn’t cover it) Producers, losing all of their income, will very possibly go bankrupt . When that industry dies, a ripple effect will happen, jobs will be lost in supporting industries (ie feed, communications, fertilizer, meatpacking, even tourism).

Swine flu will not help the economy, even as a distraction. Just look at Foot and Mouth disease and the chaos it caused in the UK. If the flu gets worse, we are in for a rough ride.