OT - Dow plunges 1,175 - worst point decline in history

[happycampyer]

Originally Posted by akelman

I should add that I'm holding for the long haul. And that I dumped a bunch (well, what passes for a bunch in my house) of cash into the market when it was ~19,000. Which is to say, I don't really have the courage of my convictions. You won't see me holding any short plays. I'm too risk-averse.

I’d be curious what VeloDuffer, VerticalDoug and others who are very plugged into what’s going on in the markets and the economy think, but my concern is how long the commercial real estate market can hang on, which is a function of two great unknowns—how long the economy will be at a standstill, and how much money governments will throw out as a lifeline.

A lot of the restaurant chains and other retail and service industries were pretty leveraged to begin with. Even a slowdown of the economy could have forced some defaults. How long can those companies survive their businesses coming to a complete stop? With no income, they will eventually default on their debt and leases, and let go all of their employees, sending a major shockwave through the economy. Stores and malls will fail in unprecedented numbers, and unemployment will explode. Landlords, REITs will go into distress in a second wave, etc. I’m sure people like Mnuchin and Powell get this, and it wouldn’t surprise be if this is what’s causing Trump to say things like we’ll all be back to normal by Easter.

So where’s the bottom in this scenario? Who knows, but it could easily be 50% down from where we are now. VeloDuffer and VerticalDoug, what are your thoughts?

[verticaldoug]

Originally Posted by happycampyer

So where’s the bottom in this scenario? Who knows, but it could easily be 50% down from where we are now. VeloDuffer and VerticalDoug, what are your thoughts?

I don't guess any better than you.

Market was optimistic and people initially thought V shape recovery. That has fallen and now the shape is U. I actually think the U is wider and the right side is a slow slope.

My reasoning for this is people will not truly be safe until we have herd immunity. We get this by everyone getting sick, or vaccine. If everyone gets sick, the mortality will be much much higher and the market is not factoring this in. So, market can easily go down another 50%.

The vaccine, even with some brilliant pre-positioning by the CDC, is probably a 1Q2021 event. Hence a wider U.

Even though there are still people thinking this is a hoax, there are enough people that are worried about a return in the fall since it is unlikely the virus is eradicated by the fall, so people will be anxious that we will repeat current social conditions. Given this, the rational thing for people to do is be more willing to save for a potential rainy day than consume. In addition, people will fall into arrears on payments, so any income will be spent to bring accounts up to date.

Given the two scenarios, I want to split the difference. Right now, I think the smart play is buying cash flow with relatively safe Investment Grade. The FED is in on a backstop, so you really just need to look at the company and it's cashflow, cash reserves. High Yield airlines, E&P is still a crap shoot. I'd rather miss the move than be a hero catching a knife. If the bonds become more distressed or in default, then I'd think it is a look.

Equities- overall, I think we can retest lows.

Banks are interesting and Banks are probably actually happy here. If you think about it, it is the first time ever, they aren't being blamed for the crash.

[echappist]

Originally Posted by jimcav

thank you. Is it reasonable to think that there will be a lag in effects of Asian economic downturn on USA similar to the lag in COVID or is the just-in-time and global supply chain ties mean it will be immediate on USA (on top of any shortfalls between the FED/Rescue Bill and actual reduced productivity/income?

You'll need someone more knowledgeable than I to answer that.

That said, next Friday's gonna be ugly

[jlwdm]

Originally Posted by echappist

That really doesn’t refute the points of the articles, at least b/c you are using anecdote of limited scope to challenge actual studies.

“There are plenty”. Define “plenty”. Are we talking absolute or relative? Is it limited to just certain areas?


You also cite “[f]or example technology” as an area with reduced emphasis on education. No idea what you mean by “technology”, b/c the “tech” jobs that go unfilled (mentioned recently on this forum) all require specialized comp sci training. Bio-tech requires even more years of formal education.

You decry a lack of common sense, yet resort to fallacies to make your own points.

Ha. The Forbes article proves nothing. As I said it just measures education.

I just see what is happening in my world and the three states I have lived in. I especially see lots of people who have come from other countries and worked hard to be very successful.

Personally by being good at the work I have done the last job I applied for was in 1975. Since then I have taken jobs that were offered to me; sometimes in different states and sometimes in different fields. The last 9 years I have worked for myself and if I could live my life over I would have started working for myself at a young age. Lots of work but more rewarding.

I will ignore your last sentence.

Jeff

[echappist]

Originally Posted by jlwdm

Ha. The Forbes article proves nothing. As I said it just measures education.

I just see what is happening in my world and the three states I have lived in. I especially see lots of people who have come from other countries and worked hard to be very successful.

Personally by being good at the work I have done the last job I applied for was in 1975. Since then I have taken jobs that were offered to me; sometimes in different states and sometimes in different fields. The last 9 years I have worked for myself and if I could live my life over I would have started working for myself at a young age. Lots of work but more rewarding.

I will ignore your last sentence.

Jeff

Basically, personal experience only + maybe few immediately adjacent anecdotes.

Which apparently is good enough to sustain the point that "[t]he U.S. is still the country of great opportunity though."

Extraordinary claims require extraordinary evidence. You have come nowhere close to furnishing that evidence.

[verticaldoug]

Originally Posted by echappist

Go to pages 3 and 4 of the round-up here


Q2 Quarter to quarter decline of up to 40% in developed economies. Overall world economy shrinkage of 2-7%

Also Chinese factory profit fell by 40%, but there are signs that it rebounded by March.

Let's clean these numbers up a little:
2Q20 decline of 40% is SAAR, it is a what the number would be if it extended for a full 4 quarters. A 40% decline, is literally the end of the world. This is not happening. The forecast is -10%, which compared to the worst quarter in the 2008/2009 financial crisis of -8.4% is probably optimistic. The worst month for job losses in 08/09 was -800,000. We are already north of 3.2mm so the contraction should be worse than -10%. The total contraction in 2008/2009 was -15% over 4q. That took a while to come back from. I think Goldman has an optimistic forecast of around -18% over next 2q.

Chinese factory profit falling by -40% is a great number. Given fixed costs and everything, I'd have thought profit would be net loss not still a profit.
I am curious what the revenue fall was. The CEO for General Mills was on TV and said although 90% of their retailers were online, the sales were running at 50% of pre-shutdown in China.

[echappist]

Originally Posted by verticaldoug

Let's clean these numbers up a little:
2Q20 decline of 40% is SAAR, it is a what the number would be if it extended for a full 4 quarters. A 40% decline, is literally the end of the world. This is not happening. The forecast is -10%, which compared to the worst quarter in the 2008/2009 financial crisis of -8.4% is probably optimistic. The worst month for job losses in 08/09 was -800,000. We are already north of 3.2mm so the contraction should be worse than -10%. The total contraction in 2008/2009 was -15% over 4q. That took a while to come back from. I think Goldman has an optimistic forecast of around -18% over next 2q.

Chinese factory profit falling by -40% is a great number. Given fixed costs and everything, I'd have thought profit would be net loss not still a profit.
I am curious what the revenue fall was. The CEO for General Mills was on TV and said although 90% of their retailers were online, the sales were running at 50% of pre-shutdown in China.

Thank you, I should have been more careful.

[HenryA]

Originally Posted by happycampyer

I’d be curious what VeloDuffer, VerticalDoug and others who are very plugged into what’s going on in the markets and the economy think, but my concern is how long the commercial real estate market can hang on, which is a function of two great unknowns—how long the economy will be at a standstill, and how much money governments will throw out as a lifeline.

A lot of the restaurant chains and other retail and service industries were pretty leveraged to begin with. Even a slowdown of the economy could have forced some defaults. How long can those companies survive their businesses coming to a complete stop? With no income, they will eventually default on their debt and leases, and let go all of their employees, sending a major shockwave through the economy. Stores and malls will fail in unprecedented numbers, and unemployment will explode. Landlords, REITs will go into distress in a second wave, etc. I’m sure people like Mnuchin and Powell get this, and it wouldn’t surprise be if this is what’s causing Trump to say things like we’ll all be back to normal by Easter.

So where’s the bottom in this scenario? Who knows, but it could easily be 50% down from where we are now. VeloDuffer and VerticalDoug, what are your thoughts?

I won’t claim any expertise in this field but I do have an opinion. Last crash the re business didn’t get the light switch flipped off. It was more a decrease in business for retailers instead of a cessation of business. The deals were fewer and larger than residential re and of longer term. There could therefor be more flexibility and incentive to renegotiate the deals.

So in residential there was a lot of repo and not so much renegotiation. Kick ‘em out and be done with it. Commercial had some slack and it was money worth talking about along with some actual facts to indicate that some payment plan might work. And a big bunch of money coming due next year is not nearly as scary as same money next month.

This one is pretty much a light switch for commercial. And that’s why gov’t is throwing money at this so hard. So much of the deals are so leveraged and in danger of crashing in a domino fashion.

There are some operators with lots of equity and they will suffer some but come out strong when this subsides. Owners who actually own won’t like it but will come out even stronger.

The huge leverage is why we need current reassurances of a date certain and the actuality of flipping the switch back on asap.

[verticaldoug]

Originally Posted by HenryA

The huge leverage is why we need current reassurances of a date certain and the actuality of flipping the switch back on asap.

Everyone would like a date to get some certainty, but it is how you arrive at the date is important. I think the science is saying Easter is unrealistic. As Fauci said, Easter is aspirational. This is basically the same mistake Boeing Management made when giving the market estimates on when the 737-Max would be fixed. The original dates I do not think were provide by software design and engineering teams, but by management as what sounded nice and wouldn't hurt the stock. The reality is the 737-Max was a harder problem to fix and the problem did not care about management timelines. And the target dates kept getting pushed back.

The risk in picking an unrealistic target for having the virus under control is giving people false hope and disappointing on goals are not met. The companies I talk to seem to be budgeting for 60 days.

[makoti]

Originally Posted by verticaldoug

The risk in picking an unrealistic target for having the virus under control is giving people false hope and disappointing on goals are not met.

This is managing expectations 101 & it's amazing how bad people are at it.
You want to be back up by Easter? Fine, tell the people doing the work to shoot for Easter. Tell everyone else Memorial Day (which still may be unrealistic, but that's another issue). Miss the Easter deadline? Get pissed at the people doing the work, but no one gets pissed at you. Get it running by Mid May? Instead of a month late, you're two weeks early & people are thrilled with you, even though you missed your target.
Giving timelines you can't make is bad in any business.

[HenryA]

Leadership in real crises is often aspirational by necessity.

[oldpotatoe]

Originally Posted by HenryA

Leadership in real crises is often aspirational by necessity.

Bite tongue, will not say it...

[CNY rider]

On a more concrete note:

Look at where your investments were at the bottom, before the bounce last week.
If you had trouble stomaching that loss, or more importantly if your standard of living was going to change because of it, or you are getting close to retirement and that was being placed in jeopardy....

Then realize that this big bounce in the market has been gifted to you, and you have a chance to sell into it and lighten up your equity exposure.

And everyone else spare me the trope about how you're in it for the long haul and the markets always comes back. This isn't about you.

[oldguy00]

wrong thread...

[oldpotatoe]

Originally Posted by oldguy00

wrong thread...

"Every party needs a pooper, that's why we invited you'..sing with gusto!!