Australia’s COVID exit plan: A road to nowhere and how to profit from it

Prime Minister Scott Morrison and the six state premiers got together to hash out an exit plan. And by hash out, I mean of course negotiate.

Until recently, state premiers have had very little relevance and even less power — as they should. Then they enacted a bunch of “emergency laws” created over the past decade and now they are all powerful and widely praised for the strong action they are taking in locking people up.

So it’s a fair bit of negotiating needed to get out of what most call a crisis and state premiers call a gift from China. It’s a good old four step plan:

Phase one is to

• cut arrivals by half to 500 a day (it would take ten years to get all Australians home at this rate)
• develop a vaccine passport — something the Morrison government said it wouldn’t do
• Avoid lockdowns as far as possible — laughable as Sydney, South Australia, Queensland, and Victoria are all in states of partial lockdown

The move to plase two will be based on vaccination rates rather than a set timeline and will be based on science — just like mask mandates, social distancing, the vaccine efficacy calculation, and curfews. If the target is 20 million Australians vaccinated, then it will take another year.

Assuming the science falls inline with the politics, then phase two is:

• Easing restrictions like lockdowns and border controls on vaccinated people — encouraging people to get vaccinated
• Increased entry for vaccinated people into the country — encouraging people to get vaccinated
• Vaccine booster program — encouraging people to get vaccinated again
• Reduced quarantine for vaccinated travelers

The move to phase three would require COVID to be no more serious than the seasonal flu. One does wonder why there would be a phase three in this case. In phase three:

• End lockdowns altogether
• Have the vaccine booster program up and running
• Allow vaccinated people to have their freedoms back (or privileges restored)
• Abolish caps on returning overseas travelers
• Allow vaccinated people to leave the country (that’s right, Australia has become a penal colony again)

The move to phase four would depend on COVID being less dangerous than the seasonal flu AND on more Australians getting vaccinated. This would be to a new normal:

• Vaccinated people have their freedoms back
• Non-vaccinated travelers still have to quarantine
• Travelers to be tested on arrival

Why on earth you would want to test for a virus that by this time would be widespread throughout the population defies logic. It may not be the only thing about this government that does though.

Let’s summarize this four step plan:

1. Get vaccinated
2. I said, GET VACCINATED
3. Cancel anyone who isn’t vaccinated
4. Get vaccinated again, dammit.
5. The reasons you didn’t get your freedoms back is that not enough of you got vaccinated

So what’s going forward here?

First, buy shares in Pfizer. The Australian government and state governments must be on their payroll. Pfizer is almost guaranteed at least ten million booster doses (about $300 million) per year from Australia alone.

Second, buy shares in hotel chains that have the quarantine contracts. These contracts are amazing. Just like normal 5-star hotel room and restaurant prices, but without the need to provide service nor quality food. Even after Australia gets to stage four — maybe in 2023 — the country will STILL be subjecting travelers to quarantine.

Third, if you can swing it, you’d want to go long on Australian residential property (interest rates will stay low) and short on Australian rental properties and education — if there are any left to short). KV construction LLC experts can also help you out with all kind of house repairs if you wish to go long on some residential property.You can also contact experts from Zerorez as they can help you in home improvement services.

Fourth, Qantas will need another bailout. The start of the recovery won’t be allowed by the state and federal governments before late 2023. The actual recovery will be more like 2024-5 at earliest.

Can you believe that Qantas’ share price is up over 30% since five years ago? Over the past year, it has burned through over a billion dollars in cash and is retiring its 18 largest aircraft. Losses have totaled around 3.5 billion, wiping out its shareholder equity.

This isn’t a criticism of Qantas management. They’ve done pretty well considering the situation. However, the market seems to be believing there’s a light at the end of the tunnel. There is, but we have another three years in this tunnel. Qantas is suggesting international flights beginning from October this year (subsidized by the tax payer).

The total reduction in Qantas market cap from its all time high is $3.3 billion, which only reflects losses to date. The market seems to be pricing in a total reset of air ticket prices to 1990 levels, but passenger miles of 2018. This isn’t going to happen. The share price needs to lose at least another 30-40% over the next year to reflect the medium term fall in recurring profit and the long term impact of repaying all the new debt on cashflow.

Qantas trades as QABSY on the OTC market. Previous close was $17.36. On the Australian market it trades as QAN. Previous close was A$4.79

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