This is my thinking. A second wave might be a slight uptick in cases which won’t stop anything and stocks hit all time highs shortly. It’s all a scam it would appear. I happen to be holding the short end of that stick:
Since April 1 my 2x leveraged bear short of DOW (bought at 21200) is -30%
My Australian bear short, where there are basically no cases and a good open for business prognosis, is -3%
Ya i have bought a ton of longer expiration puts, mostly July, pretty much every time it pumps and have gotten crushed obviously.
SP500 is down 500 points from its peak, and down more than 10% on the year…
Like, do you guys not remember the two-week period where the market indices were swinging back and forth 10% on a daily basis as the market processed the likely impact of the coronavirus pandemic and ultimately settled on 20% down as the verdict? There has never, ever been a more obvious example of the market going off into a corner to price in a bunch of stuff. Now the stuff is priced in, and indexes are not going to move in response to a bunch of predictably bad UE numbers. Or rather, they already moved in response, and future moves are going to be fine-tuning. “Coronavirus is going to be really bad” would have made you a lot of money in early February, but if that’s the depth of your insight, you should probably not be trying to market time off of it.
In the 2008 recession, which was peanuts compared to this, the s&p 500 lost almost 50% of it’s value from the previous all time high and took 4 years to regain that value. The current valuation isn’t even 15% below the ATH. We are basically at October 2019 values. That makes zero sense considering how badly fucked many sectors of the economy are for the foreseeable future.
You being a condescending prick is cool and all but do you think the markets have priced in what is likely to be a 1-2 year global event? Because I don’t. Do you think we can hit new all time highs in this environment? Because I don’t. If you do you are basically arguing our current economy is the same as it was prior to Covid and that is so far past nonsensical I don’t know what to tell you.
Nice dunking. I can assure you this is the last time I do anything but buy and hold.
This is peanuts compared to the Spanish Flu, and that didn’t have a 50% impact on the markets. The stock market isn’t a proxy for “the economy,” let alone national wellbeing, it’s a rough measure of future corporate profits. A million people dying has ~0 direct impact on stock prices. The quarantine has a huge impact on profits over the next year or two, but likely not much beyond that. The big question is how many businesses go bankrupt before we return to something like normalcy, after considering government assistance. There’s no obvious answer to that question.
What is obvious though is that the fact that a bunch of people lost their jobs when all the stores closed or that oil prices went down a bunch when everyone stopped driving their cars are not shedding any light on that question.
Where do people get money to buy all the things that are needed to drive corporate profits? Just keep firing up the printing presses until this is all over in 2 years? The effects on corporate profits from 20% unemployment haven’t been felt yet because the Fed and federal government have just printed it away.
The vast vast majority of those jobs are not coming back in any meaningful way until this is over which isn’t happening any time soon. People aren’t getting raises, bonuses, etc. People will save money rather than buy random shit they dont need in case they get laid off. Acting like unemployment doesn’t eventually have any effect on corporate profits is asinine. Those all greatly impact corporate profits and in theory stock prices.
Some ridiculous percentage of the S&P 500 is Amazon. Even Amazon is in big trouble in a prolonged high unemployment environment.
If your point is that we can stay irrational and print enough money to just blunt all of the real world pain of this(which I will admit you might be right) then I will ask it again. Doesn’t the fact that could work just completely destroy the monetary theories our entire economy has been based on for 100 years+?
Why aren’t the jobs going to come back when the virus goes away? If businesses shut down, sure. If they are trying to reopen, why won’t they just hire back a bunch of unemployed workers (for example, the people they laid off when they shut down in the first place)?
To answer your question, though, the fact that the government can keep the economy afloat for a short period of time by blowing an enormous hole in the long-term fiscal outlook doesn’t invalidate economics.
The stock market contains a ton of firms that most people don’t think of as “the economy.” Facebook and Google are completely fine and maybe even better off. Amazon is in great shape. Everybody’s still going to buy iphones. Sure, we are making less stuff and there is a ton of pain out there but a lot of it is stuff the market doesn’t care about very much, and the rebound is going to involve massive stimulus and a spending boom.
I could write the opposite case, which you guys are doing here, but the truth is I don’t know shit, you don’t really know shit, and most of the people in the market don’t know shit.
Just buy, hold, and try not to pay attention.
When the virus “goes away”? That isnt happening for years. Even the corporations know this isnt a month or two event which is why they have laid everyone off and been begging nonstop for aid.
You aren’t wrong but FANG type stocks eventually take a beating here. Ad spends will decline, people will buy less plastic garbage, they will wait longer to buy their next overpriced phone, etc. The second and third order effects when most consumers, businesses and state and local governments are broke are not being accounted for right now and it isn’t close.
I’m not so sure about that anymore. The worst of this may be over, economically. Wall Street doesn’t give a fuck about the mass graves we’re going to throw poor people in.
If the market failed to price in the risk of a really bad outcome that we saw, we failed to price in 20-30 states fudging the numbers and opening, while the GOP puts immense pressure on the other 20-30 by saying, “lovely economy you’ve got there, it’d be a shame if you had 20% unemployment and we cut off the CARES Act.”
We may have also failed to price in the speed with which researchers might have some success looking back at data to identify possible treatments and preventatives.
Have we gotten good news on that front recently? (I had to check out on CV-19 news for a few days for my sanity, and I’m about 1000 posts behind in the thread.)
Regardless of what the government does some things are not going back to normal. Let’s take tourism for example. If that gets reduced by 75% over the next 2 years what does that do to the velocity of money and the economies of many cities, states and countries? When they go belly up do we just keep printing money to keep them afloat? Does something worse happen?
And that is assuming a best case scenario where we aren’t back in lockdown by fall and we can all make our own decision on whether an airplane is a good risk to take. Now do that for every industry.
Also they could have literally printed the 2008 recession away and decided to only partially do it. There is no printing this away this time. Entire sectors of the economy are in ruins.
its possible taking one of the heartburn meds might reduce your chance of death by 50% but there is no conclusive scientific proof of it.
The 2008 financial crisis was totally batshit insane, like no one knew what the fuck was going on or what enormous gordian knot of debt and derivatives and counterparty risk was going to blow up next. The level of panic and uncertainty was just on another level from this. This is: OK people are staying home for a while. Because of a virus. We get it.
So a few donk traders donking off a few hundred billion and bankrupting a few trading houses + a mortgage scam in the US is worse than the entire globe altering their behavior for the foreseeable future in a way that almost by definition means consumption is going to decrease?
Literally almost every business, government entity and individual needs bailouts to survive on any meaningful level this time so:
Apparently. Scary, right? There ought to be a law or something.
