'Market learned to smooth out crises, because so many happened' is now least true than ever.
Let's check how non-capitalistic countries do after the crisis, for good measure.
Worst economic crisis since 1930s depression, IMF says
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Re: Worst economic crisis since 1930s depression, IMF says
#22And yet the stock market is already recovering. I guess "worst crisis since Great Depression" has been priced in?
The increase we’ve seen in the last two weeks make zero sense to me. It’s almost making me lose trust in the market as I feel like it’s rigged. We’re in a complete state of unknown, nobody knows when this will be over, unemployment raises like crazy, the US now realizes that coronavirus is hitting them the hardest...
A bunch of people sold off in a panic, a lot of volatility hit, people like Buffett bought at the bottom (and publicly advised others to do so), so who knows.
Unemployment is artificially high for now. Companies are incentivized through PPP to lay people off, especially with UI bonuses.
Re: Worst economic crisis since 1930s depression, IMF says
#23And yet the stock market is already recovering. I guess "worst crisis since Great Depression" has been priced in?
The market is pricing in a smooth recovery without a second wave of infection. It is not pricing in how much this will affect the poor, due to a cultural and class disconnect. I bet 50% of residential renters don’t pay rent for May.
It seems we’re wildly overextended, but I booked a loss on some short-term puts today so maybe my judgement isn’t the best. I’m still holding longer dated puts because I think we go down, the pre-pandemic economy is gone, we don’t know what’s left.
Edit: There were large outflows from equity mutual funds and ETFs last week. The most ever.
Re: Worst economic crisis since 1930s depression, IMF says
#24And yet the stock market is already recovering. I guess "worst crisis since Great Depression" has been priced in?
It hasn't.
The finance industry is full of well-wishers and optimistic people right now. My complete outsider and uneducated hypothesis is that the fund managers are still trying to figure out what to do in this unprecedented crisis and are watching each other like lemmings. While millions go without jobs and we head towards an inevitable spike in bad debt.
My wife watches CSPAN in the background and they dance around the phrase "depression" by calling it the D-word in their commentary.
Re: Worst economic crisis since 1930s depression, IMF says
#25How a pandemic of this nature was not planned for, war gamed, and drilled until we could gain SOME intuition as to the optimal actions and effects countries should take to avoid economic meltdown while doing the vulnerable population right is beyond me. The U.N. was created to promulgate this kind of cooperation, and here it has utterly failed.
All I hope for is that this going to serve as a cautionary tale in the future.
Re: Worst economic crisis since 1930s depression, IMF says
#26'Market learned to smooth out crises, because so many happened' is now least true than ever.
> 'Capitalism learned to smooth out crises, because so many happened' is now least true than ever.
I didn't notice that statement in the article, but I did notice this one:
> Lockdowns imposed by governments have forced many companies to close and lay off staff.
Re: Worst economic crisis since 1930s depression, IMF says
#27And yet the stock market is already recovering. I guess "worst crisis since Great Depression" has been priced in?
The increase we’ve seen in the last two weeks make zero sense to me. It’s almost making me lose trust in the market as I feel like it’s rigged. We’re in a complete state of unknown, nobody knows when this will be over, unemployment raises like crazy, the US now realizes that coronavirus is hitting them the hardest...
The increase in the last two weeks is because it's becoming obvious that:
1) The US's response to this was competent.
2) The measures put in place are working.
3) The projections are improving substantially.
4) The time horizon is shrinking.
5) We are starting to understand how to treat this.
(+ "in the us").
Two weeks ago we were looking at places like Italy, and extrapolating that the US could see deaths in the millions. A week ago that projection went down to 100-200k, and yesterday it went down to 60k. Obviously that is still a massive catastrophe, but it's nowhere near the catastrophe we were fearing two weeks ago.
Additionally, the writing is on the wall that manufacturing is going to be moving away from China as much as possible in the near future. Much of that, for American companies at least, is going to come back to the US, probably at the hands of massive tariffs.
That's all good news for the US economy.
>US realizes the coronavirus is hitting them the hardest.
Where did you hear this? It is absolutely not true.
Re: Worst economic crisis since 1930s depression, IMF says
#28Re: Worst economic crisis since 1930s depression, IMF says
#29And yet the stock market is already recovering. I guess "worst crisis since Great Depression" has been priced in?
The increase we’ve seen in the last two weeks make zero sense to me. It’s almost making me lose trust in the market as I feel like it’s rigged. We’re in a complete state of unknown, nobody knows when this will be over, unemployment raises like crazy, the US now realizes that coronavirus is hitting them the hardest...
a lot of investors have a lot of cash equivalents on their hands after the market plunged few weeks ago. That cash is set on fire with $2T in stimulus and more coming. There are not that many investment alternatives with interest rates becoming negative elsewhere
Re: Worst economic crisis since 1930s depression, IMF says
#30Earlier quoted context omitted.
The increase we’ve seen in the last two weeks make zero sense to me. It’s almost making me lose trust in the market as I feel like it’s rigged. We’re in a complete state of unknown, nobody knows when this will be over, unemployment raises like crazy, the US now realizes that coronavirus is hitting them the hardest...
A bunch of people sold off in a panic, a lot of volatility hit, people like Buffett bought at the bottom (and publicly advised others to do so), so who knows. Unemployment is artificially high for now. Companies are incentivized through PPP to lay people off, especially with UI bonuses.
How are companies incentivized to layoff staff through PPP? My understanding is one of the eligibility requirements is that you can't have reduced your staff since Feb 15th, and if you have, you need to re-hire them to become eligible.
The entire point of PPP is to incentivize companies _not_ to layoff their staff.