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Before coronavirus when a company missed earnings it was battered on the public markets. With Coronavirus 90%+ of companies will be directly affected in reduce

by raiyu 7y ago

Before coronavirus when a company missed earnings it was battered on the public markets. With Coronavirus 90%+ of companies will be directly affected in reduced revenue. Either directly like companies that are focused on retail, or indirectly, companies that are affected by challenges in logistics. Was the market perhaps inflated, in my opinion yes, but I don't see how people can say this crash wasn't caused by coronavirus. Could we have had a crash or reset in the future without the virus? Most likely. But that unknown reality didn't happen. Instead we have a global pandemic, where the only real working solution is to institute various levels of lock down and social distancing, which will slowdown economic spending dramatically. If the entire global market has to take 2-months off from generating revenue, that is a huge blow to the system. Then you have the secondary effects. Job losses, businesses closing, rent, evictions, closures, etc. The economic impact of this will take 6 months to play out to see where the bottom is. Not all companies and industries will be affected the same way, but generally speaking only a small handful of companies will really get through this without some sort of impact to their business.

defterGoose 7y ago
You could say that it was caused by the coronavirus, but that would be highly reductive. This seems epecially true when you consider that of late, there has been a waning of confidence in our economists' ability to accurately model the markets, combined with the fact that a massive shift has occurred over the past century from an economy largely based on equity, to one based largely on debt.
- raiyu 7y ago
  Losing 2 months of global GDP because of a virus which would reduce the earnings of most companies directly and indirectly seems like a pretty solid foundation for a reduction in market cap. It's like saying we believe that the market was overheated due to zero interest rates, but we were hoping to have the market head into a recession on it's own, rather than have an outside event cause the global GDP to stop for 2 months. But since that is so obvious, we won't accept it. How many households have two months of savings. How many businesses can go for 2-3 months with 80% reduction in revenue and if they have the savings to cover that. I think this event is much larger than a simple recession that would have occurred as a result of speculation and low interest rates. This is literally stopping the world economy for 2 months and seeing how many households and businesses have enough savings to counter balance that while stress testing the governments ability to intervene, not at the top end, by providing funding to banks, but at the bottom end, of figuring out how to get all of the people who work as waiters and waitresses to go without revenue for 2-3 months and not get evicted or rack up debt that they can never escape from. I think you are underestimating the impact of this.
  - defterGoose 7y ago
    I think your argument is largely orthogonal to mine. The virus is simply acting as a catalyst to expose the shaky underpinnings we already have. I think the impact is going to be massive, but the virus is more like the snowball getting pushed off the top of the mountain, not the avalanche that ensues. If the middle class was on stable footing right now, lack of spending and consequently revenues wouldn't experience such a huge shock. It's a house of cards. If you think that speculation, debt, and interest rates aren't capable of causing a system wide collapse with far reaching effects, I'll go ahead and refer you to the 2008 crisis.
    - raiyu 7y ago
      I'm actually arguing the opposite. The shaky foundation aside, if everything was valued appropriately, and there was no speculation, the impact of coronavirus alone would be enough to send the global economy into a recession due to lockdowns, change in consumer spending behavior, and the lack of income for million of people for even two months who are already living pay check to pay check.
      - defterGoose 7y ago
        Fair enough. We're still in the early days of this, so getting down in the weeds on causation is a bit premature. Your first comment made me think you were saying people were glib for downplaying the effect the virus specifically will have on this recession (depression?). I tend to think that's shortsighted, when prior to any knowledge of the pandemic, there were obvious, gaping holes in the reasoning used in shaping our economy in the modern era. Bottom line is, it seems to me that when the world's richest nation has to outsource the making of anything tangible to the place where the outbreak started, and so much of our economy is based on services of questionable value, we're in for a world of hurt. You can't fight this war with military hardware and social media VC.
- berryjerry 7y ago
  It is not reductive at all. The virus is the cause of the shutdowns, the lack of revenue, and any defaults expected to happen. Take one company, Royal Caribbean Cruises, which lost 22 billion in value because of specifically the virus. They are literally forcibly getting shut down and this is not dissimilar from the hotels, airline, and other travel industries. Events over 50 people are not allowed due to the virus, think about the effect of that on the economy with sporting events, conferences, and all the revenue that comes from that. Study the effect of holding an effect on an economy like say a UFC event coming to town. One event alone feeds millions and millions into the economy. Not having those events taking place loses again all hotel, airline, restaurant, event venue, city taxes, and shopping revenue. Events are such a huge part of the economy and removing them due to the virus is literally the cause.

by raiyu 7y ago

defterGoose 7y ago

You could say that it was caused by the coronavirus, but that would be highly reductive. This seems epecially true when you consider that of late, there has been a waning of confidence in our economists' ability to accurately model the markets, combined with the fact that a massive shift has occurred over the past century from an economy largely based on equity, to one based largely on debt.

raiyu 7y ago
Losing 2 months of global GDP because of a virus which would reduce the earnings of most companies directly and indirectly seems like a pretty solid foundation for a reduction in market cap. It's like saying we believe that the market was overheated due to zero interest rates, but we were hoping to have the market head into a recession on it's own, rather than have an outside event cause the global GDP to stop for 2 months. But since that is so obvious, we won't accept it. How many households have two months of savings. How many businesses can go for 2-3 months with 80% reduction in revenue and if they have the savings to cover that. I think this event is much larger than a simple recession that would have occurred as a result of speculation and low interest rates. This is literally stopping the world economy for 2 months and seeing how many households and businesses have enough savings to counter balance that while stress testing the governments ability to intervene, not at the top end, by providing funding to banks, but at the bottom end, of figuring out how to get all of the people who work as waiters and waitresses to go without revenue for 2-3 months and not get evicted or rack up debt that they can never escape from. I think you are underestimating the impact of this.
- defterGoose 7y ago
  I think your argument is largely orthogonal to mine. The virus is simply acting as a catalyst to expose the shaky underpinnings we already have. I think the impact is going to be massive, but the virus is more like the snowball getting pushed off the top of the mountain, not the avalanche that ensues. If the middle class was on stable footing right now, lack of spending and consequently revenues wouldn't experience such a huge shock. It's a house of cards. If you think that speculation, debt, and interest rates aren't capable of causing a system wide collapse with far reaching effects, I'll go ahead and refer you to the 2008 crisis.
  - raiyu 7y ago
    I'm actually arguing the opposite. The shaky foundation aside, if everything was valued appropriately, and there was no speculation, the impact of coronavirus alone would be enough to send the global economy into a recession due to lockdowns, change in consumer spending behavior, and the lack of income for million of people for even two months who are already living pay check to pay check.
    - defterGoose 7y ago
      Fair enough. We're still in the early days of this, so getting down in the weeds on causation is a bit premature. Your first comment made me think you were saying people were glib for downplaying the effect the virus specifically will have on this recession (depression?). I tend to think that's shortsighted, when prior to any knowledge of the pandemic, there were obvious, gaping holes in the reasoning used in shaping our economy in the modern era. Bottom line is, it seems to me that when the world's richest nation has to outsource the making of anything tangible to the place where the outbreak started, and so much of our economy is based on services of questionable value, we're in for a world of hurt. You can't fight this war with military hardware and social media VC.
berryjerry 7y ago
It is not reductive at all. The virus is the cause of the shutdowns, the lack of revenue, and any defaults expected to happen. Take one company, Royal Caribbean Cruises, which lost 22 billion in value because of specifically the virus. They are literally forcibly getting shut down and this is not dissimilar from the hotels, airline, and other travel industries. Events over 50 people are not allowed due to the virus, think about the effect of that on the economy with sporting events, conferences, and all the revenue that comes from that. Study the effect of holding an effect on an economy like say a UFC event coming to town. One event alone feeds millions and millions into the economy. Not having those events taking place loses again all hotel, airline, restaurant, event venue, city taxes, and shopping revenue. Events are such a huge part of the economy and removing them due to the virus is literally the cause.