According to the TV, the record for new unemployment filings has been utterly shattered – like 400% higher. Previous record was in the 600Ks – last week was over 3 fucking million new claims. The economic impacts of this thing are utterly immense, and we’re probably only seeing the beginning of them.
And yet the S&P 500 is rising steadily.
Right. The truly bad effects haven’t started yet, because hospitals are still relatively functioning. I mean, sure, our local hospital has horror reports coming out of it with nurses being sent home as punishment for bringing their own masks to wear b/c the hospital has run out and is forbidding nurses to wear masks when treating patients not postiively identified; and there are those images of parking decks full of beds, ready for patients; and we know about what’s happening in Italy.
But it hasn’t struck us yet.
Next week, man. And the week after that. If you’re not terrified, I don’t know what to say.
See my post #271.
It makes absolutely no sense at all, which means that investors are betting on a bottom (something not connected to reality) or trading and taking profits.
“Investing” at a time when the market fundamentals don’t really justify it isn’t necessarily a problem – until it is.
All well and good that people are getting $1200. But something like half the country is in danger of missing rents if they miss a month’s worth of pay. We’re gonna need helicopters full of cash for months.
Another consideration is that the state and local governments may not have the money to dole out. Like our healthcare emergency rooms, our economic emergency rooms calculate the ‘normal’ and the occasionally extra-normal. But they most likely didn’t plan for this.
I will applaud the senate and the WH for momentarily living in reality, but I wonder how long they can pull off this charade.
Because this is entirely expected.
It’s obvious that I don’t understand investors at all. Did they really think that 100,000 to 240,000 Americans could die and the economy would be unaffected? They just realized today, after a few days of modest rise in the market, that it’s gonna be bad? I guess supposedly they thought trump’s slush fund was going to save them even if 100,000 potential employees/customers die and most of the rest of them are worried about dying, too.
Yeah, I’ve been watching the Dow obsessively over the past several weeks, and I find it completely bewildering.
The first phase of the bear market was selling to cut losses. I don’t have anything scientific or mathematical to back it up, but my hunch a few weeks ago (and it appears to have more evidence now) was that investors in the aggregate (the market) was pricing in the initial post-2017, post-tax cut, post-end of Obama era growth. Investors have for more than a good year (and actually longer than that) been predicting a real recession because of a variety of factors, which include the trade wars, the lower Eurozone growth, volatility in emerging markets and other factors.
Investors had no way to price in the real impact of corona because they didn’t have any solid numbers yet, and they’re trying to see the ripple effects. I think we’re about to see the real pricing of the crisis and we’re just starting. I would not be surprised to see the market fall another 50% from where it is today. That might seem extreme, and I will concede that this is probably an extreme prediction - toward my lower end, certainly. A safer bet would be a decline of another, say, 25%. But the economy is unraveling at many different levels. We’re by now becoming aware of the devastation that small businesses (especially restaurants) are facing, but nobody’s even talking about the collapse of tax revenue for local governments, for example. There’s going to be massive, massive economic pain.
It could be absolutely wrong for future, but till now it seems ditto copy of October 1987 fall be it DJI, spx or rut index… Which means it is awesome buy at dow 19000 or spx 2250-2300…but i could be totally and horribly wrong as it is often the case with me…
The underlying basis of the economy is being hard hit by the lockdown, and it will take a long time to recover, despite government handouts.
Many businesses that have borrowed heavily at low interest rates will be unable to roll over their loans, because their credit ratings will have dropped considerably. That means businesses may go bankrupt, and the financial institutions will have bad loans. It will be far, far worse than 2008.
I think we have hardly even started to see the effect on the stock market. There will be small rises and fluctuations, but it’s going to seriously drop, and keep dropping for some time.
During World war II also Dow had fallen 30% and then when Central Bank did near zero interest rates, bounced back in years during the war
Yeah, me too. The fall to Dow 20k simply replaced a wildly overvalued market with one that is reasonably valued for normal times. Current valuations are in no way accounting for the severe economic risk we are currently facing. Or, potentially more charitably, the market as a whole is quite optimistic about the capability of legislatures and central banks worldwide to prevent mass economic carnage.
Which is not an unreasonable thing to assume because Central governments have tremendous powers to prop up the markets… These days,a good part of household wealth is in the stock market so they will not let it fall beyond a level… 29k to 18 k is a big fall in itself…
we could say that since economy is not growing fast if at all, it means we have to incentivise investment at the cost of savers, so we will have negative real interest rates for a long time
^^Read Central governments as Central banks* above…
Can they and should they are different questions. They clearly should not. Keeping the real economy from melting down is in the public interest, but keeping the stock market artificially overvalued is not. As to whether or not they can, at least beyond the short-term, is kind of an open question.
None of this made sense.
If interest rates are kept near zero (negative real rates), it means you don’t get anything by keeping (saving) your money in a Bank deposit, where as in the stock market you will be getting 1-2% dividend or 5 to 7% earnings yield (earnings yield is inverse of price-to-earnings value)
I would say to 2x price to book or 20-25 x shiller PE (normalised pe) is fair in low or no growth scenario when compared with 0% interest rates
Bank deposit is saving… Stock market is investing…
Ok, I’ll put aside that you are using savings and investment in an odd, idiosyncratic way (usually investments are a subset of savings), and try to reply to the rest. 20-25 “Shiller PE” (ie, 10-year CAPE) is actually relatively high historically, and extremely high for such extreme economic circumstances: Shiller PE Ratio - Multpl.
If your counter-point is that it’s high because other investment types have such low yields, that’s certainly a valid point, but it sounds like you’re advocating that we keep interest rates extremely low - or even negative - so as to prop up P/E’s, and force investors into riskier investments (stocks.) That sounds like a horrible idea.
There certainly are very valid reasons to set interest rates low, but fucking over people trying to save for their retirements isn’t one of them.
Saving is often times considered risk-free or virtually risk free. stocks are not risk free, hence are an investment. Although I understand what you are saying.
Shiller PE is better than ordinary PE. That’s all nothing more to it
“but fucking over people trying to save for their retirements isn’t one of them.” That would not be reason but a consequence. Else the investor of your country will face a bigger fall and so would the economy which needs investment.
Also those savers were able to save only because they earned money through jobs which were created through a robust economy sustained only by low interest rates.
Do you consider the stock buyback program investing?
Investing to grow the economy involves new production, more efficient production, and new products. Money in the market may support that, or may not. The stock buybacks were at the expense of true investments in companies.
We had a supply problem a while ago from the disruption in the supply chain. Now we mostly have a demand problem *, from the closing of stores and from shelter in place. The best investment at the moment is to stop the virus. Which is why the lack of support for masks and ventilators from the federal government is so criminally stupid.
- Not counting toilet paper, of course.