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Coronavirus-afflicted global economy is almost certainly in recession
- jsf01 6y agoDoes anyone have a non-paywalled mirror?
- adelHBN 6y agoOh, sorry. Are you referring to the fact that this is a WSJ article and it's not free to viewing? If I find a free article with similar info I'll post that.
- deleted 6y ago[deleted]
- awejkljsdzc 6y ago#RecallGavinNewsom
- icedchai 6y ago3% sounds optimistic.
- adelHBN 6y agoYou know, that's what I thought too. But then I was seriously surprised when I saw 0.1% contraction during the Great recession of 2007-2009.
- rogerkirkness 6y agoIt wasn't a depression in the sense that economic activity mostly continued, it was a deleveraging. People are overestimating the leverage in play in the current situation, other than giant public companies, there is less toxic debt, so it's more about actual economic activity (E.g. trade).
- Consultant32452 6y agoWhat are the odds some of that non-toxic debt turns into toxic debt as unemployment lingers?
- _delirium 6y agoIt's definitely possible that real estate (both commercial and residential) is going to see a bunch of deleveraging as the debt becomes unserviceable. Right now everything is frozen in place. But once it restarts and everyone is supposed to get up to speed on their rents and mortgages again, a bunch of landlords are going to realize they're never getting those n months of back rent that are officially just temporarily suspended. At that point, the more leveraged ones are going to end up with cash-flow problems and mortgages going into default (also currently officially just temporarily suspended). I won't venture a guess on how widespread that's likely to be though.
- anigbrowl 6y agoThat's what they said at the start of the financial crisis too. I'm too tired to write an essay, but wait until there's a de facto default on college debt.
- dahdum 6y agoChina and India grew substantially during the recession, just at a lower rate than they would have. No such luck this time.
- fooker 6y ago> No such luck this time. How do you know that? If you could predict that for certain, you could turn 10000$ into 1000000$ with ease.
- anm89 6y agoNo. This is reasonably predictable in the short term. You would have to have better knowledge than the market to be able to profit. If the whole market expects depressed gdp grow and you get depressed gdp growth, you have no edge.
- third_I 6y agoThis guy invests. More seriously, you emphasize a most important point. The delta of information is precisely where it's at. I wonder if this is exactly the same thing as what we call "bias" in trading / investing. (as a function of some objective knowledge + subjective experience) I mean, we all have the same information but if my bias happens to be correct, I will be able to outperform others (however much depends on how much risk I'm willing to take, how much hedging I conversely do). That's the delta I create with taking a stance, when I press that button, which conditions I choose to enter/increase/reduce/exit a given asset. Curious how you see it.
- nl 6y agoI also found this astonishing. World Bank data has GDP decreasing by 1.9% during the great recession[1], so I don't know where that 0.1% number comes from. [1] https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2009&locations=1W&start=2005 https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2...
- lettergram 6y agoThat’s because it wasn’t a reduction in our national output (real production output). It was a reduction in perceived future earnings (I.e. loans). Today we are facing real production losses that will lead people to really stop buying. As prices increase and many many more people are out of work.
- hacknat 6y agoConsider that it’s a 6% change, which is crazy. That’s two years of “growth” wiped out in 3/4 of a year. That’s astonishing.
- Polylactic_acid 6y ago2 years of environmental progress made in 3/4 of a year. Incredible.
- adrianN 6y agoI don't think that's true. Environmental progress must mean a shift away from fossil fuels. What we currently have is just lower demand, but not for reasons of improved efficiency. I don't think that a lot of solar panels, wind turbines, or heat pumps were installed during the shutdown.
- cylinder 6y agowe've reduced demand by realising most of our travel was utterly pointless. things can go on fine without us traversing our cities and the world constantly.
- Polylactic_acid 6y agoI wonder how many people will now switch to working from home permanently.
- ThrowawayR2 6y ago> "2 years of environmental progress made in 3/4 of a year. Incredible." Which will rebound in a bad way. People who are unemployed will not give two hoots about how much the environment gets trashed as long as they get fed. This temporary environmental progress is nothing to celebrate about.
- steve_adams_86 6y ago
- xwdv 6y agoIt is easier to make a fast fortune when the economy contracts compared to when it expands, if you have prepared properly.
- anonytrary 6y agoWhy? Because FUD and FOMO are asymmetric risks?
- jimmaswell 6y agoThe giant vacuum of shuttered businesses should make an easy opportunity to start or expand business after the pandemic, right?
- adrr 6y agoLots of people have lost lots of money trying to short the market. Your fighting the fed and their trillions of liquidity they dumped into economy. Even shorting junk bonds etfs which seemed like easy money is getting helped by the Fed.
- empath75 6y agoYeah I put half my 401k into inflation protected bonds instead of shorting.
- austincheney 6y agoIt’s not about shorting the market but readjusting your investments to capitalize on rapid recovery. In 2009 turned my $5000 from 1 year of 401k into $14000. It’s just using the down economy in your favor to sell mediocre stocks (everybody looses when the market sags so much) to buy really low stocks/funds that either recover before everything else or grows tremendously from a tremendous loss.
- lalaland1125 6y agoIn case anyone is having issues with the paywall, https://github.com/iamadamdev/bypass-paywalls-firefox https://github.com/iamadamdev/bypass-paywalls-firefox seems to work well for me. (Note: I am not affiliated in any way with that extension. I'm just a happy user.)
- SimeVidas 6y agoIs the extension not hosted on Mozilla’s website?
- pdq 6y agoMirror: http://archive.is/YfPVL http://archive.is/YfPVL
- adelHBN 6y agoI don't know what Mirror is. But this was so cool. How did you get this? The WSJ article I posted is behind a paywall.
- rashidujang 6y agoNot the original poster, but a mirror in the context of websites usually means a backup copy of a piece of content that is accessible from another source.
- ur-whale 6y agoYou can archive most site on the internet on archive.is for free. Most of the time, archive.is can defeat the paywall and save a copy of what you see for ever. As a matter of fact, I think people should directly post archive.is links on HN instead of the original.
- refurb 6y agoAs per the title, I don’t think now is comparable to 2009. In 2009, the economy collapsed because of bad loans. In 2020, the economy is shutting down because we shut it down. That’s said, our shutdown could certainly snowball into serious issues with the economy where the pre-existing economic activity doesn’t come back.
- dmix 6y agoThis also shouldn't be treated as a signal for a market correction, for ex: from 'bad' behaviour in the marketplace, and making the subsequent moral hazards that were abundant in the various bailouts of the post-2008 crisis less likely (depending on your tolerance for 'rainy day' funds I guess, which for most small/medium-businesses is pretty unrealistic beyond a 2 months lockdown IMO, larger firms slightly less so). I'm curious how this will influence economic research on the matter, possibly providing greater insight into 'force majeure' scenarios instead of merely propping companies and executives who helped cause the crisis in an effort to offset even worse consequences.
- empath75 6y agoA lot of loans are about to go bad because we shut the economy down. Do you think people are going to be keeping up with car payments and student loan payments and credit card payments?
- ChuckNorris89 6y agoThe economy was showing cracks before the shutdown happened. Now it's also due to bad loans but not for housing like in 2009 but corporate debt(stock buybacks anyone?) but it's just easier for the economists and politicians to point fingers at a new enemy without a face than to accept that the economy boon was a bubble. The Coronavirus shutdown was bad timing but it's not the main culprit, it just accelerated the inevitable bubble burst.
- fallingfrog 6y agoExactly! And now they’re going to reinflate the bubble and make the problem worse instead of the deleveraging, wealth redistribution, and regulation that we need to move forward.
- analog31 6y agoJust reading the headline, what this means to me is that the "world economy" is doing a lot better than most of us are doing as individuals. I'm on a 25% furlough. Sales from my side business have dropped to zero. My other side job has dropped to zero. Among working people, I'm one of the lucky. My family actually has a little bit of money in the kitty. "The economy" refers to a system that's primarily designed to concentrate and protect private wealth, and a 3% loss of private wealth isn't all that bad at all. The people who are really hurting have no wealth to lose. I hope an outcome of this crisis is that we start to think about "the economy" in more humane terms.
- jdavis703 6y agoThe GDP (i.e. “the economy”) is a measure of all goods & services produced and consumed. Even if someone is paycheck to paycheck or hand to mouth, this means less goods and services they can make and consume. If this response was about crashing financial markets the blasé tone would be OK (ignoring that many retirees rely on pensions or bank accounts tied to financial markets). But this is about the entire economy.
- deleted 6y ago[deleted]
- missedthecue 6y ago"the system" isn't designed to protect wealth so much as encourage productivity. There is a direct correlation between increases in productivity and increases in wealth, but a system designed to protect existing wealth would look much different than ours. For instance, cartels would not be illegal.
- pmiller2 6y agoWhat do you call it when real wages don’t go up in a system designed to “encourage productivity?” Since the gains aren’t going to workers at all, they must be going to those at the top, right? That sounds an awful lot like “protecting wealth” to me.
- umeshunni 6y agoThe actual report that this article is based on is here: https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020 https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/we... including the terminology "The Great Lockdown"
- kart23 6y agoStart buying stock.
- adelHBN 6y agoNo! It's too soon. Stocks will go down again. They went down in the 30s and also during 2007-2009. The first dip was not the final dip.
- warent 6y agoIt sounds like you're trying to time the market... Stocks are down and as long as the market exists they will recover. Going long now is a guaranteed profit
- gh54h54ehe4a 6y agoBad financial advice. Nikkei 255 was 25,000 in 1991, it has never hit that ATH in the 30 years since
- Der_Einzige 6y agoJapan's xenophobia is so strong that they don't care about doing what they need to to get back on top (embrace immigration). The USA may be headed in that direction but we are no where near the shitstorm of demographics and xenophobia that Japan is dealing with.
- dntbnmpls 6y ago> Japan's xenophobia is so strong that they don't care about doing what they need to to get back on top (embrace immigration). This old argument gets so tiresome. And then what? After they import 10 million people and then they stagnate again, do they have to import 20 million people? If the economic system depends on immigration, then there is something terrible wrong with the economic system and it needs to change. > The USA may be headed in that direction but we are no where near the shitstorm of demographics and xenophobia that Japan is dealing with. Nonsense. We are all xenophobic. It's human nature. Maybe we are better at hiding it now than japan, but that's probably not a good thing when you think about it. In times of crisis, japan is going to be better off as a homogenous and united population has proven to be far more stable than those with racial/ethnic/religion divisions/tensions.
- bravoetch 6y agoIs there a reason we think this is even a good metric to strive for?
- UncleOxidant 6y agoA 3% contraction seems really optimistic.
- adelHBN 6y agoI totally agree.
- dzdt 6y agoDoes anyone have an explanation (preferably with source links) for why the US stock market is not absolutely tanking given the depths of economic disruption? I mean I get that the government is supplying stimulus, but I don't see how that can make up for the years of rebuilding that will be ahead even after we reach the bottom of the current jobs-and-small-business freefall.
- adelHBN 6y agoJim Cramer was talking about this very issue yesterday. I have an explanation for this but will reserve it till I get a source for you (I think big investors are playing the market).
- pcurve 6y agoi think this one. https://www.youtube.com/watch?v=hbBQBmuhhPw https://www.youtube.com/watch?v=hbBQBmuhhPw full clip https://www.youtube.com/watch?v=9G5I6oikAYA https://www.youtube.com/watch?v=9G5I6oikAYA
- deleted 6y ago[deleted]
- adelHBN 6y agoYes, you got it. Thanks.
- third_I 6y agoYou mean a bull trap, essentially?
- preommr 6y agoThe ugly truth is that no one knows. People can point to algorithms, QE, things being priced in, speculation that everything will return to normal as quickly as it stopped. Or maybe it'll go the other way and something will trigger a collapse that brings down a house of cards. Nobody knows with any reasonable amount of certainty. The best we're going to get is when all this blows over and we can do some kind of post-mortem.
- adelHBN 6y agoOne of the issues of such a contraction is its impact on stocks. People often think it's just for the rich. It's not! Think of all the teachers, firefighters, nurses, police - all those first responders whose pensions are invested in stocks. Such contraction will terrible for their eggnests.
- Nerevarine76 6y agoI mean, not to mention everyday people who have 401ks with their employer or their own IRAs.
- raincom 6y ago"A whopping 84 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households"[1] "37 percent held by retirement accounts" [2] Politicians and the wealthy use that poor schmuck's 401k to bail out the wealthy. [1] https://www.nytimes.com/2018/02/08/business/economy/stocks-economy.html https://www.nytimes.com/2018/02/08/business/economy/stocks-e... [2] https://www.taxpolicycenter.org/taxvox/only-about-one-quarter-corporate-stock-owned-taxable-shareholders https://www.taxpolicycenter.org/taxvox/only-about-one-quarte...
- esoterica 6y agoA cop married to a nurse could easily belong to the top 10% of households, so you're not exactly contradicting the parent post.
- raincom 6y agoYes and No. Yes, if the top 10% of households is called "working class". If a cop and nurse family is the representative of working class, yes, use the people in the service sector (restaurants, gig workers, contractors, etc) to bail out the govt fat cats.
- dragonwriter 6y ago> Yes, if the top 10% of households is called "working class". The working class (proletariat), especially the proletarian intelligentsia, overlaps with the top 10%. “Working class” is an economic relationship, surviving principally through selling labor, rather than through a balanced mixture of capital and labor (“middle class" or petit bourgeoisie) or principally through returns on capital (capitalist class, or *haut bourgeoisie). But a cop and a nurse on average would make about $130k (round figures, $55k for the cop and 75k for the nurse), 90th percentile household income is about $185k, so while it's possible for a cop/nurse couple to reach it, it's not remotely typical for even that couple.
- daniel-cussen 6y agoAs I see it GDP measures national revenue, not national profit. The closest proxy to national profit has historically been net exports, which is why every country wanted to export a lot but import very little. Frankly, if "the economy" falls 0.1% in a Great-Depression (as alluded to by the current Democratic presidential candidate) scale catastrophe (for reference, the Great Depression was more believably 25% of GDP) maybe we've massaged the statistics too far. So frankly, why not just gauge "the economy" not by GDP but by estimating actual human profits of working, the money they have left over after rent is paid, food is on the table, and health taken care of. Further, take into account diminishing marginal utility of surplus income. How much do people have left over and how does that change over time?
- third_I 6y agoYour ideas are both beautiful and delusional. Beautiful in that they're painting a much better approach. Delusional because they address the symptom but stop short of even talking about the underlying cause. Why do you think this massaging happens? Why do you think we carefully make it so everything always looks good or "not that bad"? That we ignore realities and focus of KPIs basically? Follow the money, whose interests does that serve? Surely, some economists for decades have been asking for exactly this shift in perspective. Evidently, it hasn't happened, and there is no reason to assume the reasons why have changed. If anything, they just rose in importance for the short-term, as now is less the time for reform than the time to avoid massive, uncontrollable panic. But hold that thought, really do. Its time will come, and I suspect before too long now (this decade possibly, conservatively the next).
- ForrestN 6y agoI was surprised by this article: https://www.nytimes.com/2020/03/26/opinion/covid-economy-unemployment-europe.html https://www.nytimes.com/2020/03/26/opinion/covid-economy-une...
- nl 6y agoDoes anyone know what the "3% contraction" is actually referring to? The IMF report[1] it is based on says GDP, but world GDP contracted 1.9% during the great recession[2], so that doesn't make much sense. Also, looking at their calculations they have "advanced economies" (basically US, Europe, UK, Japan etc) forecast to contract 6.1%, India expand 1.2% and China 1.0%, ASEAN expans 1.9% and everything else shrink. That can't possibly make a 3% contraction (if 2/3rds of the world's economy shrinks 6%, then 1/3rd can't make it up by expanding 1.5%!). [1] https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020 https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/we... [2] https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2009&locations=1W&start=2005 https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2...
- AnimalMuppet 6y agoGDP is what the economy produces. Well then, if you shut everything down for a month, you expect to lose 8% of GDP, because you're not producing during that month. If you shut it down for two months, you expect to lose 16% of GDP. Losing only 3% is pretty good, actually.
- nl 6y agoYes, I understand that. My point is how can it possibly be only 3%! Their own math doesn't add up!
- yalogin 6y agoHow does this gel with the current stock market surge in the US?
- AnimalMuppet 6y agoThe stock market "surge" has left it 20% below where it was two months ago.
- yalogin 6y agoOh come on. You know I am talking about the surge in that’s couple weeks.
- AnimalMuppet 6y agoSure. And if that had happened two months ago, I would have thought that it signaled good times, too. But in the context of when it happened, the recent run-up looks more like "things aren't going to be as bad as we thought" rather than "things are good".
- tempsy 6y agoAnd yet the stock market is basically at late 2019 levels when everything was totally fine. Incredible how disconnected it is from the economy.
- mikekchar 6y agoThe S&P 500 average price to earnings ratio is actually only at about 21, which is not an unusual level for the last 20 years. It's relatively high compared pre-1990 levels, but in comparison, during the 2009 crisis, the PE ratios blew through the top. I was actually surprised when I looked at it because, like you apparently do, I expected prices to be through the roof. As this crises continues, though, I suspect we'll see it creep up. People are burning through their limited savings. When that runs out, there will be a crunch -- I would imagine.
- _delirium 6y agoThat's a 12-month trailing PE though, which has only a small amount of the covid disruption baked into it so far. The (unknowable) PE ratio calculated based on forward earnings might in reality be a lot higher if the "E" part is tanking (it did in 2008: 2008 S&P earnings were down 75% on 2007). Analyst estimates for what earnings will look like this year are all over the place, predicting anything from a 5% to a 40% drop in S&P earnings per share. If you side with a 5% drop, then the forward PE only rises to about 22. If you think a 40% drop is a good prediction though, that's looking like a forward PE of 35.
- tempsy 6y agoThe market seems to be pricing in a full recovery. Anything less than a return to normalcy when it comes to demand or unemployment by end of year will send markets lower than now, I’d imagine...
- tempsy 6y agoThe stock market is basically at late 2019 levels when everything was totally fine. The disconnect between the market and the economy is quite dystopian.
- robjan 6y agoNot really. Currently the economy is in a bad state but this is not permanent. We expect things to eventually bounce back when we have the virus under control, and that has been priced into the current valuations. If it wasn't priced in then now would be a great time to buy which would push the prices up due to higher demand. When you own a stock, you own it until either you sell it or the company goes bust. Therefore the price is based on investor belief about the future, not just the current situation.
- titzer 6y ago> the price is based on investor belief about the future Six milliseconds from now, when the automated trading systems think they can sell and make a profit. Seriously, over 50% of trading volume is done by automated trading systems these days. edit: looks like I underestimated. This article from June 2019 suggests it may be as much as 80%: https://www.cnbc.com/2019/06/28/80percent-of-the-stock-market-is-now-on-autopilot.html https://www.cnbc.com/2019/06/28/80percent-of-the-stock-marke...
- robjan 6y agoThat may be the case but I feel you are mixing cause and effect. Trading algorithms don't cause a company to make more profit and therefore distribute dividends.
- titzer 6y agoAnd companies didn't suddenly make trillions of dollars in profits in a week to recover from the bottom of the crash a couple weeks back. The market is only up right now because the sharks are feeding on the stimulus money created out of thin air. Automated trading systems are trying to make money right now, not six months or even a week from now.
- projektfu 6y agoIf the WSJ wants me to show some concern, they should eliminate the paywall on certain articles. I don’t care that the large amount of their content is paywalled, but if they want me to read their opinions, they can’t hide them.
- realtalk_sp 6y agoThis works well and is worth installing: https://github.com/iamadamdev/bypass-paywalls-chrome https://github.com/iamadamdev/bypass-paywalls-chrome
- huragok 6y agoCapitalism is a failed system and the contradictions are no more evident than right now.
- leriksen 6y agoBravo comrade, march with me in solidarity with the proliteriat !!
- qplex 6y agoIt's not like there is no food, or other supplies, but some people just don't have the money to buy them. Better to throw it to trash than give it to the poor, right? How about air pollution dropping to record lows? Just can't wait for everybody to get back into their cars and idle in traffic, and for the smog to return. Anybody who advocates unchecked economic growth as some sort of magical savior is an idiot. On the scale of the planet the current situation is very positive. If we could keep the emissions down like this, the large ecological trends that _really_ matter could be reversed, but I'm pretty sure everything will bounce back to normal.
- alharith 6y agoWhy do you speak for the planet? Are you mother earth's cousin? The world will be just fine long, long after whatever minor local maxima of carbon we produce vanishes after thousands of years. It's survived much worse.
- flunhat 6y agoOf course the planet will be fine, it’s the people we’re all worried about
- titzer 6y ago> The world will be just fine long, long after See this comment so much. It's infuriating, because it's always cover for more pool-pissing and public defecation. It'll be fine more better more sooner if we'd stop. fucking. it. up. so. bad. Society will be fine long after you jab red hot pokers into your eyeballs. Yet you should probably not do that.
- mark_l_watson 6y agoI think the 3% refers mostly to the effect on large corporations, and I think that number is low, even understanding that most government bailouts are going to the financial industries and mega corporations. I think that number is very low when talking about regular people, their purchasing power and what I predict to be a large drop in discretionary spending.
- flashman 6y agocommunism baby 3% is nothing if shared equally
- dang 6y agoPlease don't do this here.
- james_s_tayler 6y agoThe beatings will continue until morale improves!
- all_blue_chucks 6y agoTravel, hospitality, and events are something like 20% of the US economy. That 20% will be crushed until we have a vaccine next year at the earliest. I am deeply suspicious of this prediction.
- zmmmmm 6y agoIt will be an interesting test to see what happens after things return to "normal". Real economic downturns happen because deep structural issues have developed in the economy that cannot be dealth with other than by broad scale cyclical restructuring. But in this case there is not an underlying structural issue - everything was "fine" and then an externality prevented normal productivity. So in one theory of things, once the lockdowns are over people will mostly go back to doing what they were doing before and apart for some one-off bad debts, etc life will just resume. In another theory, economic downturns are like self-fulfilling prophecies and once started will take many years to work out. It will be interesting to see which one of these happens.
- HSO 6y agoThings were far from "normal" before. This is still the same crisis that started in 2007.
- anm89 6y agoAnd the same bubble that started with dot com boom collapse which Greenspan reinflated into the housing crisis
- HaloZero 6y agoLet's say a vaccine happens. You still have to get it to 7 BILLION people or at least disseminate it across the entire globe. It's going to take forever and even if the developed nations are back to normal it's going to be a shit show in the rest of the world.
- james_s_tayler 6y agoYup. The push for "equitable distribution" means you know the geopolitical shit fight is going to go down.
- dclusin 6y agoPeople were incredibly leveraged before the this virus. Not earning for several months could prove fatal to enough people to create a wider catastrophe. Think about cascading failures in software systems. One relatively smaller sub-system fails which others were dependent on. These other dependent subsystems now fail because their dependency is now unavailable. It snowballs until the entire system is unavailable.
- yters 6y agoHow does this translate into human deaths? Does that amount outweigh the potential human deaths adverted by causing the economic downfall through worldwide lockdowns in response to covid-19?
- bariswheel 6y agoFear mongers are fishing for another stock sale!
- onetimemanytime 6y agoOK, I officially do not get economics. Close to everything has stopped for 2 months, lots of lost jobs and econ goes down only 3%? If I lose 3% in my worst year, I'd be jumping from joy.
- atum47 6y agoyou know what? things are kinda bad right now, I even lost my job but I'm still hopeful. Hopeful that this "thing" will end and we as humans will grow from that bad experience.
- elchief 6y agoWell, if COVID's R0 is 5.7, then herd immunity is 82%, which we could hit before there's a vaccine. Death rate is 3.4%, according to WHO (which is absurdly low in my mind), then population would drop by 2.8%, meaning GDP would drop by the same...assuming those that die spent an average amount of money
- neonate 6y agohttps://archive.md/mjbka https://archive.md/mjbka
- Kiro 6y ago3% is massive. You can't just compare it with other things contracting 3%, thinking it doesn't sound like a big deal. The effects of each 0.1% the world economy contracts will shift whole industries.
- anigbrowl 6y agoAmazing - how did they figure out that when only everyone has been saying it for the last month? Besides coronavirus, we were already in a period of anemic growth masked by the arguably inflated performance of the stock market. Federal Reserve activity going back to last September or so suggested an economic overhang.
- aktuel 6y agoduh
- cletus 6y agoI still think there's way too much naive optimism out there that things will all be back to normal a month or two from now. I found this [1] deeply fascinating. Some highlights: - Corporate earnings have been pretty much flat since 2014 (this one in particularly surprised me). So the last 5 years has been a disconnect between earnings and valuation and that always comes crashing back to earth at some point, Covid-19 was just the spark. - The demand for US dollars will likely devastate some developing nations (who borrow in US dollars) with all that entails; - The US is in a fiscally weak position; - Because of the strong dollar and huge deficit the US essentially has to print money to buy its own bonds. A real (rather than nominal) devaluation in US government debt is not out of the question; On the Covid-19 front: - Making a vaccine takes time. Proving it works and is safe takes time. Even after you've done all that you have to manufacture it somehow. This is a nontrivial problem. For the flu vaccine the US government actually pays billions to grow eggs for this purpose [2]. This is unsatisfactory in many ways and there has been a long search for an alternative but so far to no avail. Influenza viruses reproduce in chicken eggs. Coronaviruses do not. - It will take time--possibly years--for spending to return to previous levels. We have examples of this already with the SARS and MERS outbreaks in Hong Kong and South Korea where spending took 6 and 12 months respectively to return to previous levels [3]. - Some industries will take years to recover. Cruise lines are an obvious one but airlines, hotels and tourism are in the same boat (at least it's not the Diamond Princess). I wouldn't be surprised if a lot of frequent flyer miles just evaporate or getting hugely devalued; - Some businesses just won't come back. Those businesses spend money. They paid employees who spend money. All that money went to other people and businesses who then spend money. - Social distancing may be here for the long term [4]. - My own belief is that the protracted response to this is there will be some permanent changes in behaviour. This will create new opportunities but also devastate some sectors. For some reason, share buybacks are the latest bogeyman and I really don't understand why. They're just another form of dividend (ie returning money to shareholders). Borrowing money at low interest for share buybacks is just a tax deferment strategy (one that I don't think should exist but it does). There's still significant market and economic downside potential and at best I think we'll have stagnant growth for several years. The problem here is that many people now have no memory of what an actual recession looks like. Even the GFC was quite localized (but of course devastating to many). [1]: https://www.lynalden.com/global-dollar-short-squeeze/ https://www.lynalden.com/global-dollar-short-squeeze/ [2]: https://edition.cnn.com/2020/03/27/health/chicken-egg-flu-vaccine-intl-hnk-scli/index.html https://edition.cnn.com/2020/03/27/health/chicken-egg-flu-va... [3]: https://www.abc.net.au/news/2020-04-14/retailers-warned-not-to-expect-post-coronavirus-spending-bounce/12144354 https://www.abc.net.au/news/2020-04-14/retailers-warned-not-... [4]: https://edition.cnn.com/2020/04/14/health/social-distancing-research-coronavirus-2022-trnd/index.html https://edition.cnn.com/2020/04/14/health/social-distancing-...
- zuhayeer 6y agoJust gonna leave this here: https://twitter.com/eladgil/status/1250530780666671105?s=21 https://twitter.com/eladgil/status/1250530780666671105?s=21
- known 6y agoI believe https://en.wikipedia.org/wiki/Chiemgauer https://en.wikipedia.org/wiki/Chiemgauer is the Cure
- third_I 6y agoLike predictions mean anything right now. We have 4 months of real-world experience with the threat but we're supposed to project what 1 year of it looks like. We're not even done with the very first phase. Color me skeptical. Such hubris is vain at best and dangerous at worst in times like these.