3 ms·
We've got a long way to go down, IMO. A lot of these highly leveraged companies are going to implode, and the companies that lent them money will also implode.
by brenden2 7y ago
We've got a long way to go down, IMO. A lot of these highly leveraged companies are going to implode, and the companies that lent them money will also implode.
The biggest victims (out of survivors) of this coronavirus panic are probably going to be the millions of people who will lose their jobs and go broke for a variety of reasons. Foreclosures will jump, big company CEOs will get large government handouts, and the poverty gap will just get wider.
- tomp 7y ago> big company CEOs will get large government handouts Indeed, which is why I'm against emergency loans, but for emergency equity... it's free market capitalism, if your company isn't able to survive on its own (due to your lack of planning) and needs government help, then you don't deserve to own (all of) it.
- obituary_latte 7y agoI'm a layman so apologies, but any examples of these highly leveraged companies you can give?
- brenden2 7y agoHere's some information about it: https://en.wikipedia.org/wiki/Corporate_debt_bubble https://en.wikipedia.org/wiki/Corporate_debt_bubble
- PragmaticPulp 7y ago> We've got a long way to go down, IMO. By definition, the market will bottom out when everyone's pessimism peaks. Earnings season will be interesting. Seeing the world governments' fiscal stimulus plans will be interesting.
- dennisgorelik 7y ago> market will bottom out when everyone's pessimism peaks Do you think we are at the peak of pessimism?
- streetcat1 7y agoSince the government response is a LAGGING indicator (I.e. people are already the steps to contain the virus before the government), we probably saw pick virus. Also, the stock market becoming cheaper actually reduces inequality since it allows new savers to get in at a lower price. And the same thing for housing.
- Invictus0 7y ago> we probably saw pick virus Just wait till testing ramps up and people realize that there already tens of thousands if not hundreds of thousands of people infected. We're nowhere near peak virus, we're still doing virtually nothing to contain this.
- EarthIsHome 7y ago> Also, the stock market becoming cheaper actually reduces inequality since it allows new savers to get in at a lower price. And the same thing for housing. It increases inequality: people lose their jobs, people can't pay their rents, people can't pay their mortgages. Most people can't put money in stocks and work paycheck to paycheck. Those people are going to get hit the hardest. When the stock market is doing the best ever, these people aren't benefiting, but when the stock market crashes, these people have the most to lose. It's exactly why our economy shouldn't be tied to the whims of the stock market.
- throwaway55554 7y ago> Also, the stock market becoming cheaper actually reduces inequality since it allows new savers to get in at a lower price. And the same thing for housing. I'm sure all the hospitality workers getting fired/laid off are just itching to get into this rocky market right now.
- snarf21 7y agoThis is why we need fiscal policy not monetary. People are begging for T-bills and we could create positive GDP for years with it. Unfortunately with a partisan government it is a non starter.
- arethuza 7y agoAre there many CDSs floating about for any of those companies (the highly leveraged companies and whoever made the loans)?
- brenden2 7y agoIDK, but you can short them with options (by buying puts).