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Except the situation we're in is unprecedented. Never before has the government stepped in with this much force in response to an economic crisis. The March cr

Except the situation we're in is unprecedented. Never before has the government stepped in with this much force in response to an economic crisis. The March crash was the event that was going to normalize asset prices, but really just became a blip due to the pump. Should the government have done nothing? Absolutely not, but aid should have been better targeted. Overleveraged and poorly run businesses should fail. People who made excessively risky and speculative bets should have had them go belly up. The business cycle is no longer a cycle at all, things just go up. Was the virus a predictable event? Not at all, but pretty much every bust in the business cycle is due to a new unforeseen tail risk that materializes. That's why it's prudent not to excessively leverage yourself in the good times, because bad times will come. Certainly businesses such as restaurants, that were forced by the government to close, or travel, where it truly was an apocalyptic scenario, should have received the bulk of the aid.

pembrook 6y ago
> The March crash was the event that was going to normalize asset prices, but really just became a blip due to the pump. The main reason it was a blip, is because earnings have returned almost to pre-COVID levels for large public companies. Just as everyone expected. Did fiscal and monetary policy help smooth things out? Sure. But again, earnings are normalizing, like we knew they would. Markets discount the entire future, not just what's going to happen next month. > Overleveraged and poorly run businesses should fail. People who made excessively risky and speculative bets should have had them go belly up. Most companies pre-COVID were nowhere near "excessively leveraged." I think you (as well as OP) are conflating 2009 with COVID. These are two distinctly separate things. As are monetary (The Fed) and fiscal policy (Congress). > The business cycle is no longer a cycle at all, things just go up. So you're saying "this time is different." Let's see how that plays out.
- username90 6y ago
  > So you're saying "this time is different." Let's see how that plays out. Main difference from the past recessions is that today the main way to store money is index funds. In recessions people pump money into savings, ie into index funds, ie into the stock market making stocks value increase rather than fall. As long as people believe that index funds are a more stable currency than the dollar this will continue to be true in future recessions.
  - maneesh 6y ago
    this is a very insightful look at how people have changed their belief in what safe money is. In a lot of ways, money is a story of trust -- it's what you believe that other people will believe is true, is true. And when that fundamental belief of 'safe asset' moves from cash under the mattress, to cash in a savings account, to cash in an index fund, to cash in a cryptocurrency -- well, the ramifications are massive.
- deleted 6y ago
  [deleted]
- coderaptor 6y ago
  > Did fiscal and monetary policy help smooth things out? We're assuming the crash in March was due to COVID - though there's no proof this was the case. This very much could have been a correction to more realistic valuation. > So you're saying "this time is different." Let's see how that plays out. Agree here - I think we're in for an interesting year. We may have amplified the upswing dynamics with Fed action, but I'm pretty sure we'll see amplified downswings, as a result.
  - anm89 6y ago
    I get what you are saying but cmon. We very well may have had a recession without covid but covid has certainly majorly shaped what our current economic situation looks like.
- anm89 6y ago
  >The main reason it was a blip, is because earnings have returned almost to pre-COVID levels for large public companies. Those earning are structurally very different from an accounting perspective than normal earnings (one example being ppp loans). I'm not saying your wrong that these earnings are justifying PE based valuations but I don't think anyone is arguing that propping up earnings won't work in the short term. I think a lot of people are arguing that propping up earnings will backfire in the longer term.

pembrook 6y ago

> The March crash was the event that was going to normalize asset prices, but really just became a blip due to the pump. The main reason it was a blip, is because earnings have returned almost to pre-COVID levels for large public companies. Just as everyone expected. Did fiscal and monetary policy help smooth things out? Sure. But again, earnings are normalizing, like we knew they would. Markets discount the entire future, not just what's going to happen next month. > Overleveraged and poorly run businesses should fail. People who made excessively risky and speculative bets should have had them go belly up. Most companies pre-COVID were nowhere near "excessively leveraged." I think you (as well as OP) are conflating 2009 with COVID. These are two distinctly separate things. As are monetary (The Fed) and fiscal policy (Congress). > The business cycle is no longer a cycle at all, things just go up. So you're saying "this time is different." Let's see how that plays out.

username90 6y ago
> So you're saying "this time is different." Let's see how that plays out. Main difference from the past recessions is that today the main way to store money is index funds. In recessions people pump money into savings, ie into index funds, ie into the stock market making stocks value increase rather than fall. As long as people believe that index funds are a more stable currency than the dollar this will continue to be true in future recessions.
- maneesh 6y ago
  this is a very insightful look at how people have changed their belief in what safe money is. In a lot of ways, money is a story of trust -- it's what you believe that other people will believe is true, is true. And when that fundamental belief of 'safe asset' moves from cash under the mattress, to cash in a savings account, to cash in an index fund, to cash in a cryptocurrency -- well, the ramifications are massive.
deleted 6y ago
[deleted]
coderaptor 6y ago
> Did fiscal and monetary policy help smooth things out? We're assuming the crash in March was due to COVID - though there's no proof this was the case. This very much could have been a correction to more realistic valuation. > So you're saying "this time is different." Let's see how that plays out. Agree here - I think we're in for an interesting year. We may have amplified the upswing dynamics with Fed action, but I'm pretty sure we'll see amplified downswings, as a result.
- anm89 6y ago
  I get what you are saying but cmon. We very well may have had a recession without covid but covid has certainly majorly shaped what our current economic situation looks like.
anm89 6y ago
>The main reason it was a blip, is because earnings have returned almost to pre-COVID levels for large public companies. Those earning are structurally very different from an accounting perspective than normal earnings (one example being ppp loans). I'm not saying your wrong that these earnings are justifying PE based valuations but I don't think anyone is arguing that propping up earnings won't work in the short term. I think a lot of people are arguing that propping up earnings will backfire in the longer term.