Coronavirus

[TheStig]

Doug, I think the difference here is that this will hopefully be an isolated incident. I'm not saying we're at the bottom. But I don't think this type of black swan event will lead to a long protracted recession. I think with it's nature, it will be shorter.

There are lots of reasons to think this isn't true though.

Unemployment is real. Many (most) of those people are now in critical financial condition and will not be spending the same way. With lack of spending, you will also see business pick up slower and companies slow to hire back in many cases. Tons of companies are expect just to go under.

There are all kinds of structural problems that these issues cause, because companies are heavily leveraged to enhance earnings and aren't built to survive a long time with abnormal cash flows. There are whole industries that may not bounce back for years.

If we were to bounce back with everyone working and unemployment back down to 2-3% when we stop social distancing then I'd agree with you that a quick bounce back would be possible, but I think while this event wasn't caused by structural problems, it has created very real structural problems.

Pumping trillions of dollars into the economy may help but also causes different long term problems that we'll have to cope with down the road. The response to this pandemic has been unlike anything we've ever seen. It is highly unlikely, IMO, to end up being a V-shaped recovery for companies and earnings. Market prices, who knows, but again, market prices were at very high levels relative to fundamentals prior to coronavirus news.

Doug, I understand and agree that is true today. What I'm trying to say is that after the virus situation is resolved, then in the coming months after, hiring and the economy will start to pick up. I think businesses and consumers want to get back to normal.

[Dresden]

For any business owners out there, tomorrow is the day when you can start applying for the Payroll Protection Program, through the SBA. It will probably be a mad rush tomorrow, and I'd bet the website crashes, but this program will pay for 8 weeks of employees wages plus some overhead. It's a loan, but it will be forgiven if you don't lay off any of your workers. For me, it's a godsend (if it comes through), as it will allow me to pay all my employees for 2 months, which will carry us through the period of the shutdown (provided it is lifted by June 1). I imagine if the shutdown lasts longer, an extension might be added to this, but who knows, and at least this will cover employers with fewer than 500 employees, and will protect those workers so they don't have to worry about meeting all their bills.

[dougthonus]

Doug, I understand and agree that is true today. What I'm trying to say is that after the virus situation is resolved, then in the coming months after, hiring and the economy will start to pick up. I think businesses and consumers want to get back to normal.

After the virus is resolved, you will have the following after effects:
1: Many cost cutting measures will not be rolled back because companies will use this as an opportunity to trim the fat.

2: Many consumers will not immediately go back into pre-coronavirus mode with spending because they lost so much in the meantime and need to financially recover.

3: Lack of spending means businesses won't snap back immediately in terms of revenue or earnings either and gives them more reason to not hire back to full right away.

4: Many industries will be permanently damaged by this and won't recover, there will be huge losses of corporations that will simply disappear. This will create opportunity for others, but in the short term it means that there could be large losses in bond portfolios and other investment areas which impact the markets.

I'm not telling you what to do with your money, the stock market often behaves irrationally and was irrationally high prior to this event to begin with. There is also a ton of money on the sidelines of people just sitting in cash waiting to find something to invest in which could also push prices up fast.

However, what I am saying is that fundamentals of our economy will probably be poor for at least a year from today (from a corporate perspective). People whom lost their jobs, just like in 2008, are likely to initially come back to work underemployed compared to the past and spending will take a longer time than you think to get back to normal.

From a governmental perspective, who knows what we've done here. We may have set the bar for a massive inflationary event for our currency which causes all new kinds of problems (that said other countries may be in the same boat so maybe it all cancels?). We may end up adding 25% to the national debt before all of this is done as well, and that could have serious after effects.

States like Illinois which were barely solvent before are going to be facing tough decisions coming up too. Even the ones in good shape are going to struggle dealing with the loss of revenue.

[Chi town]

Doug, I understand and agree that is true today. What I'm trying to say is that after the virus situation is resolved, then in the coming months after, hiring and the economy will start to pick up. I think businesses and consumers want to get back to normal.

After the virus is resolved, you will have the following after effects:
1: Many cost cutting measures will not be rolled back because companies will use this as an opportunity to trim the fat.

2: Many consumers will not immediately go back into pre-coronavirus mode with spending because they lost so much in the meantime and need to financially recover.

3: Lack of spending means businesses won't snap back immediately in terms of revenue or earnings either and gives them more reason to not hire back to full right away.

4: Many industries will be permanently damaged by this and won't recover, there will be huge losses of corporations that will simply disappear. This will create opportunity for others, but in the short term it means that there could be large losses in bond portfolios and other investment areas which impact the markets.

I'm not telling you what to do with your money, the stock market often behaves irrationally and was irrationally high prior to this event to begin with. There is also a ton of money on the sidelines of people just sitting in cash waiting to find something to invest in which could also push prices up fast.

However, what I am saying is that fundamentals of our economy will probably be poor for at least a year from today (from a corporate perspective). People whom lost their jobs, just like in 2008, are likely to initially come back to work underemployed compared to the past and spending will take a longer time than you think to get back to normal.

From a governmental perspective, who knows what we've done here. We may have set the bar for a massive inflationary event for our currency which causes all new kinds of problems (that said other countries may be in the same boat so maybe it all cancels?). We may end up adding 25% to the national debt before all of this is done as well, and that could have serious after effects.

States like Illinois which were barely solvent before are going to be facing tough decisions coming up too. Even the ones in good shape are going to struggle dealing with the loss of revenue.

I’m seeing much of the same. I think a lot of it will cancel out from other countries. It will still be dark and lots of people will have to adapt and reinvent themselves.

[coldfish]

Doug, I understand and agree that is true today. What I'm trying to say is that after the virus situation is resolved, then in the coming months after, hiring and the economy will start to pick up. I think businesses and consumers want to get back to normal.

After the virus is resolved, you will have the following after effects:
1: Many cost cutting measures will not be rolled back because companies will use this as an opportunity to trim the fat.

2: Many consumers will not immediately go back into pre-coronavirus mode with spending because they lost so much in the meantime and need to financially recover.

3: Lack of spending means businesses won't snap back immediately in terms of revenue or earnings either and gives them more reason to not hire back to full right away.

4: Many industries will be permanently damaged by this and won't recover, there will be huge losses of corporations that will simply disappear. This will create opportunity for others, but in the short term it means that there could be large losses in bond portfolios and other investment areas which impact the markets.

I'm not telling you what to do with your money, the stock market often behaves irrationally and was irrationally high prior to this event to begin with. There is also a ton of money on the sidelines of people just sitting in cash waiting to find something to invest in which could also push prices up fast.

However, what I am saying is that fundamentals of our economy will probably be poor for at least a year from today (from a corporate perspective). People whom lost their jobs, just like in 2008, are likely to initially come back to work underemployed compared to the past and spending will take a longer time than you think to get back to normal.

From a governmental perspective, who knows what we've done here. We may have set the bar for a massive inflationary event for our currency which causes all new kinds of problems (that said other countries may be in the same boat so maybe it all cancels?). We may end up adding 25% to the national debt before all of this is done as well, and that could have serious after effects.

States like Illinois which were barely solvent before are going to be facing tough decisions coming up too. Even the ones in good shape are going to struggle dealing with the loss of revenue.

I agree overall. I don't see an inflationary cycle though. The fed has significant leverage over the economy and can draw down excess money in circulation quickly. At most, you might get shortages in certain sectors as supply chains get damaged through this. This or that good might go way up but the general trend is going to be significant negative price pressure. With everyone hoarding money and just working on paying down debt, I'm guessing that the money in circulation is collapsing even with fed actions. This whole collapse is an interesting case study in fractional reserve banking's impact on money supply. People stop loaning money, money supply tanks.

I don't really understand the national debt at this point. I kind of get the impression that the fed is holding a lot of the debt. Its almost like the national debt is meaningless.

In general, I think this is going to be a nasty recession. I got out of stocks as much as I could albeit too late. I continue to be surprised at the market's resiliency. Its going to take the threat of a major company going bankrupt and wiping out shareholders for prices to get reasonable.

[Dresden]

One thing that will complicate any bounce back is the time it takes for the pandemic to burn itself out. Some scientist are saying 2-3 years. If there is a successful treatment or an effective vaccine, that will shorten it's duration. But it's quite possible that just like the flu of 1918, this one will linger on, inflicting heavy mortality through several waves spanning several years, as most flu epidemics do.

[Dresden]

I think this is also going to re-shape the economy in some ways. I imagine many new businesses will be spawned from this, just as 9-11 spawned a lot more companies that specialize in surveillance, explosive detection, and making buildings terrorist proof. I could see a lot more being done in the way of making things sterile, from work places to retail shops, to things like subway systems and busses. And all sorts of new PPE, designed for both medical professionals and the general public. Airlines might start offering "virus free" seating, enclosed is some sort of antiseptic material. Workplace testing for Corona might become common. Who knows, but I bet a lot of companies will find ways to capitalize on what will be a heavy demand for new ways of staying germ free.

[dougthonus]

I agree overall. I don't see an inflationary cycle though. The fed has significant leverage over the economy and can draw down excess money in circulation quickly. At most, you might get shortages in certain sectors as supply chains get damaged through this. This or that good might go way up but the general trend is going to be significant negative price pressure. With everyone hoarding money and just working on paying down debt, I'm guessing that the money in circulation is collapsing even with fed actions. This whole collapse is an interesting case study in fractional reserve banking's impact on money supply. People stop loaning money, money supply tanks.

If you still have the money issued you are creating an inflationary action. Money is worth less when more is available, maybe it over inflates the stock market or some other area where we temporarily put in the excess, but I don't think that stops the problem and rather masks it unless you actually retire money.

I don't really understand the national debt at this point. I kind of get the impression that the fed is holding a lot of the debt. Its almost like the national debt is meaningless.

Well the debt related to GDP is generally what people track, and so while the debt has grown massively, so has GDP which makes it less of a big deal. We do owe a lot of the money to the American public, institutions, and other government agencies. A huge amoutn of social security is held in the debt (probably the biggest government owner of it). It's hard to say how much it matters, but unless we just don't pay retirement to government employees or social security, we still owe the money.

In general, I think this is going to be a nasty recession. I got out of stocks as much as I could albeit too late. I continue to be surprised at the market's resiliency. Its going to take the threat of a major company going bankrupt and wiping out shareholders for prices to get reasonable.

I lost 16% overall since the peak of my portfolio vs 25% for the SP500 overall, so I feel pretty good about my exit price compared to what it could have been. Like everyone I guess I wish I was out earlier, but I think I'll make it up on good buying opportunities. It will be interesting to see if any major companies go bankrupt. I mean you have a lot of them that are on the verge of it except for government bailout money (virtually all the airlines, possibly boeing, probably tons of restaurant chains, cruise lines, entertainment venues etc...).

Anyone whom is highly leveraged will struggle. I don't know if OXY counts as a major company, but they might go under. I also think you're going to see insurance companies or banks with bad balance sheets struggle. Probably won't impact the biggest players, but they make their money off of rate arbitrage and with interest rates at sub 1% they will really struggle.

[dougthonus]

One thing that will complicate any bounce back is the time it takes for the pandemic to burn itself out. Some scientist are saying 2-3 years. If there is a successful treatment or an effective vaccine, that will shorten it's duration. But it's quite possible that just like the flu of 1918, this one will linger on, inflicting heavy mortality through several waves spanning several years, as most flu epidemics do.

Seems extremely unlikely that we won't be in a place where this is no big deal within a year. Most people feel we'll have a vetted vaccine by that point and there are a bunch of treatments that already show a lot of promise and could curb this off sooner.

[dougthonus]

I think this is also going to re-shape the economy in some ways. I imagine many new businesses will be spawned from this, just as 9-11 spawned a lot more companies that specialize in surveillance, explosive detection, and making buildings terrorist proof. I could see a lot more being done in the way of making things sterile, from work places to retail shops, to things like subway systems and busses. And all sorts of new PPE, designed for both medical professionals and the general public. Airlines might start offering "virus free" seating, enclosed is some sort of antiseptic material. Workplace testing for Corona might become common. Who knows, but I bet a lot of companies will find ways to capitalize on what will be a heavy demand for new ways of staying germ free.

A lot of companies are going to discover that remote work works pretty well if coordinated properly and will reduce office space and have more full time remote employees or just have jump seats and have people 50% remote.

Also think if it gets bad enough that you might see people adopting the asian cultural view of acceptability of wearing masks and seeing the production of masks be a new industry.

People's habits may also change to have food delivered much more frequently in the past, which was already happening but may be accelerated now.

I do agree that you'll see some permanent changes based on what has happened.

[musiqsoulchild]

The upside if there is any to the economy is that as this pandemic clears us, we will be bang in the middle of summer.

Spending will be high and more people will be out.

This is different than all other financial calamities in that people will actually WANT to leave home.

There is so much incentive to go back out there for kids, young adults and grown ups.

I think of anything salaries might flatten out. Unemployment will go back quickly to the levels it was at.

[coldfish]

I agree overall. I don't see an inflationary cycle though. The fed has significant leverage over the economy and can draw down excess money in circulation quickly. At most, you might get shortages in certain sectors as supply chains get damaged through this. This or that good might go way up but the general trend is going to be significant negative price pressure. With everyone hoarding money and just working on paying down debt, I'm guessing that the money in circulation is collapsing even with fed actions. This whole collapse is an interesting case study in fractional reserve banking's impact on money supply. People stop loaning money, money supply tanks.

If you still have the money issued you are creating an inflationary action. Money is worth less when more is available, maybe it over inflates the stock market or some other area where we temporarily put in the excess, but I don't think that stops the problem and rather masks it unless you actually retire money.

I'm guessing you get this so I hope this doesn't come off wrong. Let's say there are $10,000 printed dollars and person A has it. He puts it in his bank. That person loans 80% of it to person B who puts it in his bank. That bank loans $6000 to person C who puts it in his bank. After the moves, you now have 10K + 8K + 6K showing in bank accounts that any of those people can buy stuff with. The original $10k shows up as $24k. On the downside, if those people pay back their loans, the money supply contracts from $24k back down to $10k.

Right now you have a bunch of people paying off loans and no one taking out new ones. No one is leasing cars, buying new houses or even putting much on their credit card. As people make their monthly payments, the money supply is contracting. When the fed steps in like this, they are replacing the missing money supply.

When I talked to people who were around during the great depression, one of the things that regularly struck me was that money itself was extremely rare and valuable. Because of that, people sat on it when they got their hands on it. Deflation has an ugly impact on economies. Helicopter Ben Bernanke did a lot of work on the great depression and was panicked in 2008 that it would kick off a deflationary cycle.

[dice]

One thing that will complicate any bounce back is the time it takes for the pandemic to burn itself out. Some scientist are saying 2-3 years. If there is a successful treatment or an effective vaccine, that will shorten it's duration. But it's quite possible that just like the flu of 1918, this one will linger on, inflicting heavy mortality through several waves spanning several years, as most flu epidemics do.

Seems extremely unlikely that we won't be in a place where this is no big deal within a year. Most people feel we'll have a vetted vaccine by that point and there are a bunch of treatments that already show a lot of promise and could curb this off sooner.

yeah, it seems very unlikely to me that the economic impacts won't last significantly longer than the health crisis

[dice]

The upside if there is any to the economy is that as this pandemic clears us, we will be bang in the middle of summer.

Spending will be high and more people will be out.

This is different than all other financial calamities in that people will actually WANT to leave home.

There is so much incentive to go back out there for kids, young adults and grown ups.

I think of anything salaries might flatten out. Unemployment will go back quickly to the levels it was at.

we were at historically low unemployment levels. we're not getting back there in the forseeable future, if ever

[dumbell78]

I think one thing I would like to see moving forward before anything goes back to "normal living" is a final phase of this economic stimulation/bailout that SOLELY focuses on pandemic prevention and research. I'm talking much like we would fund defense, infrastructure, etc. This must be at the forefront of all our minds.

We cant go back to normal life once this dies down and think "cool we're good now". No BS politics, pork hidden in the bills, every day scenario we see from these fake ass politicians. Yeah its a pie in the sky hope maybe but we cant just go back to what it was.

[coldfish]

Stuff discussed before that I don't feel like digging up

A lot of information has come out over the past 24 hours that pushes this in the direction of a fast spreading, low mortality disease that we discussed before. Stuff like:
- Iceland saying that lots of people show no symptoms
- Doctors coming out and saying that it spreads as an aerosol, making it a super spreader
- Information that the standard test gives a massive number of false negatives

IMO, 10's of millions have already been infected just in the US.

[Chi town]

I think this is also going to re-shape the economy in some ways. I imagine many new businesses will be spawned from this, just as 9-11 spawned a lot more companies that specialize in surveillance, explosive detection, and making buildings terrorist proof. I could see a lot more being done in the way of making things sterile, from work places to retail shops, to things like subway systems and busses. And all sorts of new PPE, designed for both medical professionals and the general public. Airlines might start offering "virus free" seating, enclosed is some sort of antiseptic material. Workplace testing for Corona might become common. Who knows, but I bet a lot of companies will find ways to capitalize on what will be a heavy demand for new ways of staying germ free.

A lot of companies are going to discover that remote work works pretty well if coordinated properly and will reduce office space and have more full time remote employees or just have jump seats and have people 50% remote.

Also think if it gets bad enough that you might see people adopting the asian cultural view of acceptability of wearing masks and seeing the production of masks be a new industry.

People's habits may also change to have food delivered much more frequently in the past, which was already happening but may be accelerated now.

I do agree that you'll see some permanent changes based on what has happened.

Yes to all the above. I think more people will move out of cities into suburbs too. More room for your buck especially working from home that much. Less traffic with more people working from home which people are willing to do the commute 50%.

Also think all social gatherings will greatly change. Conferences, theme parks, concerts will be dead for awhile. That will be a big hit to the economy.

[The Box Office]

Summer of 2021 will show our new way of life. Not Summer of 2020.

Also, 6.6 million unemployment claims as of 4/2/2020 and still rising in super turbo speed. Again, this only took days to double from 3.3. million claims just 6 days ago.

A "V" shaped bounce back is almost impossible. The economy is not bouncing back that fast. It's gonna a "U" graph bounce back or flat lined "L" graph like Japan and Greece.

20 million unemployment claims in the good ol' USA? That figure looks realistic to reach at this pace.

[dice]

I don't really understand the national debt at this point. I kind of get the impression that the fed is holding a lot of the debt. Its almost like the national debt is meaningless.

Well the debt related to GDP is generally what people track, and so while the debt has grown massively, so has GDP which makes it less of a big deal. We do owe a lot of the money to the American public, institutions, and other government agencies. A huge amoutn of social security is held in the debt (probably the biggest government owner of it). It's hard to say how much it matters, but unless we just don't pay retirement to government employees or social security, we still owe the money.

for what it's worth, japan's net government debt (% of gdp) is nearly double what ours is

[Chi town]

The upside if there is any to the economy is that as this pandemic clears us, we will be bang in the middle of summer.

Spending will be high and more people will be out.

This is different than all other financial calamities in that people will actually WANT to leave home.

There is so much incentive to go back out there for kids, young adults and grown ups.

I think of anything salaries might flatten out. Unemployment will go back quickly to the levels it was at.

People will travel due to cabin fever but I don’t see anyone gathering at theme parks, sporting events, concerts etc. I don’t see any travel outside of US without testing upon entry and govt oversight w quarantine.