4 ms·

Two points. 1. Today's drop is sort of misleading because it followed an irrational (IMO) low volume rally on Friday. We're still roughly flat from last week.

Two points. 1. Today's drop is sort of misleading because it followed an irrational (IMO) low volume rally on Friday. We're still roughly flat from last week. 2. A recession is pretty much what we're ASKING for in order to stop the virus. People need to stay away from one another. So if it's not online, the business should be closed. 3. (bonus point) Unlike systemic recessions (like 2008), this one is purely externally driven (like 2001) - which means it's temporary. Whether we deploy a vaccine, deploy anti-virals, flatten the curve, or just suffer, it'll still be over in a maximum of 18 months. Since stocks are valued by their 20 year forward earnings, the market is very much oversold. (the exception being for companies that is going to go bankrupt in the next year due to cash flow issues - and receive no bailout).

mgolawala 7y ago
I agree with both of your three points. (ha!) It was why I stated that it felt like a panic. The problem is panics are much like stampedes, they can take on a life of their own once they get started.
VikingCoder 7y ago
Why do you presume there won't be another external or systemic recession in the next 18 months? You can't just assert it's temporary. You can say, "The causes of this downturn are temporary." We have no idea what the market will do in the future. We have strong evidence it will recover, but that's not the same thing.
JoshTko 7y ago
The problem is that the externally driven factor can cause systemic issues. Having 25% retail & restaurant sales for a year will wipe out savings for a significant portion of the world. Most people will be fearful of spending for a long, long while.
- hkmurakami 7y ago
  This is particularly acute since the American economy derives a big part of its drive from consumer spending, unlike other economies that may be more producer or infrastructure driven.
- paulmd 7y ago
  Airlines are another one. The market expects domestic travel bans Soon (tm), forecast for United is revenue is down 9% this quarter and 95% next quarter. https://www.cnbc.com/2020/03/16/coronavirus-makes-airlines-consider-chances-for-a-halt-to-us-flights.html https://www.cnbc.com/2020/03/16/coronavirus-makes-airlines-c... I'll be curious how this affects package delivery, personally. A lot of 2-day shipping flies on those passenger planes. If anything shipping volume will be up but there will be fewer planes to put it on.
m_a_g 7y ago
>...this one is purely externally driven (like 2001) - which means it's temporary. This can't be stressed enough. It may take a while but everything is going to be alright and normal again.
- addicted 7y ago
  I don’t get this. If a meteor hits the earth and wipes out 25% of the population, that would be external. But there’s absolutely no reason to believe the significant reduction in economic activity and wealth would be temporary.
  - matwood 7y ago
    You think COVID-19 is going to kill 25% of the population?
- kaitai 7y ago
  If economic impacts to less-well-off people continue, though, we're going to see significant impacts on consumer spending. If economic impacts wipe out every small business without enough cash to stay afloat for 2 stressed months, we're going to see significant consumer spending, employment, and consumption impacts. Fine, everything will rebound in eight weeks... except for my local taco place, ramen place, pizza place, sporting goods place, and bookstores, which can't pay their rent for two months given a huge reduction in business.
  - tjs8rj 7y ago
    Except local and state Govs have thought of that. Many localities and states have rolled out rent-freezes and interest-free loans to stop-gap those issues.
coliveira 7y ago
> the exception being for companies that is going to go bankrupt This is not a small issue. If businesses are closed for two or three months, I believe half of the businesses in this country will be close to bankruptcy.
rel2thr 7y ago
You are assuming that COVID will go away and not become a yearly thing. Also assuming that this type of shutdown won’t become the new normal in response to a virus. ( something that happens every 4 or 5 years ) I too am hopeful, but I think there is 10-15% chance of massive long term economic downside
ksj2114 7y ago
There are so many assumptions in here that are IMO wrong. We're not asking for a recession. And I have no idea what you mean by "externally" driven. Everything is connected in the economy.
- TheGallopedHigh 7y ago
  Externally meaning an authoritative power told the economy to stop. As opposed to 2008 where the market internally collapsed.
tomp 7y ago
A lot of the companies won't survive. A lot of the companies that do survive, will take a huge beating by the government, forcing them to be more resilient (to supply chain problems, short-term lack of labour, ...), reducing expected profits. I 100% expect made in USA (or made locally for other countries) to be the selling point of both Trump and the Democratic candidate the next election. Most certainly after a shock like this.

mgolawala 7y ago

I agree with both of your three points. (ha!) It was why I stated that it felt like a panic. The problem is panics are much like stampedes, they can take on a life of their own once they get started.

VikingCoder 7y ago

Why do you presume there won't be another external or systemic recession in the next 18 months? You can't just assert it's temporary. You can say, "The causes of this downturn are temporary." We have no idea what the market will do in the future. We have strong evidence it will recover, but that's not the same thing.

JoshTko 7y ago

The problem is that the externally driven factor can cause systemic issues. Having 25% retail & restaurant sales for a year will wipe out savings for a significant portion of the world. Most people will be fearful of spending for a long, long while.

hkmurakami 7y ago
This is particularly acute since the American economy derives a big part of its drive from consumer spending, unlike other economies that may be more producer or infrastructure driven.
paulmd 7y ago
Airlines are another one. The market expects domestic travel bans Soon (tm), forecast for United is revenue is down 9% this quarter and 95% next quarter. https://www.cnbc.com/2020/03/16/coronavirus-makes-airlines-consider-chances-for-a-halt-to-us-flights.html https://www.cnbc.com/2020/03/16/coronavirus-makes-airlines-c... I'll be curious how this affects package delivery, personally. A lot of 2-day shipping flies on those passenger planes. If anything shipping volume will be up but there will be fewer planes to put it on.

m_a_g 7y ago

>...this one is purely externally driven (like 2001) - which means it's temporary. This can't be stressed enough. It may take a while but everything is going to be alright and normal again.

addicted 7y ago
I don’t get this. If a meteor hits the earth and wipes out 25% of the population, that would be external. But there’s absolutely no reason to believe the significant reduction in economic activity and wealth would be temporary.
- matwood 7y ago
  You think COVID-19 is going to kill 25% of the population?
kaitai 7y ago
If economic impacts to less-well-off people continue, though, we're going to see significant impacts on consumer spending. If economic impacts wipe out every small business without enough cash to stay afloat for 2 stressed months, we're going to see significant consumer spending, employment, and consumption impacts. Fine, everything will rebound in eight weeks... except for my local taco place, ramen place, pizza place, sporting goods place, and bookstores, which can't pay their rent for two months given a huge reduction in business.
- tjs8rj 7y ago
  Except local and state Govs have thought of that. Many localities and states have rolled out rent-freezes and interest-free loans to stop-gap those issues.

coliveira 7y ago

> the exception being for companies that is going to go bankrupt This is not a small issue. If businesses are closed for two or three months, I believe half of the businesses in this country will be close to bankruptcy.

rel2thr 7y ago

You are assuming that COVID will go away and not become a yearly thing. Also assuming that this type of shutdown won’t become the new normal in response to a virus. ( something that happens every 4 or 5 years ) I too am hopeful, but I think there is 10-15% chance of massive long term economic downside

ksj2114 7y ago

There are so many assumptions in here that are IMO wrong. We're not asking for a recession. And I have no idea what you mean by "externally" driven. Everything is connected in the economy.

TheGallopedHigh 7y ago
Externally meaning an authoritative power told the economy to stop. As opposed to 2008 where the market internally collapsed.

tomp 7y ago

A lot of the companies won't survive. A lot of the companies that do survive, will take a huge beating by the government, forcing them to be more resilient (to supply chain problems, short-term lack of labour, ...), reducing expected profits. I 100% expect made in USA (or made locally for other countries) to be the selling point of both Trump and the Democratic candidate the next election. Most certainly after a shock like this.