Biden Visits Korea and Japan With Rare Opportunity

On his first Asia spin as president, Joe Biden will find a surprisingly warm welcome, and is due to launch an economic framework for US-Asia relations.

Joe Biden is today starting his first Asia trip as U.S. president, visiting South Korea and Japan with an unusual opportunity to cement alliances with these key Asia Pacific democracies. He will be mindful all the time of the threats presented by a nuclearized North Korea and by China, with its promise to conquer Taiwan, by force if necessary.

I’m watching Biden’s first steps in Korea, where he has made a Samsung Electronics chip factory in Pyeongtaek his first stop. Samsung chief Jay Lee has been excused from attending his accounting-fraud trial to take Biden on a tour, where they’re joined by new South Korean President Yoon Suk-yeol. Samsung in November announced a US$17 billion chip factory near Austin, Texas, and is showing off its advanced 3-nanometer chips for the first time on Biden’s visit.

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During his five-day Asia stay, Biden will find fertile ground to forge friendships with new U.S.-friendly leaders in both Tokyo and Seoul, arguably the best opportunity in two decades to do so. Rivals China and North Korea, meanwhile, are both battling Covid-19 outbreaks that undermine domestic popularity for the leadership in Beijing and Pyongyang.

Still, U.S. and South Korean intelligence suggests that North Korea may well test another long-range intercontinental ballistic missile during Biden’s visit, or possibly even conduct its first nuclear-bomb test since 2017. Biden cancelled an intended trip to the demilitarized zone between the two Koreas, and there’s been no progress on denuclearization talks since he became president.

Biden arrives in Asia at a time that leaders have newly taken office who have pledged to improve relations with the United States. Japanese Prime Minister Fumio Kishida moved into the Kantei on October 4, while Yoon was inaugurated on May 10. Yoon may push for South Korea to join “the Quad,” the alliance of Pacific democracies that currently consists of the United States, Japan, Australia and India.

The U.S. president is due for a summit with Yoon on Saturday, then will fly to Tokyo on the next day, where he is set to launch the Indo-Pacific Economic Framework on Monday, May 23. The framework is a U.S.-led initiative designed to counter criticism that the United States has focused only on security issues in Asia. China champions the Regional Comprehensive Economic Partnership free-trade deal that went into effect with 14 other Asia Pacific nations on January 1. But the United States has been accused of an “all guns and no butter” approach.

The “IPEF” is very vague and in its early days. An early draft obtained by the Financial Times shows that member nations have agreed only to “launch negotiations” on trade. But even that assertion may be watered down in a planned two-page statement simply to say the countries are starting consultations that could lead to negotiations that might amount to something. Phew. The language was literally being finalized on the Air Force One flight to Seoul.

Biden is attempting to undo some of the damage done when former president Donald Trump pulled out of the Trans-Pacific Partnership, an executive order Trump literally signed on Day 1 when he took office in January 2017. Kishida in Tokyo will likely nudge Biden to consider rejoining the recast 11-nation partnership, which Japan had championed, although there’s been no indication the United States is considering that.

The IPEF will be a weak TPP substitute. It does not include any improved access to U.S. markets for Asian nations, whereas the TPP promised free-market access for many goods. But the IPEF will attempt to address infrastructure, supply-chain resilience, clean energy, and digital trade. Kishida will join Biden at the unveiling, with South Korea, Australia, New Zealand, the Philippines and Singapore likely to join Japan and the United States in the deal.

Biden will then attend a Quad summit in Tokyo on May 24. The four-way partnership has risen in profile since it was rebooted in 2017, having been on hiatus since Australia withdrew in 2008 in a bid to improve Aussie relations with China. How things have changed. Australia is once again “all-in” on the Quad, and is now instead embroiled in trade disputes with China, which it has also accused of meddling in domestic politics to the extent of attempting to get a Beijing “agent” elected to national office.

The Quad, whose leaders met in person in September at the White House, has made progress on public health with the Quad Vaccine Partnership, pledging 1.2 billion vaccine doses globally, and on infrastructure. It has also formed a coordination group to “deliver transparent, high-standards infrastructure” in the region, a response to China’s Belt and Road Initiative. It is also working on green energy, lower-emissions shipping and high-tech supply chains for goods like semiconductors.

But it has yet to make much obvious headway in handling the military threat China poses in the Pacific. Beijing has basically gotten away with its island-building program to construct missile, naval and air-force bases on islands in the South China Sea. There’s been deadly conflict on the Himalayan border between Indian and Chinese troops, where China has again built structures in contested no-man’s land.

Most recently, Australia in particular has been alarmed by a security pact China has struck with the Solomon Islands, which could see Chinese troops based in the island nation. U.S. officials have said they would need to respond to any deployment of Chinese paramilitary troops to a country that saw heavy fighting on Guadalcanal during World War II, after Japan built naval and air bases there. Aussie defense minister Peter Dutton said in response to the China-Solomon security pact agreed in April that “Australia should prepare for war,” claiming China is “on a very deliberate course at the moment.”

The leadership in Canberra is in question. Australia holds national elections on Saturday, in which it is mandatory to vote. The opposition, left-leaning Labor Party holds a very slight edge over the conservative Liberal Party, and its unpopular Prime Minister Scott Morrison, or “ScoMo.” If there’s a change in leadership, it’ll be a scurry to take part in the IPEF signing and the Quad summit, with Biden due to meet the leaders of India and Australia on the sidelines.

Unusually, a group of around 25 independent candidates known as the “teals,” almost all women with successful careers, may hold the balance of power in Australia. Inaction on climate change has fueled frustration with the “gray-haired men fighting for power,” as Damien Cave put it in The New York Times, in a country that produces the world’s highest levels of coal-generated greenhouse gas per person, and that faces devastating now-annual bushfires and floods.

One of Biden’s key differences from his predecessor on the foreign-policy front is his ability to forge multinational diplomatic alliances. He held a summit at the White House on May 12-13 for the leaders of the nine Southeast Asian nations in ASEAN, at which they agreed to strengthen economic ties, improve health security, collaborate on smart manufacturing and develop renewable energy. Most pointedly, they pledged maritime cooperation and to maintain “the South China Sea as a sea of peace, stability and prosperity,” noteworthy since China claims almost all of that sea as its own territory.

Biden noted a joint desire to see an Indo-Pacific that is “free and open, stable and prosperous, and resilient and secure.” The United States committed US$150 million in infrastructure initiatives with ASEAN op top of support of US$100 million made after Vice President Kamala Harris visited Southeast Asia in August.

Former president Donald Trump alienated just about everyone, and championed an isolationist policy of the United States going it alone. He opted to skip ASEAN meetings when he was in power. Given Trump’s antagonism toward NATO, which he repeatedly hit up for money, it is hard to imagine him having any success calling on Europe to present a united diplomatic front against Russia after its invasion of Ukraine. Then-German chancellor Angela Merkel was pretty upfront with her disdain for Trump; French President Emanuel Macron backed off their early “bromance,” saying the lack of U.S. leadership under Trump had led to NATO’s “brain death.”

Trump saved his warmest words for hardmen dictators like Russian President Vladimir Putin, describing Putin’s early moves in Ukraine as “genius.” Putin “was a friend of mine,” Trump told the golfer John Daly in March. “I got along great with him.” His attempts to curry favor with North Korean leader Kim Jong-un led to a great photo op as Trump became the first U.S. president to step across onto North Korean soil, but ultimately produced no progress on the diplomatic front.

Trump also criticized the “horrible” terms of trade with South Korea. He took Japan to task for not buying enough U.S. autos, while ignoring that many American models are way too big for Japanese streets. That informed a decision to impose higher tariffs on Japanese steel. Trump criticized Japan and South Korea, too, for failing to pay enough for the U.S. troops stationed on their soil.

The Biden administration rolled back the Trump-era tariffs on Japanese steel as of April 1. With this first Asia spin, Biden will be hoping to strengthen U.S. influence across the Pacific, both in terms of the economy and the security of the region. These first small steps may help improve the direction of U.S.-Asia policy, after many Asian nations began to sense that Washington was retreating from Asia. The United States, and its leader, are back here in Asia again.

Will Asia Catch Back Up in 2022?

For Asia, 2021 was tease. It was a year that often promised something better, only to deliver everything worse. It’s hard to escape the feeling at the end of the year that we are back in much the same position as when it began.

This story originally appeared on Jan. 3, 2021 on TheStreet.com and its subscription service Real Money. Click here for the original story.

Will 2022 see the Asia Pacific region finally escape its cycle of opening up, then locking down again? There were tentative attempts to welcome foreign visitors once again in countries like Thailand, Vietnam and Indonesia. That gave way to a hellish pattern of waves of virus washing over the region, with all the travel bans, curfews and stay-at-home orders that unfold in response. Asia’s production schedules and shipments have been heavily disrupted as a result.

China persists in its zero-Covid strategy, an ultimately impractical approach that is exported to Hong Kong as East Asia’s financial hub attempts to open the mainland borders. Anyone returning from overseas must spend three weeks in an expensive hotel. China will likely maintain its position at least until the “coronation” of President Xi Jinping for a third term. That will come in the power reshuffling confirmed during the weeklong 20th National Congress, the latest in a series of once-every-five-years major meetings that is due to happen in October or November. March will see the growth target set at the annual National People’s Congress.

Before that, the Beijing winter Olympics will go ahead from February 4-20 in front of Chinese spectators, if all goes to plan. The winter events will make Beijing the first city to host both summer and winter games. But the political undercurrents are strong. The Olympics will go ahead minus diplomatic delegations from the United States, United Kingdom, Canada and Australia, in protest of the human-rights violations in China’s westernmost Xinjiang province, and the death of civic society here in Hong Kong. China says those politicians weren’t invited in the first place…

Other governments in the Asia Pacific region, led in this regard by Singapore, Australia and New Zealand, appear willing to try something other than “zero Covid.” Ratchet up the vaccine rate, do your best to protect and triple-jab the vulnerable, and learn to “live with Covid.” This seems the sensible approach.

When you look at the 26.9% gain for the S&P 500 in 2021, the 21.0% gains for the Eurozone stocks in the Euro Stoxx 50 index, and the 14.3% advance in London’s FTSE 100 index, it has been a disappointing year for Asian equities. There’s scope for them to gain ground in relative terms.

The S&P Asia Pacific Broad Market Index, which tracks developed markets in Asia, posted a loss for 2021, down 0.6%. But that was a better showing than the S&P Asia Pacific Emerging BMI, which netted a 2.3% decline for the year. China-linked plays had a torrid time.

There were solid gains for the Tokyo market, with the broad Topix index up 10.4% for the year. But it was a tougher time for export-oriented companies, as reflected in the poorer 4.9% showing for the Nikkei 225, which tracks big-caps and multinationals. Those kinds of companies should benefit in the year ahead from a weaker yen, as the Fed boosts the dollar by raising rates.

I’ve indicated before that the Japan market will be a safe haven in 2022. We can be certain that the central Bank of Japan will maintain its exceedingly easy monetary policy, with Japanese interest rates still negative at -0.10%. Inflation is not a concern, as yet, in Japan – in fact, it is desirable. The central bank and the government have struggled to achieve a 2% inflation target since setting that as a goal way back in 2013.

The Japanese economy should post strong (for it) growth of 3.2% in 2022, according to IMF estimates, up from 2.4% last year. It’s a similar pace of growth as you’d find in South Korea, Taiwan and Singapore, all typically more dynamic in recovery mode. Underpinning it all, the Japanese government under new Prime Minister Fumio Kishida passed a record US$490 billion stimulus spending package in November, bucking the trend toward tapering in other developed markets.

Value Partners, the Hong Kong-based asset manager, indicates that “investor sentiment towards Japan remains weak, and needs time to pick up,” it states in its 2022 market outlook. “Corporate earnings will likely continue to recover and we view that Japan will be one of the very few countries that will continue to have earnings upgrades.”

Australian stocks also delivered steady if not stellar performance, with the S&P/ASX 200 index up 13.0%. “With pent-up demand following Q3 lockdowns, a high vaccination rate, elevated confidence and rebounding mobility, the stage is set for a strong six months” in Australia, Nomura predicts in its global economic outlook for 2022.

Singapore’s Straits Times index didn’t quite post double-digit gains, up 9.8% in 2021. Like Australia, Singapore is now exceptionally poised having vaccinated the vast majority of its populace. The jobs market is improving, while the strength of high-end manufacturing and pharmaceuticals should stand the city-state in good stead for the year ahead. It’s a likely outperformer.

The problems with supply chains globally hurt South Korea, where the Kospi advanced only 3.6% all year. Despite the heavy influence of semiconductor producers on the Seoul market, electronics- and tech-related exporters did not experience the stellar kind of year they had in 2020, when the world couldn’t get enough gadgets to keep people company in lockdown.

Korea will have presidential elections in March, which add an element of uncertainty to the market. The central Bank of Korea also became the first in Asia to raise rates back in August, did so again in November, and will likely continue to tighten throughout 2022 to combat rising prices and home-price inflation. Rates may rise to 1.5% by the end of the year. That makes it a hard market to like for now, with South Korea’s highly indebted population sure to struggle under straightened circumstances. There’s pressure on the Seoul home market, where prices have doubled in the last five years.

The strongest showing in Asia came in India, where the Sensex posted a 21.7% gain for 2021, with the Nifty 50 up 23.8%. In fact, it’s been a very strong showing by the Mumbai market since the original depths of the first wave of Covid back in March 2020. The Indian market has more than doubled since then, with the Sensex up 111.1%.

That’s come on the back of breakneck growth, the world’s strongest major economy with a pace of 9.5% in 2021, likely to moderate to 8.5% in 2022. Reflecting that slowdown, Indian equities have flagged since mid-October, down 5.7% in the last 10 weeks of the year, so there’s no surging strength to carry them into the new year.

“While India enjoys a long-term secular bull market with expanding new-economy sectors, and is still in the upward profit cycle, we are cautious as valuations are at extreme levels versus the rest of Asia,” Value Partners notes.

Taiwan also outperformed as a market, a rare year when it did not move in lockstep with South Korea. The Taiex index added 23.7%, with electronics makers booking strong orders. Taiwanese companies also benefitted from sanctions and restrictions on some mainland Chinese manufacturers. In Taipei, retail traders became very active in the market, and have not been hampered by the higher rates seen in Korea. The Taiwanese central bank may start to raise rates next year, which could stem the tide of retail flows.

There was a narrow 0.2% loss in the Philippines, where the process of vaccinating 110 million people across 7,000 islands proving exceptionally difficult. The task is even more trying in the world’s largest archipelago, Indonesia, with the world’s fourth-largest population of 274 million people spread across 17,000 islands.

The commodities boom and increased digitalization of the Indonesian economy drove the Jakarta market up 10.1% in 2021. Vaccination rates and the success of “back to normal” business will dictate the future direction of equities in both island nations this year.

More than anything, 2021 became the year that the full vulnerability of investors in China was exposed. A series of sudden, overnight regulatory actions made it eminently clear that the Chinese Communist Party puts its own interests and its diktats over the Chinese people far above any common capitalist concerns about investor protection.

First, the for-profit tutoring industry was essentially banned. Then young people were restricted to at most three hours of videogame playing over the weekend. Next came an assault on Big Tech, with all China’s largest tech companies called in for a dressing down, and ordered to change their ways. Most recently, the country has started revising its securities laws to restrict how and where Chinese companies can go public.

Caught in the crossfire were the poor investors who bought into the “China story,” such as those who subscribed to the international offering of DiDi Global, the Chinese ride-haling market leader. Its business should be a huge growth market – scratch that, it is a huge growth market. But DiDi ran afoul of rules that didn’t exist, fulfilling the requirements of securities regulators for a foreign listing but failing to appease the newly-powerful, previously obscure cyberspace-security review office.

DiDi saw its apps stripped from Chinese app stores, and was barred from signing up new customers. That tanked its business, with the company last week posting a US$6.3 billion loss for the first nine months of the year. And it tanked its stock, an immediate descent days after its June 30 listing that leaves it down 64.8% as of the end of the year.

So it was Chinese and Hong Kong stocks that saw the most-pessimistic mood all year. The CSI 300 index of the largest stocks in Shanghai and Shenzhen fell 5.2% over the course of 2021.

Life was even worse here in Hong Kong, where the much-hated National Security Law continues to be used to pound pro-democracy activity, and anyone deemed “anti-patriotic.” The benchmark, the Hang Seng index, plunged 14.1% over the last 12 months.

Hong Kong’s mix of overseas-inclined Chinese companies, in particular those that also have U.S. listings, drew it down. The city also has a hefty influence from Chinese property developers. Many of those are in or on the brink of default, led by China Evergrande Group, which lost virtually all its value, down 88.8% over the last 12 months.

Hong Kong has been my home for the last 20 years, but it’s terrible to see it suffer so. We are walled in by excessive quarantine, treated to an East Germany-style police state, and are losing the international attractiveness that a once-free city has surrendered.

In Beijing, there is no sign that Chinese regulators will ease up their pressure on overleveraged developers. President Xi has cast scorn on investor-owners, repeating his insistence that “Houses are for living in, not for speculation.” This flies in the face of conventional wisdom, where the incredible unpredictability of the stock market leads anyone with any money to look to invest it in property, first and foremost.

Not that consolidation will be a bad thing in the long run in the property industry. There are too many Chinese developers, 103,262 of them as of 2020, the last count by Statista, a number that grew 21.1% in a decade. Fly-by-night behavior and overborrowing to fund rapid development drove land prices sky high, and homes in the biggest cities are the domain only of the wealthy.

But it is a painful correction as the model is disrupted of pre-selling flats off plan, then racing through development to the next project. Local and provincial governments have based their budgets on aggressive land sales projections, too, so there’s desperation at that level and reports of deep wage cuts among local Communist Party officials.

I don’t see any way to recommend Chinese stocks in 2022, except as a completely contrarian or bottom-feeding play. They are too unpredictable at this stage. Someone is going to make a lot of money when Alibaba Group Holding rebounds. It’s an extremely profitable company that saw its share price fall 47.8% in 2021 in a move that had nothing to do with its fundamentals. But a bet on the company is essentially a bet on what kinds of regulations the Chinese government will implement, without warning. It is not your conventional rebound story.

If you know what social changes Beijing is going to push next, and which companies it will target, perhaps you can make that kind of call. If not, there are better places to invest your money where you can be sure your ownership is valued, protected, and means something.

Australia and India Lead Mid-Week Selling for an Asia in Recession

There are country-specific reasons why Australia, India and Thailand are leading Asia’s plunge, but the whole region is in recession, S&P correctly says.

The wildly unpredictable movements of equity markets continued apace on Wednesday. Despite the strong rally on U.S. markets the day before, when the S&P 500 rose 6%, almost all Asian markets again posted sizable losses here on Wednesday.

The biggest losers are in Australia and India. I’ll briefly explore why each of those two markets is performing particularly poorly.

In Australia, there are massive daily moves in either direction, sometimes even intraday. The S&P/ASX 200 was down 6.4% at the close Wednesday after posting its biggest single-day gain in 20 years on Tuesday. Now that gain has been wiped out! Since hitting a record high on Feb. 20, the index has corrected 31.2%.

Australian equities are dominated by the Big Four banks – Commonwealth Bank CMWAY, Westpac Banking (WBK) , ANZ ANZBY and NAB NABZY – all of which are seeing their shares oscillate as central banks shift policy globally. The Oz market also has a healthy dose of commodity stocks such as the gold miners BHP Group (BHP) and Rio Tinto (RIO) , and commodities are getting crushed, even gold. There’s also a hefty listed real estate sector and renters are going to start struggling to pay up. Oh, and let’s not forget that Australia’s main customer is China, which isn’t buying.

India follows suit

Indian shares again sold off hard on Wednesday, with the Sensex down 5.6% at the close. Indian shares have now corrected 30.1% in the month since Feb. 19, one of the worst performances in Asia. Foreign institutional investors have been heavy sellers, placing a higher risk premium on Indian stocks than before the outbreak.

India only has 137 declared Covid-19 cases so far, and it’s a bit of a mystery why the world’s second-largest country by population has been spared so far. It may be that only a few people are being tested. While ultraviolet light does kill viruses in general, there has been no scientific proof that hot weather deters Covid-19, so it may be that developing markets that often are hot either haven’t been hit yet or tested well. Of course, developing nations will struggle the most in a health care sense if the disease sets in.

Here in Hong Kong, we’ve had virus cases confirmed among Hong Kong tourists returning from India trips. State governments in India are starting to shutter schools, malls, movie theaters and so on, an economic danger because domestic consumption accounts for around 60% of the economy. Travel and tourism, around 7.5% of GDP, will suffer immensely with tourism visas being cancelled.

There are some India-specific issues that add an extra layer of worry. Yes Bank, a private bank established in 2004 as an alternative to state-backed institutions, has collapsed and is being bailed out by the Reserve Bank of India, the nation’s central bank. Also, violent attacks against Muslim minority by radical Hindu nationalists have left scores dead. Those ethnic tensions are not going to be helped by any downward spiral in the economy.

It isn’t pretty elsewhere, either

While Australia and India have fared worst here on Wednesday, other markets alternate to outdo each other in poor performance. Japan was one of the only sources of green on screens, with the Topix up a narrow 0.2% on Wednesday after the Bank of Japan announced it will support the market by buying ETFs. But the Topix, a broad measure of all big Japanese stocks, is down 26.2% this year.

Thailand’s SET index has fallen 33.7% in 2020, by a small margin the worst year-to-date performance in Asia. Thailand gets 11% of its GDP from tourism, and that’s dead – technically, down 44% and getting worse. The Philippines, where stocks are down almost as much, 31.7% in 2020, has simply shut down its stock exchange, saying it couldn’t guarantee the health of folks on the floor. The blood pressure of investors is another health disaster altogether.

It’s going to take a coordinated global response when it comes to fiscal and monetary stimulus to get everyone on the same page. It also will take cooperation among medical bodies and addressing transportation links if we’re going to get out of the coronavirus mess. The unilateral, single-nation responses are firing buckshot when we need a .458 Winchester Magnum, the kind of Big Game rifle the ranger carries when I’ve been on walking safaris in South Africa.

Investors are sensibly responding to economic disruption rather than simply rates of infection. Korean stocks lost 4.9% in a market dominated by big exporters and heavy industry.

Hong Kong’s Hang Seng index closed down 4.2% on Wednesday, even though the rate of new infections is now slow in East Asia. Most of Hong Kong’s new cases are coming from abroad as Hong Kongers hurry home ahead of travel shutdowns around the globe. The Hang Seng hadn’t risen as high as other Asian indexes due to the pro-democracy protests here last year, so the benchmark is down “only” 20.9% in 2020.

Mainland China, where this all started, is seeing its stocks spared the worst of the selling. The CSI 300 index of the largest shares in Shanghai and Shenzhen fell 2.0% on Wednesday, and the whole index is down only 11.2% this year. That’s half the size of the general selloff around Asia. But treat Chinese share movements with skepticism. Domestic retail investors drive the trading and don’t have many other places to put their money. They are also notorious momentum traders. Mainland stocks are also essentially options on companies rather than genuine holdings, because Communist Party policy can change literally overnight without warning and shut your favorite company down. The party also has cash to spend on stimulus.

Recession is here

I was a guest on RTHK Radio 3’s drive-time business show “Money Talk” Tuesday morning, talking about the disastrous economic figures out of China on Monday. The jobless rate is at a record high, manufacturing has slowed a record amount, and retail sales cratered by a record margin.

One point I made is that, given the shutdowns already under way in Italy and Spain, we can expect similar figures out of those economies in the next month or two. And as more countries corral movement and stop public gatherings, we will see that economic pain spread.

So I chuckle a wry laugh when I hear forecasters predicting that we’re heading for recession. We are in recession, people! It’s here now.

The backward-looking economic output figures will confirm that assessment in the future. I hate the new piece of business jargon that an analyst is attempting to “nowcast” activity. But real-time assessments and common-sense assessments are what we need right now.

I’m digesting a particularly gloomy set of reports from Standard & Poor’s. The rating agency isn’t pulling any punches.

“Asia-Pacific Recession Guaranteed” is my light reading right now. It’s a quick hit. The “enormous first-quarter shock” in China means its growth will shudder to 2.9% in 2020, S&P says, a gutsy call because the Communist Party was keen on “predicting” growth of “around 6%.”

S&P is using the traditional definition of two down quarters in a row to define recession. By other measures, countries such as India and China need to achieve outsize growth just to keep the floods of people moving from the countryside to the city gainfully employed.

This new report says the “rising scale of the shock will leave permanent scars on balance sheets and in labor markets” in Asia. I concur. The rating agency believes US$400 billion in permanent income losses is going to be wiped off profit-and-loss statements.

S&P forecasts aggregate growth will fall by more than half in Asia to under 3% for all of 2020. It envisions a U-shaped recovery.

V-shaped, U-shaped, it’s all a question of how deep and how long this recession is going to last. All downturns are temporary unless you think the world economy is going to zero, which it’s not. But how bad will this get? We don’t know. The costs are continuing to add up, meaning we can’t count the final tab yet.