U.S. Economy Shrinks at 4.8% Pace, Signaling Start of Recession • Hacker News Board

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

#441

Post by mcguire » Wed, Apr 29, 2020, 4:35 PM UTC

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…

I'm going to have to argue with 3 a bit.

The market incorporates news quickly, such as that there is a pandemic and it is going to have bad effects. Then it essentially forgets about it. I suspect most of the 12% is a response to government actions to control the pandemic and to the recent news that it is coming under control. You will see another drop if relaxing controls leads to another covid spike, and when economic effects appear on corporate financial reports, and when long term job losses are reported. Those are perfectly foreseeable, but in the meantime the market will likely go up as the memory of why they went down in the first place fades.

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

#442

Post by adrianpike » Wed, Apr 29, 2020, 4:35 PM UTC

tmaly wrote: post #297

baron_harkonnen wrote: post #257

Earlier quoted context omitted.

Tech people will be hit much harder by this than they think. The STEM world is largely in denial because ultimately SV grew because of the last major recession. That won't be happening this time. Startups are having massive layoffs right now, and each week bring companies further and further down the chain lay people off. I strongly suspect we'll see more major layoffs next week. Most big tech companies are driven by…

Maybe Tech will in short term, but investors still will need to chaise yield in a zero interest rate environment. As soon as things pass, money should start to flow back into startups.

> As soon as things pass

This may not be soon.

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

#443

Post by asdff » Wed, Apr 29, 2020, 4:35 PM UTC

_bxg1 wrote: post #381

mcphilip wrote: post #138

Earlier quoted context omitted.

> 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. Thanks for posting this comment. I know it sounds trite, but I’…

> My question is how much, if any, social unrest this will lead to. There is deep rot at the heart of the American system, and something is going to have to give. The economy has been broken for the lower 50% for a long time now. This course is unsustainable. I try not to get explicitly political on here, but Bernie Sanders was, as far as I can see, our last shot at reversing the trend from within the current system.…

It wasn't too long ago that Los Angeles was burning on national TV, and people had to post on roofs with rifles due to the police refusing to get involved with the situation beyond protecting the wealthiest zip codes. It only stopped when the national guard deployed armored vehicles.

People think the U.S. is removed from this sort of thing. It's not. If you push the working class to a breaking point, they will break into stores to steal diapers if they have to.

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

#444

Post by sjtindell » Wed, Apr 29, 2020, 4:36 PM UTC

_bxg1 wrote: post #381

mcphilip wrote: post #138

Earlier quoted context omitted.

> 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. Thanks for posting this comment. I know it sounds trite, but I’…

> My question is how much, if any, social unrest this will lead to. There is deep rot at the heart of the American system, and something is going to have to give. The economy has been broken for the lower 50% for a long time now. This course is unsustainable. I try not to get explicitly political on here, but Bernie Sanders was, as far as I can see, our last shot at reversing the trend from within the current system.…

Does anyone else remember Occupy Wall Street here in the US? Millions camping out in parks demanding change and support. But they were unable to rally, organize, create any lasting impact on the elites and wealthier strata of society. The middle and top looked down on the bottom as an annoyance. They were literally removed by riot police, and the movement died. Unsurprisingly, the number of homeless people increased drastically in that same period (financial crisis) and how have many municipalities responded? Laws against sleeping on benches. There was literally a tent city under Las Vegas, but the decision makers in this society are so far removed it just doesn’t matter. Until the bread runs out, we are not in a real “end of the world” crisis as you describe it. Americans are apathetic, just wealthy enough not to starve, have deeply ingrained individualism that makes them resistant to anything resembling support or handouts, and don’t understand what’s happening - that is to say, the rich are getting so rich their families will never be poor again, and the doors to that class are closing. There’s more support now for ideas like a basic income, universal healthcare, etc. but the fundamentals of the system are so ponderously difficult to change...a very interesting situation.

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

#445

Post by ModernMech » Wed, Apr 29, 2020, 4:36 PM UTC

klmadfejno wrote: post #169

Filligree wrote: post #149

Earlier quoted context omitted.

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.

Keep in mind death is not the only negative outcome of this. My wife's uncle is relatively young (50s), completely healthy, gainfully employed, and has contracted Covid. He's been in the hospital for over a month, has been on a ventilator for weeks, is currently off but has been in and out of the ICU, his lung has collapsed, he can't feed himself, he can't walk, and he's currently re-learning how to swallow. If he makes it out of the hospital (that's a question mark right now), he's not going to be able to support himself. He won't be able to walk without getting winded so he will need a wheel chair, which will prevent him from doing the job he had before he went in. His experience, which has a decidedly negative economic impact and which is not uncommon for those who have needed to be hospitalized by covid, is completely missing from the "covid only impacts old people who were unproductive and probably would have died anyway" narrative.

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

#446

Post by noarchy » Wed, Apr 29, 2020, 4:37 PM UTC

dleslie wrote: post #134

cpursley wrote: post #121

Earlier quoted context omitted.

[flagged]

Canada is a strong counter example to your hypothesis. https://en.m.wikipedia.org/wiki/Supply_management_(Canada)

Canadian here. Supply management is probably great for many producers. They participate in legal cartels engaged in mandated price-fixing, so this can protect their bottom line. For consumers it keeps prices high on things like dairy (even with the CAD in rough shape, I could still find cheaper cheese just across the border, in the US; pre-covid, mind you).

Most major countries have some kind of scheme in place to fix agriculture prices. In the case of the US there are subsidies that everyone pays, via taxes.

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

#447

Post by CydeWeys » Wed, Apr 29, 2020, 4:38 PM UTC

qppo wrote: post #325

Server6 wrote: post #309

Earlier quoted context omitted.

It's because of the long term 72-84 month loans. People are trading in used cars for close to the loan payoff amounts - which is still pretty high.

GM had 0% interest for 84 month loans on their trucks for awhile there. something is very wrong with the lending market when it makes sense to give people free money.

You're not giving them free money, you're getting them to pay you a lot more in total over many years by selling them a much more expensive vehicle up front. Instead of, say, $20k over 3 years, they can get $40k+ over 7 years for selling a product that doesn't remotely cost them twice as much to build. It's more profit for them.

These 0% 7 year loans are not coming from banks. They're coming from the car companies. They're a sales tool.

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

#448

Post by standardUser » Wed, Apr 29, 2020, 4:38 PM UTC

at-fates-hands wrote: post #438

thescriptkiddie wrote: post #394

Earlier quoted context omitted.

Only 52% of americans own any stock whatsoever [0], and the richest 10% of americans own 84% of all stock. [0] https://news.gallup.com/poll/190883/half-americans-own-stock... [1] https://www.nber.org/papers/w24085

> and the richest 10% of americans own 84% of all stock. The top 20% of earners also handle close to 90% of the tax burden, while close to 50% of the population pay nothing in taxes.

In a society where the bottom 50% have virtually no wealth and are in debt, how much do you think they should pay in taxes and how do you expect them to pay for it?

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

#449

Post by asdff » Wed, Apr 29, 2020, 4:39 PM UTC

mcguire wrote: post #441

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…

I'm going to have to argue with 3 a bit. The market incorporates news quickly, such as that there is a pandemic and it is going to have bad effects. Then it essentially forgets about it. I suspect most of the 12% is a response to government actions to control the pandemic and to the recent news that it is coming under control. You will see another drop if relaxing controls leads to another covid spike, and when econo…

We are heading for a leg down now that earnings are coming up, and everyone is going to whiff.

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

#450

Post by q084yn39cptyth » Wed, Apr 29, 2020, 4:39 PM UTC

scottLobster wrote: post #14

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?

Best explanation I've found: https://www.youtube.com/watch?v=0ECqDaPjjV0 Can't post this enough these days. TLDR is that the stock market is forward looking. It goes up or down based on whether conditions are better or worse than EXPECTED. If reality is in line with expectations then nothing happens. If it's better than expected stocks go up, if it's worse than expected stocks go down. The current shitty economy has…

Related to this is that the current circumstances are different from, say, 2008, which was a sort of internal collapse. A lot of this is external, regulation-driven. Not saying it's not a bad situation, or all government shutdowns of the economy, but there is a big element of it.

A lot of businesses are cutting back because people can't go out and do what they'd normally do legally. So when governments start easing restrictions, people [stockholders] are probably more optimistic because the situation seems more tractable. It's a lot more predictable than 2008 when people were talking about the collapse of fundamental financial institutions and systems involved in monetary supply because of their underlying structural composition.

I do think there's some disconnects in interpreting the stock market, but it seems to me investors are just seeing restrictions being eased, daily COVID case counts on a downward trajectory, etc. They're reinvesting in markets they see a path of recovery in, early.

What's less certain to me is if in say, July, this all gets worse again with overrun hospitals, etc. in a second wave. Then markets might really take a nosedive.