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U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

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Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#161

Post by banannaise »

iambateman wrote: post #4

I understand that the economy and the market are different but I'm so confused. The S&P is up ~12% this month, despite massive unemployment, a shrinking economy, and serious long-term questions about the outlook. Is most of the 12% just market speculation that the virus issue will pass without a long-term earnings hit?

The wealth bubble is still alive and well. Mass layoffs of low-wage workers don't change that very much, and the wealth bubble drives demand for investment vehicles as a class of goods. As long as it keeps inflating, the price of investment vehicles will keep going up, which includes the stock market. And as long as you expect it to keep inflating, you should expect the stock market to keep going up, unless there's a mass exodus into some other type of investment.

This may also help explain why many people are terrified of the wealthy getting less wealthy: it'll cause a massive market correction as the demand for investment vehicles decreases to a more reasonable level.

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#162

Post by pc86 »

res0nat0r wrote: post #120
dudul wrote: post #112

Earlier quoted context omitted.

And this post is why I get so infuriated when I see all the blue-checkmarks on Twitter, calling people who want to go back to work "Selfish, stupid, idiot, etc". People don't want lockdown to stop because they need to go to their hairdresser, or because they need to go hangout at the pub, or whatever idiotic reason these privilege a-holes put in their tweets. People want to get back to work , because they need money…

I understand their thinking because not working is causing a massive amount of collateral damage, but the virus doesn't care about any of that. If everyone goes back to normal too early, this all just starts over, and folks are forced to be inside even longer, there's just no way around it.

Not a single sane person is arguing going from isolation to business as usual overnight.

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#163

Post by pepy »

MattGaiser wrote: post #148
nimbius wrote: post #98

This is anecdotal and it might come across as bitter and tonedeaf as someone who is not in a STEM job and cant see the bigger picture very well. Im a diesel engine tech who repairs those big trucks carrying food and shit tickets to grocery stores. the fact that ANY market is completely detached from whats actually happening to Americans is frustrating. My job just cut benefits and hours but we're "essential." Remembe…

> Ive counted 2 furniture stores, a consignment shop, a few barber shops, and half the god damn bars Retail like that is very underrepresented in the stock market, so those losses wouldn't be reflected.

stock market will make new all time high any day now lol

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#164

Post by cm2187 »

hn_throwaway_99 wrote: post #17
iambateman wrote: post #4

I understand that the economy and the market are different but I'm so confused. The S&P is up ~12% this month, despite massive unemployment, a shrinking economy, and serious long-term questions about the outlook. Is most of the 12% just market speculation that the virus issue will pass without a long-term earnings hit?

3 things: 1. People keep saying about the market being up recently, but skip the part about it still being down about 10% since the start of the year. 2. S&P is heavily weighted towards the strongest companies. Amazon, Apple, Facebook, Microsoft and Google account for 20% of S&P market cap. Most of those companies have been helped by the pandemic, or at least not hurt nearly as bad as smaller companies. 3. The market…

The S&P is where it was in October last year, there, it just erased the massive gain in Q1 this year. No serious recession is priced in really.

And the only thing that can explain where the stocks are now is that the Fed has pushed 2 trillions of liquidity into the market in matter of weeks, which is just unprecendented (the previous QE were much more gradual) and that lifted all asset classes.

But at one point stock prices will need to get back in line with earnings. I don't really hear anyone talking about v-shaped recovery anymore.

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#166

Post by chasebank »

chadash wrote: post #129
JKCalhoun wrote: post #63

Earlier quoted context omitted.

> 1. People keep saying about the market being up recently So, down 10% from the previous bubble. > 2. S&P is heavily weighted towards the strongest companies Good point. Dow is also up almost as much though. > 3. The market is always very forward looking. I may be cynical, but I see perhaps 2 to 3 years to regain the jobs we are losing, to see the employment rate return to earlier levels. That's years of depressed s…

> Good point. Dow is also up almost as much though. The dow is a subset of large companies in the S&P.

Look at the Russell 2000.

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#167

Post by BoiledCabbage »

newacct583 wrote: post #140
nimbius wrote: post #98

This is anecdotal and it might come across as bitter and tonedeaf as someone who is not in a STEM job and cant see the bigger picture very well. Im a diesel engine tech who repairs those big trucks carrying food and shit tickets to grocery stores. the fact that ANY market is completely detached from whats actually happening to Americans is frustrating. My job just cut benefits and hours but we're "essential." Remembe…

> Half the country is out of work It is clearly not, otherwise that 4.8% would be a much bigger number. Hyperbole doesn't help here. No one claims things are good. A global pandemic is a disaster any way you cut it. We're all affected, some much more than others, and we all have to help. But there's no magic wand we can wave where we all go back to work, either. Even "essential" industries are affected. Very few peop…

> It is clearly not, otherwise that 4.8% would be a much bigger number. Hyperbole doesn't help here.

Uh buddy, you know the first quarter is January, Feb, March right? The country was in shutdown mode for maybe half of March at most. Extrapolate that out to the full quarter (ie multiply 5% by 6) and you get a 30% drop. And on top of that, in March many businesses were still trying to partially pay or at least remain in business on paper. That's all done, plus now we start getting secondary effects.

The Administration's mismanaging of this situation is one of the single most costly screw ups in our country's history.

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#168

Post by xenocyon »

cpursley wrote: post #121
hnarn wrote: post #115

Earlier quoted context omitted.

[flagged]

[flagged]

Your first paragraph makes a thesis that is not easily falsified by anecdote (both capitalist British Raj India and communist Stalinist Russia had large famines).

However I agree that US food production is already highly centralized, at least where big ag is concerned, with the characteristic that profits fill private pockets while losses are subsidized by the people at large.

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#169

Post by klmadfejno »

Filligree wrote: post #149
res0nat0r wrote: post #120

Earlier quoted context omitted.

I understand their thinking because not working is causing a massive amount of collateral damage, but the virus doesn't care about any of that. If everyone goes back to normal too early, this all just starts over, and folks are forced to be inside even longer, there's just no way around it.

80-90% of people who catch this disease would survive without treatment. If America won't support people who might die of starvation when stuck at home, then the individually smartest response becomes to take their chance with the virus. I don't need to explain what a 10-20% death rate would do to society, however.

> I don't need to explain what a 10-20% death rate would do to society, however.

Not much if 80% of them are very old and sick.

Re: U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession

#170

Post by short_sells_poo »

matwood wrote: post #77
hn_throwaway_99 wrote: post #17

Earlier quoted context omitted.

3 things: 1. People keep saying about the market being up recently, but skip the part about it still being down about 10% since the start of the year. 2. S&P is heavily weighted towards the strongest companies. Amazon, Apple, Facebook, Microsoft and Google account for 20% of S&P market cap. Most of those companies have been helped by the pandemic, or at least not hurt nearly as bad as smaller companies. 3. The market…

You're spot on. The companies you listed plus others are going to come out of this leaner, with fewer competitors, and a whole set of new people forced to learn how to use them. Great news for those companies. I would also add a #4 to your list that people often miss. There is risk and there is uncertainty (think unknown unknowns). The market hates uncertainty because it is so hard to price. Risk though can be priced…

This is very much what most people don't understand. The primary driver of market stress is uncertainty. Once that is gone and the bad news has been digested, that's it. If lagging indicators further confirm the bad news, that's almost irrelevant because there is no new information content there. Most traders are not stupid, they know the economy is going to tank. The information that there is going to be a recession is already known and pricd in. The question at this point is how much is it going to tank? If it tanks more than expected, or 2nd/3rd order effects materialize (e.g. solvency issues, deleveraging, etc...) then prices will fall more. At this point I'd also like to stress that what you personally expect is not neccessarily what the market expectation is. The market is never wrong in this sence, it is just a consensus of opinions. Opinions are by definition subjective. When new information arrives, the opinions change.

In a mathematical sense, the relationship isn't as much between the absolute level of the economy and prices, it is the tendency of the economy and the prices. You should look at the first (maybe second?) differentials.

Furthermore, values like GDP are inherently lagging. They show data that has happened months ago. There's almost no new information content in that number. Yes the number is bad, but everyone knew it's going to be bad. It sounds like (judging by the market action) that it wasn't worse than consensus.

Now, all the above is viewed through a lens of efficient markets. Reality is again more complex. As it has been pointed out, the price is not just driven by expectations about the economy or stocks, it is very much driven by central bank and government action. Easy money distorts prices. When Tesla which makes a puny 400k cars a year and has just about stopped being loss making is priced higher than VW which makes >6 million cars a year and made $17 billion, something is off. Let's put that into context, Tesla shares have priced in decades of non-stop geometric (20% YoY) sales growth to justify the _present_day_ valuation.

Don't think for a moment that traders don't know this. It's absolutely a game of musical chairs and they know it. Everyone, and I repeat, even the most boring, backwater pension fund board knows that this is a bubble. Everyone is participating and hopes that when the music stops, they'll have already made some safe haven stockpile to weather the storm.

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