On the bull case, another few trillion in stimulus is a lock. Combine that w/ America OPENING FOR BUSINESS and staying open come hell or high water, and could see stock prices maintaining.
Why haven’t we just printed money before? Well, to do this you need to be 1) the world’s reserve currency 2) every other currency to be in similar or worse shape 3) desperate enough to try it 4) have the balls to try it.
Only other precedent is 2008 and it worked. We had the bigger crash in 2008 than today because in 2008 the crash was necessary to trigger conditions #3 and 4. There was nothing else to tell us we were fucked other than the markets failing.
With COVID everyone knew we we fucked instantly. Combined with the experience from 2008, we had no problems fulfilling conditions #3 and 4 and the money machine went brrrrr instantly.
The money machine might not work this time but no one really knows. Also important to note that for put buyers, “not working” does not just mean the real economy is fucked it means nominal stock prices fall. Very different.
I’m saying all this as someone on the sidelines. But at least I’m getting paid something like 2% guaranteed to sit on the sidelines, put buyers are paying fees to make bets against people with insider knowledge. Can’t be a good idea.
And weren’t there were policy changes with the Fed that lets them put whatever the hell they want to on their balance sheet whenever they want? MBS, corporate junk bonds, whatever? Whereas in 2008 they had to beg Congress like a bunch of peasants to be able to do that sort of thing.
It is also very clear this time around they are not going to let any huge companies fail. That was not at all clear last time around. Like if Ford and GM run out of money it isn’t going to be some ZOMG AUTO BAILOUT from congress, the Fed will just ship them whatever they need.
I agree with this point and also Master’s point. Are there consequences to this? If not then lol all the econ donks we all learned from like Milton Friedman, Keynes, etc.
Tourism won’t be down 75% if we are somewhat ok from here. Maybe 20%.
Nobody knows for sure, but imo once there is a vaccine and/or treatment to make this more like a bad flu, people are going to return to normal. That includes eating in crowded restaurants, big crowds at sports events and concerts, etc.
If people like us are waiting to see beyond a month or so, we’ll be the lol crazy conspiracy nutters.
Put buyers are dumb af. I can tell you from personal experience. I have been trading the swings and selling some one down moves and buying on big up days so only down a couple thousand on like 10k in puts lol. Of course that is terrible for only having been attempting this positive for like 12 days and the market being close to flat in that time frame. Vix going down and time are eating me alive.
We’ve been told for years that the average American can’t pay a $500 emergency bill. I’m sure tens of millions being out of work for several months with no prospects for income replacement qualifies as a $500+ emergency.
The service sector is in shambles, and restarting it isn’t going to happen overnight. If you have a 200 car freight train cruising along and it hits a slowdown, it doesn’t take nearly as much energy to get it back up to full speed as it does if you bring it to a complete standstill. We brought the economy to a standstill, and are now pretending like you can just flip the switch and be back to status quo in a couple days.
Many people on this forum are largely insulated from this because you’re wealthy professionals of above-average intelligence and have specialized training. I’d be scared to death if I were a waiter/bartender or a casino host right now. Add any number of other jobs to that list.
My wife was unemployed and looking for work in an entirely new career path just before this all went down. We went to Vegas for 10 days in March and returned to this nonsense. No way in hell she’s getting a non-teaching job at anything remotely close to her prior wage now. She’s going to be in line behind countless furloughed office workers who were never brought back.
Good luck to all recent college graduates, too. Not going to even have that retail job to fall back on while you’re looking for something in your field.
If there were ever a circumstance to let the Bernie Bros have a shot at fixing things, I suppose now is the time. Fire up the printing presses and make it rain. 50/50 it either works, or it doesn’t, right? Are we feeling lucky?
There’s no way that someone who lived through the 2008 financial crisis as an adult and remembers it well would characterize it this way. It was scary as shit.
Keep in mind that in theory Dow 29K and Dow 32K could be equal in terms of actual value, if in fact there is inflation. We’ll just have done it in a way that keeps wealthy people wealthy and makes poor people a little more massively fucked than they already were. But they mostly won’t notice, they’ll just be like “Damn, the dollar menu costs $1.09 now? What a joke!”
And the wealthy will yell at them to stop being lazy poors and pull on their bootstraps 10% harder.
Of course we will be fine once there is a vaccine or viable treatment. I just don’t see that happening for quite a while. I think airport traffic was done 90%+ last month. That isnt going to magically turn back on while we are printing 1000+ deaths a day.
If companies are certain that the government will bail them out if they get into trouble then they’re likely to engage in more and more risky behavior in good times. But that argument is less impactful in times like this, because every firm in a given sector is hosed right now. Just because the feds bails out the airlines in general right now doesn’t mean that they’ll bail out United in particular if they’re about to go bankrupt and every other airline is doing fine. Maybe not the best example given how cyclical and correlated the airline’s performance is likely to be but I’m sure you take my point.
The consequence is that small businesses are going to get massacred and a large wealth transfer for future taxpayers to present companies will occur. Is that bad? Well yeah. Is it bad for the stock price of large corporations? Maybe not.
You might be right and a month from now the stock market tumbles another 30%. But today’s bulls might also be right that a government pulling out all the stops to save the stock market will have the affect of saving the stock market .
This is exactly why I tried to put together that industry earnings/valuation spreadsheet earlier, because I think people overestimate how much of the aggregate market is represented by very visible businesses like restaurants, bars, travel agencies, casinos, etc. Even if those industries went completely busto (which would be obviously terrible for the individual employees), it’s still not a huge percentage of the aggregate public market.
Amazon is probably going to be hiring, though, so college grads have that to look forward to. Probably 29 hour work weeks at $10 an hour, no bennies, but a great employee wellness plan.
(Burn 3,000 calories per shift carrying shit around with no breaks, lose weight, be “well”.)
I think there is something to this. I work for a fortune 500 co. and I get the feeling we’ll be happy to get through this year without firing a ton of people. In leadership team meetings we are already framing a draw as a win, so to speak, and we are usually way more aggressive than that.
I am almost 40 and was teaching college economics at the time. While scary I completely disagree that was as scary for your average American as a global pandemic.
Non-professional option buyers are dumb as fuck. I learned my lesson messing around w/ calls on companies like Apple and Facebook around 2012 or so. If you guessed I made a killing on those, you are wrong. Game is rigged, lol.