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Effect of economic crisis on America’s small businesses [slides]

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Re: Effect of economic crisis on America’s small businesses [slides]

#251

The stock market is largely collapsing because: 1.) Hedge funds levered up their capital 5 - 15x to make more money, then got caught with their pants down. So they all panic sold at once, crashing the market. 2.) CEOs of large corporations used cash to buy back their stock, inflating the stock price, and depleting their cash reserves. So now those same companies are on the brink of collapse, causing the credit market…

1) Pretty sure you're misinformed on this point. The hedge fund sector that has gotten attention and partial blame for this meltdown is the risk-parity segment of hedge funds. These funds target a specific range of volatility, so when the market becomes wildly volatile they are forced to reduce their overall holdings. The entire risk-parity segment of the market is at most $400bn and they are levered 2-3x on average.…

I can accept viewpoint only if we ALSO allow all unprepared companies to fail. This will then inform the next generation of CEOs to prepare more. If we socialize losses while privatizing gains we create wrong incentives.

I think the general sentiment is that we cannot just organically let most companies fail, so we are forced to bail out. But if we are breaking capitalism by bailing companies out, we should at least try to incetivize them to learn from mistakes rather than learn that they can do whatever when the times are good and get bailed out when the times are bad.

Re: Effect of economic crisis on America’s small businesses [slides]

#252

Earlier quoted context omitted.

But for how long? The stricter the quarantine the longer we have to quarantine to reduce spread. That's the problem. Best estimate is we can reduce daily interactions by 70%, for the next 12-18 months.

The alternative is systemic failure of the healthcare infrastructure and millions of deaths.

We don't know all the alternatives yet.

Re: Effect of economic crisis on America’s small businesses [slides]

#253

The stock market is largely collapsing because: 1.) Hedge funds levered up their capital 5 - 15x to make more money, then got caught with their pants down. So they all panic sold at once, crashing the market. 2.) CEOs of large corporations used cash to buy back their stock, inflating the stock price, and depleting their cash reserves. So now those same companies are on the brink of collapse, causing the credit market…

Should companies not return profits to their shareholders? CEO's should be in jail for doing so? Be serious.

They definitely should return profits, they shouldn't take on additional debts to increase share price.

Re: Effect of economic crisis on America’s small businesses [slides]

#254
It's worth to take a look at Karl Marx again. I'm not referring to any existed entities, but the model of pure capitalism is so problematic as he pointed out.

The usual reason against shutdown is because people have mouths to feed, mortgages to pay. But seriously, most of the products and services people are selling not really important or even any useful - that's why people have to advertise them so hard - it's not as straightforward as advertising cars, houses, and Coke. But those jobs are very important to those individual employees because it's their only source of income if their business were shut down, they wouldn't have roofs over their heads.

So the capital is the way to let people claim their part of the economy. It's so vulnerable that it's not even doomsday yet and people start to lose their source of income, and even without shutting down things. If we're going to shut down non-mandatory industries, people from those industries would get broke immediately - it's so deeply coupled so effective measures could not be taken.

In a perfect world, less than 10% of people working, or everyone working one day per week could feed everyone effectively. As automation goes on, the percent could keep shrinking. As a comparison, at the end of the day of a capitalist world, most of the "meaningful" jobs would done by very few persons because of the automation, and the rest of the world can only earn money at their mercy by doing "barely meaningful" jobs. Other than that, those who can't even get "barely meaningful" jobs have to working hard on futuristic versions of TikTok trying to become superstars - it's their only way of claiming their part of the economy.

Furthermore, the well-connected people get tested first as Trump suggested (or naturally happens in the US) is also a capitalist way of doing things. If we take Asian countries as an example, the testing kit is soon promoted as strategic resource mostly instructed by the government, which should eventually come from health care institutions, they have ideas to allocate those test kits in order to make maximum use of it, instead of blindly testing people back and forth.

If Karl Marx is not for you, it's always worth taking a look at Singapore where they did most things correctly most of the time. It's perfectly balanced in economics, politics and many, many other aspects (Though usually bashed by Western media as an authoritarian country). People can afford to buy houses, education is excellent and at a reasonable price, eating outside is cheap and easy, health care is affordable, and people are relatively free. Everything is carefully planned and designed by the government.

As a comparison, at a first glance, Hong Kong seems to be similar to Singapore to those people who haven't been there, but Hong Kong is a more western-style democratic society compared to its neighbors (at before 97 if you protest). But the rent is out of control, things are messier, there's no specific plan for things.

Again, I'm not evangelizing communism but those problems Karl pointed out have been overlooked largely nowadays.

Re: Effect of economic crisis on America’s small businesses [slides]

#255

Earlier quoted context omitted.

> total economic shutdown seems to be the only option left That's quite the overreaction. Italy found that among fatalities the median age is over 80 (older than the average lifespan of an Italian man). 99% of fatalities were among people with a prior illness. About 50% of the deaths were people suffering from at least three other illnesses. https://www.bloomberg.com/news/articles/2020-03-18/99-of-tho... To put it an…

> 99% of fatalities were among people with a prior illness. About 50% of the deaths were people suffering from at least three other illnesses. So far... wait until you get the number of critical cases above the number of ICU beds and you'll see 18 year olds dying from this

Based on what? According to the Bloomberg article -

”As of March 17, 17 people under 50 had died from the disease. All of Italy’s victims under 40 have been males with serious existing medical conditions.”

They reached maxed capacity of beds or ventilators right? We read stories of doctors having to make life & death decisions. Where are the dead 18 year olds?

Spreading info like that on a hunch, or an exaggeration, is counterproductive if not damaging.

Re: Effect of economic crisis on America’s small businesses [slides]

#256

Earlier quoted context omitted.

China's Red Cross supposedly advised Italy yesterday that 'total economic shutdown'[1] is the only way to contain the COVID-19 situation in the country now. It all comes to what part of the curve the country is now, the choice being total lockdown incl. economic shutdown vs aggressive testing. Considering US lapsed on aggressive measures in the beginning and that proper test kits are just being flown in from Italy[2]…

> total economic shutdown seems to be the only option left That's quite the overreaction. Italy found that among fatalities the median age is over 80 (older than the average lifespan of an Italian man). 99% of fatalities were among people with a prior illness. About 50% of the deaths were people suffering from at least three other illnesses. https://www.bloomberg.com/news/articles/2020-03-18/99-of-tho... To put it an…

I wish I could upvote this about 50 more times.

Re: Effect of economic crisis on America’s small businesses [slides]

#257
post #178

Earlier quoted context omitted.

It isn't about landlords doing the "right thing". Landlords have debt to pay, generally aren't sitting on mountains of free cash, and foreclosure of the property you are renting is functionally similar to eviction.

to re-iterate the other comment: landlords have landlords.

> First, we pause all fixed financial obligation

Keyword: all. That includes landlords' financial obligation to their landlords. And their landlords. And their landlords. And their landlords. Ad infinitum.

Re: Effect of economic crisis on America’s small businesses [slides]

#258

The stock market is largely collapsing because: 1.) Hedge funds levered up their capital 5 - 15x to make more money, then got caught with their pants down. So they all panic sold at once, crashing the market. 2.) CEOs of large corporations used cash to buy back their stock, inflating the stock price, and depleting their cash reserves. So now those same companies are on the brink of collapse, causing the credit market…

Low interest rates are the biggest culprit in this. Low interest rates have given these CEOs to borrow money to pump their stocks. Had interest rates been higher, say 6 percent, (a) these CEOs wouldn't have borrowed money to pump their stock, and (b) many investors would not have invested 60 to 90 percent of their portfolio in stocks. Another consequence of these low interest rates is (c) the inflation of real estate in many markets. That means, the middle class (say, employees of FAANG types) have loved this gravy train. Politicians, as a class, have benefited from this: inflated equities; inflated real estate. Greenspan, Bernanke, Yellen, Powell and the political class (both Democrats and Republicans) have all contributed to this.

People who invested in index funds fared better than hedge funds. And there was no real price discovery thanks to Fed put; even many small hedge funds closed their shops when they couldn't beat ETFs based on indices like SPY, VOO, QQQ, etc.

Now both bonds and stocks are crashing, as the commercial paper becomes junk.

Re: Effect of economic crisis on America’s small businesses [slides]

#259
post #252

Earlier quoted context omitted.

The alternative is systemic failure of the healthcare infrastructure and millions of deaths.

We don't know all the alternatives yet.

The exponential function is a terrifying beast. Any alternatives we don't know now are irrelevant. There is a reason why NYC is bracing for impact: a tsunami of new cases are about to slam into the healthcare system.

Usually Hacker News middlebrow skepticism is just in poor taste. On this topic, it is foolish and farcical. One of our doctor friends is already telling us that her hospital is under stress and she's not in one of the hardest hit states.

Re: Effect of economic crisis on America’s small businesses [slides]

#260
post #255

Earlier quoted context omitted.

> 99% of fatalities were among people with a prior illness. About 50% of the deaths were people suffering from at least three other illnesses. So far... wait until you get the number of critical cases above the number of ICU beds and you'll see 18 year olds dying from this

Based on what? According to the Bloomberg article - ”As of March 17, 17 people under 50 had died from the disease. All of Italy’s victims under 40 have been males with serious existing medical conditions.” They reached maxed capacity of beds or ventilators right? We read stories of doctors having to make life & death decisions. Where are the dead 18 year olds? Spreading info like that on a hunch, or an exaggeration,…

> They reached maxed capacity of beds or ventilators right?

They just started to reach max capacity, and not in every region, every hospital at the same time...

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