This is anecdotal and it might come across as bitter and tonedeaf as someone who is not in a STEM job and cant see the bigger picture very well. Im a diesel engine tech who repairs those big trucks carrying food and shit tickets to grocery stores. the fact that ANY market is completely detached from whats actually happening to Americans is frustrating.
My job just cut benefits and hours but we're "essential."
Remember those $1200 checks? Im still waiting on mine. Lenders and banks were supposed to start going easy on loans but ive had two emails and a phone call about the loan for my Silverado this month and wouldnt you know, the caller was excited to mention my stimulus check.
A guy who used to be my bartender now couch surfs a few days a week at my place while he looks for work. His mother is getting evicted from an assisted living center in a few days and his girlfriend is sick. She 'works at the Amazon' so she cant take any time off, but hes hoping if he gets a job at the Flying J at the edge of town he can switch places with her and she can take a few days off.
Shops are closing and nobody seems to care. Ive counted 2 furniture stores, a consignment shop, a few barber shops, and half the god damn bars in this town including one that was burned to the ground "mysteriously" over the last two weeks. Someone spray painted a swastika on the late night pizza joint.
So yeah this is a recession but it is so much worse than a lot of people think. No school means poor kids roam the street like packs of feral dogs asking for money for food around here. Half the country is out of work and the best Bloomberg can come up with is "its the start of a recession dont you know!"
> This is anecdotal and it might come across as bitter and tonedeaf as someone who is not in a STEM job and cant see the bigger picture very well. Im a diesel engine tech who repairs those big trucks carrying food and shit tickets to grocery stores. the fact that ANY market is completely detached from whats actually happening to Americans is frustrating.
Thanks for posting this comment. I know it sounds trite, but I’m sending well wishes your way, hoping you and your loved ones make it through this crisis as minimally impacted as possible.
I think you likely see the big picture better than others. The economy is absolutely crushed. That the markets go up must be especially frustrating to those not able to partake in any gains. My take on the market is that it will go up on good or bad news for the moment. Going up on good news is self explanatory, going up on bad news could be related to speculation that the Fed and Congress will pump even more money into the economy —- the wealthy expect to be propped up by the government as they were in the great financial crisis.
My cynical take on this is that the rich expect to get richer, no matter the outcome, and are investing accordingly. My question is how much, if any, social unrest this will lead to.
>My question is how much, if any, social unrest this will lead to.
The only social unrest that has happened so far have been the protests about wanting to lift or ease restrictions on states, and they were widely panned as a bunch of nutjobs. I doubt there will be any "unrest" beyond the protests.
> My question is how much, if any, social unrest this will lead to.
My question is how many people have absolutely no ties to the stock market? I'm pretty far from any definition of rich, but I still have a 401k, so you're not likely to see me rioting because the S&P 500 is in the green.
Most people will not want social unrest. Social unrest leads to chaos and unpredictability.
A better alternative is the less sexy but more productive political action obviously with buy in from the power brokers.
Unrest is what happens in Venezuela or Yemen, etc. it doesn’t always have to be like that as those are extreme; never the less unrest is a medicine that is in most instances worse than the disease.
Very few rich people will actually get any richer. Most of them are heavily invested in stocks, which have plummeted, or owned or work for businesses which are being crushed. There are very, very few places to hide from what's going on.
One possible exception, and it's quite a small group really, may have had a lot of money in cash and bonds. They may be able to do quite well by buying or investing in businesses at relatively low prices and earn gains during the recovery. This is _not_ a bad thing. The economy desperately needs fresh investment to re-grow businesses, re-hire employees, pay salaries, rebuild supply chains. That takes a lot of capital investment.
I suppose another way would be to confiscate all their wealth and give it to the government to invest, but who do you trust to do that most efficiently and to the best economic effect. Government bureaucrats, or businesspeople with track records of investing in and growing businesses?
So on the business side now is not at all the time to bet on Socialism. We can't afford it at the best of times, let alone the worst. On the other hand, this crisis has starkly exposed the weaknesses of naked market capitalism. It's pretty obvious already that the European model of social democracy with single payer health systems and a robust social safety net has proved far better able to cope with this crisis. It's a system specifically designed to help people suffering hardships, and now it's doing exactly that on a massive scale. I think this comes out of the European experience in the two world wars. Existential crises in which all of society pulled together because we flat out had no other choice. We were all in it together. Now we're all in this together.
I suspect this will lead to similar realisations in the US. If big companies hit by disaster deserve bailing out for the common good to save jobs and economic resources, why are individuals hit by adverse circumstances any less deserving at a personal scale? If it's reasonable to help a business hit by a health crisis, why is it unreasonable to help a family? I'm no socialist, check another post on this discussion where I defend Conservatism here in the UK, but recognising that as a society we have obligations to each other isn't socialism, for me it's just pragmatism.
for investors there is no gain so far, definitely worse than those who did not or could not invest. I think most if not all of "us" are still under deep water, my 401K became 201K a few weeks ago, now it's about 301K, so as a matter of fact, this is a loss year for people who saved to invest, worse than those who did not invest.
> My question is how much, if any, social unrest this will lead to.
There is deep rot at the heart of the American system, and something is going to have to give. The economy has been broken for the lower 50% for a long time now. This course is unsustainable.
I try not to get explicitly political on here, but Bernie Sanders was, as far as I can see, our last shot at reversing the trend from within the current system. He is the only person on Capitol Hill with the motivation to make the real changes that desperately need making. Joe Biden will just pretend the problem doesn't exist for another four years. Trump, as a leader, is just an agent of chaos with no ideals and no plan. I can't totally blame people for taking a chance on that over the continued, slow march of rot.
I think we're going to start seeing escalating social unrest until something breaks. All we can hope for is that something breaks sooner rather than later, and that we get whatever new deal needs making before things get too bad.
Tech people will be hit much harder by this than they think. The STEM world is largely in denial because ultimately SV grew because of the last major recession. That won't be happening this time.
Startups are having massive layoffs right now, and each week bring companies further and further down the chain lay people off. I strongly suspect we'll see more major layoffs next week.
Most big tech companies are driven by either consumer spending and advertising. Before 2008 at lot of these companies still had not capture their full market share, so even in a recession there was room for growth. Now profits in these companies are based on market dominance. Even the big names will likely take a hit as the severity of this recession starts to take hold.
Finally in the Bay Area there's the looming problem that huge amounts of everything is paid for in RSUs (restricted stock units). The more ridiculous those total compensation packages may seem to outsiders the more they are built up from RSUs. In theory you should just live off base salary and RSU are the (very thick) icing on the cake, but this is unrealistic in SV. This stock part of the compensation goes a long way to paying for the insane housing in that region. Stocks drop and instantly Bay area income does to.
Tech will be effected, but a combination of naiveté and denial
make conversations here seem like tech is safe.
100% agree. The housing market in the bay area will go down even more. The last year changes in tax rules such as lower deduction for mortgage interest and municipal taxes had already weakened the market. With RSUs going down, even less people will be able to buy housing, driving the price down. I think my house lost 8% in the last year, pre-COVID19. Sucks for me as a home owner, but I really believed the housing market was over-inflated. If we have layoffs, in FAANGs, I suspect a lot of folks will not be able to pay there mortgage.
The problem with a lot of startups is that they aren't making a profit when everything is going fine, let alone during a world wide pandemic, sometimes for years.
I see it as a wake up call for tech. It will suck for many people but in the long run it might be positive for the industry.
I also feel pretty strongly that many companies have been hoarding engineers/etc. because they've been so flush with cash from places like SoftBank and because there has been no expectation of making a profit for the last 10 years. Then they make them work on a VPs pet-projects with not much business value and those will be reviewed fairly soon.
>"The STEM world is largely in denial because ultimately SV grew because of the last major recession. That won't be happening this time."
Says who? Are you really claiming knowledge of what the future portends?
If you are certain of the future-- you would make a bit bet. Have you bet money on it? I doubt it. If you truly thought this was the case, you'd have purchased some options ;)
>Finally in the Bay Area there's the looming problem that huge amounts of everything is paid for in RSUs (restricted stock units).
The FED and Treasury have "united" in some sense, and we have unlimited (trillions) QE flowing into equities. So unless the FED stops the money printing party, I'm not so confident this will happen.
> Lenders and banks were supposed to start going easy on loans but ive had two emails and a phone call about the loan for my Silverado this month and wouldnt you know, the caller was excited to mention my stimulus check.
Don't settle for this. My niece had her car repossessed 3 weeks ago. They said for $18k cash she could have it. We told them to pound sand. She's borrowing cars and getting rides, but next week she'll have a decent car, and I'm going to record a lien on it with the county so nobody can take it if things get worse and she has to declare bankruptcy.
Make them an offer: for $1000 cash, you'll park it in the driveway, unlocked, with the keys in the visor on any day they want to schedule. You're going to buy it back at the auction for 1/3 of what you owe. Or they can work with you, politely. If they take your car, they're just as screwed as you - possibly more so. The used car market is a bloodbath and they all know it's going to be far, far worse in 6 months.
The rich get richer because they know how to take advantage of situations like this. As a diesel tech, you almost certainly have the knowledge to nurse an old beater along and take advantage of your lenders weakness. Please do it.
This is such horrid advice. She will have to declare bankruptcy to discharge the auto loan and 18k debt may not be sufficient to guarantee she can. Worse, that 18k will now have fees added to it for the repossession and late payments. The chance of getting the car back through auction are near nil for many reasons, from that auctions do not necessarily take place in the same locale to it can be months before the car gets to that point as the paper work has to work through the system, a system sufficiently hampered by the CV19
Now we don't know the full extent of the original poster's loan issues but the best bet is to try to arrange payment changes with the lien holder. Never ever advise anyone to walk away, that is the worst thing you can ever do.
This might be a dumb question, but wouldn't whoever sold the car/provided financing have the lien on the title? Wouldn't sale/financing be contingent on no other liens on the car/property?
> No school means poor kids roam the street like packs of feral dogs asking for money for food around here.
I think this is possibly the single biggest long term problem we're going to face as a result of all this. Economic recessions will come and go. But missing 5/8ths of a school year is going to be absolutely devastating for this generation of kids. They will be left permanently behind without a serious concerted effort by every school district to make up for lost time. The bar (which is already dismally low) will have to be lowered further for them to graduate, and how/when will it ever be raised back again?
When I was in third grade, we spent half the second semester learning about different kinds of whales. This is material I forgot pretty much as soon as it was over. When I graduated high school, my mom and I went through all my old elementary school material to see what we'd like to keep for sentimental value and what we're okay with throwing out to make room in the garage, and we were just overwhelmed by the sheer massive volume of paper that came out of that whale unit.
There is so much redundancy in elementary school education that you can take out a large chunk of it and still teach the same amount of information. School could be way, way denser than it is. Hell, even in high school, a full year would cover the same amount of material as a single semester of one of my college classes, and my college classes only met 3 times a week (for the same exact class length as my high school classes; or fewer than 3 times a week for longer class length).
>The bar (which is already dismally low) will have to be lowered further for them to graduate, and how/when will it ever be raised back again?
You don't have to lower the bar. There are other options. There is no fundamental law of physics that says a generation has to graduate at age X, so we -- the society -- should be perfectly able to delay that process for a year, instead of lowering the bar.
That said, there's something deeply wrong either with the society as a whole or with the HN audience if you read "poor kids roam the street like packs of feral dogs asking for money for food" and you say that the biggest long term problem is the lowering of the bar because kids skipped school.
I missed pretty much the same amount of school during SARS in Hong Kong in 2003. This was before any sort of remote learning was possible, I didn’t do school work for pretty much a whole semester. I didn’t feel that this held me back at all, however there were a few key differences in my end:
- I was in 4th grade where school was less rigorous
- I went to a private international school
- While my parents were busy working, I still had a stable home environment to count on
There was some discussion of aspects of this yesterday and there have been a few articles. The general consensus is that kids who have good home environments and have at least some interest in learning will mostly do fine. Some may even do better than normal.
But kids in poor home situations who were already barely scraping by--if that--will basically lose the year and everything that implies. In some areas, double-digit percentages of students have basically gone incommunicado from their schools.
Students attend school for 13 years. Let's say they miss out on 5/8 of a year because of this (I think the number is closer to 1/3, but it's not a big difference). So, instead of getting 100% of a "dismally low" education, they're only getting 95.2%. That hardly seems like a devastating loss to me, either from a knowledge or economic perspective.
You should rethink that. It's the poverty that these kids and everybody else will be subjected to that will have a much larger impact. If every one of these kids were sitting at home in a financially secure household, I guarantee you they'd all be fine.
> But missing 5/8ths of a school year is going to be absolutely devastating for this generation of kids
If only there was a way we could give them access to the entirety of the world's knowledge, a million lifetimes of recorded video, and the world's best teachers for near zero incremental cost, right in their homes. If only.
We're gonna flub this one because "Netflix and chill" is the best this tech generation can muster in the face of the worst crisis in recent history.
Squandered.
I weep almost every day because our entire communications infrastructure and online experience has been tailored for our own. goddamn. greed.
Yes I'm sure many did not plan on having a snap year. Though it does seem to be the case. Looked cool in the movies, real life - not so much.
Let alone the whole financial impact upon university students whose lifelong debts they build up in education fees, will also entail the everyday costs of living as well. Most of which work summer to pay for that and now, had a real kick upon that. Now that whole aspect hasn't even been touched up and does seem to be one that needs addressing. Heck, i'm sure some parents will be impacted equally. After all if a child is effectively held back a year, then equally government support should for that child equally be extended a year beyond the normal age cut-off's.
Though I'm 50+ and no children, I'm mindful that the impact has much minutia.
May I ask you a question though - when you do get back to school after this `snap`, will your drive for learning and making the most of the class's be more, or the same as it was without this pause? I ask as I suspect many student will be more focused and keener to learn after this break as for many if you deny somebody something or remove it - they tend to appreciate what they are missing more - something we all do in many respects.
> But missing 5/8ths of a school year is going to be absolutely devastating for this generation of kids.
It's not. The amount of learning that happens in a typical school year is not very high. The world can skip an entire year of school, and the educational cost it will pay will not be very high.
The cost of missing a year of childcare, that school provides, on the other hand, is pretty massive.
This sounds like 1970s' movies depicting groups of teenage and younger kids roaming the streets throughout the night after all the community centers, arcades, and malls [i.e. any communal source of entertainment] closed. Midnight skateboarding in abandoned lots, drunk 11-year-olds, graffiti, sneaking out the window as a matter of course ... parents having no idea where their children go at night [remember "Do you know where your children are?"? Forgive a "wrong decade" but the point stands] ...
Of course this is all "crazed cinema depicting crazed societal horror", but are we truly expecting a return to such times and activities?
For primary school, it's a lot more about the child care than it is about the education. At that age the most important thing is safety and enrichment, something provided equally well (well, probably better) by unschooling. Something all my neighbors seem to be doing right now.
We could come out of this with a generation of kids that have learned better how to play and how to let boredom cultivate creativity. Depends a lot on the home situation though.
It’ll also discriminate on educational and monetary lines. Highly educated households are better prepared to self educate, both in terms of experience and available resources. While they probably won’t do as well as teachers did, they’ll do better than less educated households, conferring a competitive advantage.
What you're saying matches up with the reports I've been seeing.
I think a lot of HN readers are simply unable to believe such a thing can occur; the recessions of the past thirty years were mild compared to what's happening right now. Personally, I'm absolutely terrified.
What bothers me more than anything else is the unpredictability of it all. We don't know how this thing will pan out. There is way too much conflicting data about it. Will it burn out and mutate into less lethal strains? Will we get it in the waves? Will it be a seasonal thing we have to live with? Will there be a cure or better, a vaccine? Or will it be like the common cold with no vaccine?.
We don't know. And without that knowledge, you can't plan for the future. I wouldn't want to invest money into any business right now. Who knows what shape we will be in in 12 months time?
This is anecdotal and it might come across as bitter and tonedeaf as someone who is not in a STEM job and cant see the bigger picture very well. Im a diesel engine tech who repairs those big trucks carrying food and shit tickets to grocery stores. the fact that ANY market is completely detached from whats actually happening to Americans is frustrating
This is something I see from coverage of "lock-down protesters." There's a concentration of imagery, so bad associations can be made, pandering to those with left-leaning viewpoints. The underlying message is, "see, we don't have to pay any attention to the ravings of these crazy deplorables."
Such patterns were also at play in the media coverage of minorities in the 1900's and early 20th century. They're just being used by a different set of people with different directional vectors.
What you have to remember, is that a lot of people have been given this "deal:"
How about you have a period of unplanned, involuntary unemployment with little prospect of finding alternative employment in your areas of expertise? Okay, thanks, bye!
It's even worse because the lockdowns hurt young people economically for the sake of the health of the elderly. The lockdowns are financed by debt which will be paid by the young. The young are also probably much poorer and browner than the elderly.
If the country feels rudderless and without leadership, it is.
The top is, well, obviously, useless.
State leadership is all doing different things, which is, in some ways, a good thing, but I don't hear much in a concrete way about what the plan is to address this all over the next 12-18 months. We hear a lot about when we'll "open things back up" or phased re-openings, but nothing whatsoever about a strategy -- THESE are the tests we'll use, THIS antibody test to let people work THOSE jobs, THIS kind of contact tracing.
I'm not quite sure if the states are hoping the federal government will come out with some unifying strategy/process/materials/procedures at some point, or what, but it sure ain't happening.
The back-to-work strategy will most likely be led by large businesses. They have resources, they will decide what strategies they want to follow, and they're all working on that now.
And really, no one can argue with them on that. A governor or president can order businesses closed, they can lift that order, but they can't force businesses to go back to work before the business leaders and customers are ready to.
What governments need to do is clarify the new rules of the road for businesses. For example companies that used to be heavily restricted on how they can use health information are now going to need to test all their employees, make decisions based on those test results, provide protective medical equipment, etc.
> I'm not quite sure if the states are hoping the federal government will come out with some unifying strategy/process/materials/procedures at some point, or what, but it sure ain't happening.
They're not - most of the megaregions are forming interstate compacts to coordinate medium to long term strategy. Colorado and Nevada just joined the Western States Pact which CA/OR/WA started a few weeks ago around the same time the East Coast created their own. I think the Great Lakes states have one as well.
A lot of people care. Many of those who care believe that the situation we're in right now is caused (or at least greatly exacerbated) by incompetent leadership at the national level, but unfortunately that view is not shared by a substantial fraction of the American people, and against that kind of headwind there is only so much we can do.
On top of that, an even greater fraction of people who believe that the administration is incompetent, believe the correct solution to that predicament is to vote the opposite party come election time. It’s as if change in the election system isn’t even an option.
Someone on Twitter described the stock market as a graph of rich people feelings and, facetious as that is, I wonder if there's truth to it. A market driven partly by emotion could mean a stock hysteresis where the market's long-term reaction lags behind the economic reality like you describe. The recent headline "16 million people just got laid off but U.S. stocks had their best week in 45 years" is the most mind-shatteringly insane headline I've ever seen.
The other thing to remember is that nobody actually loses anything when stock prices go down. Everyone still owns the same stocks, in the aggregate, and no actual material property is lost. Just the valuation changes. To insist that valuations cannot be allowed to go down as a matter of government policy is totally bonkers.
It might help to remember that a recession is economic decline over a period of time, so a steep decline over a very short period is not considered a recession. As we move into a longer period of time (in the past, the rule was two quarters, but that doesn't seem to be a "rule" of the definition anymore), it starts to officially be considered a recession.
So it's not that it was being dismissed as not significant before this but, rather, it hadn't been going on long enough yet to officially be called a recession.
Also they are competing for market share with companies on the stock exchange. The sad truth is a shutdown like this is terrible for small businesses that are going to die, but great for large corporations that can weather the short term pain.
But many people invest in commercial real estate directly or indirectly, and all those travel/retail industry companies were advertising customers for google/fb, and their unemployed workers are customers for Apple and Amazon who now have no money.
That the stock market doesn't reflect main street yet after the biggest stimulus in history is perhaps unsurprising but also a little worrying.
Every furniture store around here has been "going out of business" for the last 20 years. At least that's what I've gathered from their "everything must go", "50% off" fluorescent signs.
plus in some areas the unemployment payments have been a disincentive for some to return to work. there have been stories in the news that for many it is more than would earn normally; however most seem to skip over that taxes are not deducted from all benefits and some are taxable so we might get a lot of heart ache come beginning of next year
There is a good free e-book that can shed a bit of light on the mechanics of why markets can rally when the real economy seems to be in deep recession.
Basically when money printer goes brrr then prices of financial assets tend to go up. The unfair bit about this is that these kind of assets are mostly owned by the rich, which makes the wealth gap even bigger.
someone who is not in a STEM job and cant see the bigger picture very well
The bigger picture is not any more visible from a STEM job. I haven't left the house aside for a jog in at least a month, and I work from my kitchen. I am living in a smaller bubble than ever, the only thing I'm missing is a hamster wheel. Wait, no, there's already a treadmill in the basement.
I hope online shopping is helping the shipping industries limp along, if only a little.
I'm sorry, your situation sounds terrible, and this is hard on a lot of people. I truly feel for you and everyone impacted. Speaking from personal experience, not even STEM people are immune from the economic impacts of the pandemic.
1) Have you tried the IRS website to check the status of your payment? My status finally flipped from "GO F YOURSELF" to "Please give us your bank information"
between 2011 and 2016 I went on a bunch of motorcycle trips around the western states. It was really depressing and heartbreaking to see so many closed businesses and obviously economically depressed towns when we were supposedly having a economic recovery. You could see that the situation outside the coastal bubbles was pretty bad.
Over time the more tourist-serving towns seemed to recover.
I am pessimistic that we're heading for the same situation again. The companies that the stock market cares about will recover, we will all go on pretending that things are back to normal. Meanwhile there will again be large swaths of the population in dire straits.
It still surprises me that America has such a culture of leasing cars they can't afford for hundreds, if not thousands of dollars a month.
Here in the UK if you said you were going to buy a car, most people would instantly assume you mean second hand. There's not much of a culture of buying or leasing new cars here, and even less of leasing cars that you really can't afford (outside of petrolheads anyway)
I think there's two confounding factors there, in the US parking is usually plentiful and right out front (or visible), so you're always seen in the vehicle you pull up in. It can be a part of your identity, both for yourself, and socially.
Americans also spend a lot of time in their cars, I went from a short commute to a long commute (1 hour each way), and found I got almost exponentially more critical of my car the longer the commute.
Suddenly the practical vehicle I didn't mind driving 15 minutes, was an eyesore to look at after an hour, and the NVH (noise, vibration, harshness) wears on you exponentially with time.
I started browsing cars to buy that would have been borderline financial suicide for how much I made, just because of how important the comfort and aesthetics became to me.
Couple this with their tendency towards financing things, and how cheap automotive related expenses are in the US, and it's the perfect storm.
I ended up changing jobs to one 10 minutes from my house, and it's downtown so parking is just done at various pay lots a few blocks from my office so nobody ever sees what I drive, and suddenly what I drive is irrelevant again, I was back to being content with my 15 year old Camry.
So while I agree if someone says they are buying a “new car” it just could mean “new to them” I do think a lot of people do lease. I see a lot of young people with new BMWs etc, probably paying with money that they will regret not having put into their pension in years to come. Or maybe I should have lived a little bit more at their age.
As an American it surprises me. I'm in the top 13% in terms of income/household and I've never bought or leased a new car in my life. It's well known (at least to people I know) that if you want to save money you buy used, ideally with cash, although you can sometimes save a little money with financing if you get lucky.
The issue seems to be in previous generations cars were more of a status symbol for many (as well as being generally more affordable), so lots of people were raised with that expectation. So they buy/lease flashy overpriced German maintenance money-pits and scoff at used Toyotas because they're boring.
That or they're just trying to put on a veneer of financial success as part of their "hustle".
Plenty of people must be buying new cars in the UK - the average age of cars is only 8 years, and if you buy a used car it will be a UK model.
That’s quite different to somewhere like New Zealand, where the average age is twice that and almost nobody buys a brand new car - instead most cars are imported second hand from overseas.
This is very eye opening, thanks. Yes, in the US, the implication is the opposite: "I bought a car" is taken to mean brand new.
I guess part of it is that it's a very car oriented culture, but the other part is that people value owning a new shiny thing over financial cautiousness.
I suspect this has to do more with social circles than country. Obviously there are more people buying new cars, or else there wouldn't be any used cars for anyone to buy. I think the same is largely true in the US -- lots of people would never buy a brand new car, but there's also many people who would only buy a car brand new. The break down is probably 30/70 or 40/60.
So, how is it that people employed in essential businesses have not become rich in this pandemic? After all they are in high, crucial demand and could/should command better wages than programmers at this time. Sure, some of those raises would increase the price of goods, but that would be offset by hefty UBI checks to everyone. How is it that people who endanger their lives working in supermarkets don't get raises, but developers (whose contribution to the pandemic was "lets make another surveillance toy") get to work from home and still get their full paychecks? I'm sure someone will find a great excuse why it's wrong to think that and some other economicky argument. But something feels wrong about it.
Hope better days for you man, but those other jobs in leisure sector will not recover for a long time unfortunately. Do you think that they can somehow use the itnernet to keep businesses alive?
Lack of strong unions is one contributing factor. Companies have all the power, and this situation is giving them even more power. No one dares risking losing their job in these conditions when so many others are already out of work and would take any paying job without complaint.
That would only really happen where workers are actually getting compensation commensurate with the value of their work. That hasn't been true for years (if ever) in the US.
Also essential doesn't really mean their more in demand now than before in all industries. Mechanics for example are essential and still at work but cars if anything will be needing less maintenance now than before because so many people are out of work and not driving anywhere for vacations.
Additionally the places where there is simply an increased demand and need are a lot of 2 types of job 1) warehouse workers or 2) manufacturing. Warehouse workers don't have that strong of a bargaining position because places like Amazon are already used to constant turnover, surge by up to 200k a year already, and only really need warm relatively able bodied people of which there are loads right now that'd love a job. Manufacturing people are in a slightly better position as it's harder to just throw bodies at it but factories have limited ability to ramp up. Grocery store workers are kind of (1) employees where it's very easy to replace workers so it's tough for ununioned employees to demand hazard pay or raises because it's very easy to find replacements, especially so now when there's so many other service industry jobs that are out of work right now.
Because essential doesn't mean hard to replace or highly skilled. It sucks and I wouldn't want to do their job but enough people are willing to at that wage.
With 22 million out of work, it's easily to replace an "essential" meat packer. It's far harder to replace an engineer or doctor even if they aren't essential
That's why white collar workers make so much money in the first place...
You probably know this, but worth saying just in case: you should look into unemployment assistance. I believe that the CARES Act applies in case of reduced employment, and the $600/wk benefit is always given in full.
Assuming the state’s computer systems and unemployment department personnel can handle it. Which they obviously can’t since millions and millions of people have requested unemployment assistance but are met with error messages and busy signals on the phone, and don’t have the money they need.
I don’t want anyone to have to put themselves at risk of catching covid in order to survive. And, the survival of working class people has to be placed above the convenience of upper middle class people who want a haircut or to go to fuddruckers.
At the same time, working class people are the ones who will suffer first and most from an economic downturn. So if they want businesses reopened, you can hardly blame them.
I think we need ubi, right now. Can’t think of any other solution.
>> No school means poor kids roam the street like packs of feral dogs asking for money for food around here.
In a lot of areas, schools are still open to serve breakfast and lunch to kids, school buses are dropping off food, and in states like mine, half the families are getting extra cash for food right now. Families will receive $193.80 total for March and April for each eligible K-12 student, and another $182.40 total for May and June.
Thank you for sharing your experience. That's tough.. I can only wish you the best of luck, surviving and thriving.
Having tasted some of the bitter existence out there, it felt needlessly cruel. In a land of abundance, there's really no reasonable explanation for anybody going hungry, being without shelter, live in dilapidated conditions, fear one's neighbors, fall into irrecoverable debt for healthcare, or any of the million ways that poverty ruins people.
I've been down and out in the U.S., where whole neighborhoods were struggling. It's enough to drive one crazy. Much respect to those able to rise above (or just hang on) and still manage to keep their spirits up.
Mass media and journalism often feel way out of touch with the day-to-day realities on the streets. Much of the time they're in the business of shaping the public narrative, rather than giving people a voice or reporting the truth.
Normally economic indicators are signals of what is to come. However with the sudden current crisis it's the other way around. Everybody already knows millions of people are without a job and the situation is very bad. This is not an economic crisis, this is a health crisis with economic consequences.
Unfortunately, business failure is part of a laissez faire economic philosophy (i.e. let things take their own, natural course without interference). It's also part of life-- the cycle of creative destruction.
Some businesses will fail (for whatever reason). New ones will step in to fill the void-- perhaps very similar ones, or ones somewhat similar to those they replace.
I think of it as economic evolution.
The world outside of those businesses has evolved-- if those businesses and their management are not simultaneously evolving, then they risk being left behind.
I think the covid-19 situation has exposed weaknesses in the economy, which will be shored up-- but not without painful economic corrections.
"No one seems to care" Eh, the reality is that the owners, families, and adjacent/partner/affiliate companies may care.
Other people care-- about other things which are higher priorities from them (things which you may not be aware of).
Ultimately, those businesses may have failed in part because their owners/management didn't care enough to evolve their skills and offerings to what is in demand in the economy (outside of the impact from covid, of course).
To be honest, if you really want to understand economics, you might not be trained to the degree necessary-- i.e. diesel mechanic does not equal knowledgeable economist. So, you are allowed to have an opinion, but others like myself might remind you that it is not a qualified economic opinion, but rather the opinion of a mechanic.
For example-- Do you take investment or other economics advice from your local mechanic? Do you think others would? I certainly wouldn't. As such, if I were a mechanic, I would not have confidence in my assessments of economic situations-- instead I would read the thoughts of those who I am confident are knowledgeable on the topic.
Assertions are easy to make. Valid assertions depend on knowledge, experience, data, perspective, etc.
And this post is why I get so infuriated when I see all the blue-checkmarks on Twitter, calling people who want to go back to work "Selfish, stupid, idiot, etc".
People don't want lockdown to stop because they need to go to their hairdresser, or because they need to go hangout at the pub, or whatever idiotic reason these privilege a-holes put in their tweets. People want to get back to work, because they need money, to have a roof above their head. To feed their kids.
Edit: Just to clarify because I see a lot of misunderstanding in the replies: I am not advocating to end the lockdown. I am criticizing the tone deaf, patronizing, rude, caricatural comments attacking people who want to end it to get their paycheck back.
The essential motivation for people to want to feed their families/pay bills is completely logical, but it's important to keep in perspective that the virus doesn't care about any of these things. We don't need to look too far back in history to see that ending isolation in a pandemic too early can have huge consequences (much bigger than an economic slowdown/unemployment).
We can print more money right. Money isn't real. Death and this virus are.
How about we just take care of those who need taking care of during this disaster. How about we put all national efforts to keep the lights on, providing safe housing and keeping the food supply chains intact.
Instead we are worried about corporate quarterly profits and when the Ruby Tuesday can reopen, because somehow serving burgers for $3/hr plus tips is going to secure that person's financial situation.
Most people who don't have money don't want to go back to work. They feel like the have to go back to work even though it's a terrible idea, because the rest of the country is refusing to support them while they can't.
The biggest contributor to this economic downturn is the pandemic. Demand and market valuations plummeted in February, long before any stay-at-home orders.
On the flip-side, putting all businesses in this situation means most of us are in the same situation; and every market/industry needs to work together to get out of this crisis.
If no one can pay their mortgage, loan holders HAVE to make exceptions.
That shared spirit of sacrifice isn't a reason to institute lock down orders, but my opinion is that it will allow us to lesson the economic damage long term.
I guess I don't understand why more people aren't asking for a solution that allows them to sustain themselves and their families and also doesn't elevate the risk of spreading COVID-19. I don't get how "end the lockdown and let a bunch of people get sick" or "possibly starve homeless in the streets" became the only two possible options, and I don't get how anyone becomes a staunch advocate for either.
I understand their thinking because not working is causing a massive amount of collateral damage, but the virus doesn't care about any of that. If everyone goes back to normal too early, this all just starts over, and folks are forced to be inside even longer, there's just no way around it.
blaming "Blue Checkmarks" for the fact that people are being victimized by capitalism during a pandemic makes me sick to my stomach. What a hopeless year this has been.
My brother, though his situation is not so dire, has given me similar anecdotes, many of those from his friends group. He lives in a small college town in rural southeastern Ohio. Many of his friends, though, who are being hit very hard right now are all over Ohio... Columbus, Cincinnati, Akron, Dayton.
> His mother is getting evicted from an assisted living center in a few days and his girlfriend is sick.
That's awful. I know some localities have "paused" evictions and payment "holidays," but there's been a lot of unevenness. Frankly, I think there should have been a national to that effect, so there'd have been uniformity and no gaps.
STEM jobs are starting to feel the pain too. They also make their money by selling to other companies and people who are hurting. The Behemoths are doing alright but there are so many business areas of software that are about to crash into the rocks fairly soon because their customer base has disappeared.
> No school means poor kids roam the streets like packs of feral dogs asking for money for food around here.
You don’t think that describing poor kids who cannot go to school and likely cannot afford to eat on their own as packs of feral dogs is problematic at all?
I found that part odd. Describing children of poor people as packs of feral dogs is similar to me as to describing children of black people as pack of feral dogs. The only conclusion I can make out is that either people did not interpret it as a negative description of poor people, or that looking down at poor people is more acceptable than in my own culture.
I would be very interested to hear from someone who find the current phrase acceptable but not if the comment had written "black" rather than the word "poor".
And all that because of a virus that has a fatality rate about between .2 and .5% which mainly targets people who are already on the verge of death to begin with.
We need to begin opening our country back up and implementing more targeted lockdowns and isolations for the most vulnerable.
Not only will this bring us to herd immunity faster, we will have a huge pool of recovered people available to donate plasma antibodies to those suffering from the virus.
Taking the recent deluge of antibody test data that's been released in the last few weeks from around the world indicating infection rates are far higher than official numbers indicate and the growing threat of economic misery for tens of millions, this is the best way forward.
The difficulty here is that the lockdowns are almost entirely self-inflicted, not the result of directives from the government. So even if the government proclaims "back to normal everyone!" very little will change in reality.
Though, if "go back to work!" also means the unemployment assistance and stimulus payments stop, it could get more exciting.
Or, instead of taking the lives of those who cling to it, we could enact sensible policies to re-engage the capital squandered by the richest in our society. "But that would be tantamount to thievery!" you say. Perhaps, but that seems better than murder.
Current estimate is that you need around 70% of the population infected to get herd immunity. 0.5% fatality rate * 70% of the population is >1 million deaths in the US alone.
It is clearly not, otherwise that 4.8% would be a much bigger number. Hyperbole doesn't help here.
No one claims things are good. A global pandemic is a disaster any way you cut it. We're all affected, some much more than others, and we all have to help. But there's no magic wand we can wave where we all go back to work, either.
Even "essential" industries are affected. Very few people want to go to a crowded restaurant or theater right now, lockdown rules or no. Almost no one wants to travel on an airplane. That's just not coming back until we get the disease under control, and releasing lockdowns pushes that date farther into the future.
Remember the disease is disruptive all by itself. We have something like 25% of the nation's pork butchering capacity off line right now, not due to lockdowns (obviously they were "essential") but due to actual outbreaks. And that's what we should expect everywhere we permit commerce: random, uncontained, very disruptive outbreaks.
There's no magic. This sucks. But we have to work together to fix it, and harping about only one side of the problem hurts and doesn't help.
> It is clearly not, otherwise that 4.8% would be a much bigger number. Hyperbole doesn't help here.
Uh buddy, you know the first quarter is January, Feb, March right? The country was in shutdown mode for maybe half of March at most. Extrapolate that out to the full quarter (ie multiply 5% by 6) and you get a 30% drop. And on top of that, in March many businesses were still trying to partially pay or at least remain in business on paper. That's all done, plus now we start getting secondary effects.
The Administration's mismanaging of this situation is one of the single most costly screw ups in our country's history.
The Market does not scale directly off unemployment numbers. Depending on how the GDP is being calculated here, it could be over-valuing certain fields and that would bias the shrinkage in one direction or another - for example, the tech industry is more likely to be able to work from home, so those businesses are still mostly operating, and tech is also a high-profit-low-cost industry that isn't as dependent on having supply chain stuff (like factories and warehouses) as other industries are.
High unemployment in tech or finance would potentially drop GDP much more than high unemployment in low-income fields would, even though low-income workers are often VERY important - nurses on the front lines right now don't bring in big money, neither do people staffing grocery stores or fulfillment warehouses.
What, concretely, does this mean, especially if creditors are pressuring people to return to work to keep up with their payments, and returning to work is a public and personal health hazard?
I understand that the economy and the market are different but I'm so confused. The S&P is up ~12% this month, despite massive unemployment, a shrinking economy, and serious long-term questions about the outlook.
Is most of the 12% just market speculation that the virus issue will pass without a long-term earnings hit?
1. People keep saying about the market being up recently, but skip the part about it still being down about 10% since the start of the year.
2. S&P is heavily weighted towards the strongest companies. Amazon, Apple, Facebook, Microsoft and Google account for 20% of S&P market cap. Most of those companies have been helped by the pandemic, or at least not hurt nearly as bad as smaller companies.
3. The market is always very forward looking. It is essentially betting that things are as bad as they'll get. I don't know if I personally necessarily agree, but if you look at countries starting to open up it's not an unreasonable bet.
4. Government policy, both current and expected future.
I want to add emphasis on (2). The effects are not spread out uniformly across all businesses. The hard hit businesses including restaurants, bars, and hair and nail salons have seen almost all of their business evaporate. You're not going to find the corner nail salon in the S&P 500.
The S&P is where it was in October last year, there, it just erased the massive gain in Q1 this year. No serious recession is priced in really.
And the only thing that can explain where the stocks are now is that the Fed has pushed 2 trillions of liquidity into the market in matter of weeks, which is just unprecendented (the previous QE were much more gradual) and that lifted all asset classes.
But at one point stock prices will need to get back in line with earnings. I don't really hear anyone talking about v-shaped recovery anymore.
> 1. People keep saying about the market being up recently
So, down 10% from the previous bubble.
> 2. S&P is heavily weighted towards the strongest companies
Good point. Dow is also up almost as much though.
> 3. The market is always very forward looking.
I may be cynical, but I see perhaps 2 to 3 years to regain the jobs we are losing, to see the employment rate return to earlier levels. That's years of depressed spending, and all the other woes of society from high unemployment.
So the market is looking to, what, 2025 or something?
You're spot on. The companies you listed plus others are going to come out of this leaner, with fewer competitors, and a whole set of new people forced to learn how to use them. Great news for those companies.
I would also add a #4 to your list that people often miss. There is risk and there is uncertainty (think unknown unknowns). The market hates uncertainty because it is so hard to price. Risk though can be priced. This is often why the market will go up with numbers that look really bad when they come in. They are no longer uncertain.
> 2. S&P is heavily weighted towards the strongest companies. Amazon, Apple, Facebook, Microsoft and Google account for 20% of S&P market cap. Most of those companies have been helped by the pandemic, or at least not hurt nearly as bad as smaller companies.
I thought I'd look up the performance of various indexes for the past month (as of the time I looked them up):
* S&P 500: +15.2%
* Dow Jones Industrial Average: +14.1%
* Nasdaq Composite Index: +17.9%
* Russell 2000: +21.7%
* Russel 3000: +16.0%
* Wilshire 5000: +16.3%
I then looked at the YTD, and didn't bother comparing them because they all essentially looked identical to one another.
Note that the DJIA and NDQ are mostly contained within the S&P are they are highly correllated. Weighting aside (I'm not actually sure what differencs their might be), the S&P is contained in R3k and W5000, but not R2k.
So no, I don't think the idea that Apple and Facebook are doing well (thus keeping hte S&P numbers inflated) holds weight. In fact, the Russell 2000 does not include the top 1000 companies (like the Russell 3000) and shows the highest return for the past month.
Rather, it seems like all of these indices are correlated. It reminds me of the Hillary Clinton autoregression of prediction markets during the 2016 election: immune to new information.
The market incorporates news quickly, such as that there is a pandemic and it is going to have bad effects. Then it essentially forgets about it. I suspect most of the 12% is a response to government actions to control the pandemic and to the recent news that it is coming under control. You will see another drop if relaxing controls leads to another covid spike, and when economic effects appear on corporate financial reports, and when long term job losses are reported. Those are perfectly foreseeable, but in the meantime the market will likely go up as the memory of why they went down in the first place fades.
4. Investors are driven by quarterly results. Q1 earnings are all being released right now by major companies, and since the pandemic only really hit in March, they're reporting pretty good results and investors are reacting as they always do.
This is despite the economic slow down as B2C companies losing 20-100% of their customers and B2B companies lose their B2C customers who no longer have income.
I agree and there is one other thing. Interest rates are 0 you can try to sit on cash but with the increase in money into the system, that is a loser long term. The Fed is buying things to keep prices up. There are trillions that have to go somewhere. Asset prices continue to propped up and people and funds are chasing returns.
On #2: No one is helped except perhaps medical supply companies. Folks are mistaking the durability of these companies in the face of SIP orders (due to their ability to function under WFH conditions).
> People keep saying about the market being up recently, but skip the part about it still being down about 10% since the start of the year.
It's also at the same level as one year ago. The economic situation, and outlook, is surely worse than one year ago? What has improved is the Fed inclination to make it true that stonks can only go up.
It is a bet on the continued support of the market by the Fed.
If you're interested in preserving purchasing power 15 years from now, would you rather hold dollars or things today?
As a value investor, all of my theses were blown out of the water by the unprecedented Fed intervention. It is an environment in which the fundamentals are uncertain. I'm standing pat and waiting for things to make sense before moving again.
The trailing (!) S&P P/E is greater than 20 right now. The Fed is supporting prices above their historical mean/median of 15. It makes zero sense, from a financial standpoint, unless the market is pricing in substantial inflation.
> The trailing (!) S&P P/E is greater than 20 right now. The Fed is supporting prices above their historical mean/median of 15. It makes zero sense, from a financial standpoint, unless the market is pricing in substantial inflation.
No, it's just pricing in low returns across all asset classes (to simplify, low interest rates) - assets are priced by excess returns not absolute.
There's nothing unreasonable about a P/E over historical norms if you think interest rates will continue to stay well below historical norms.
1. P/e does not mean much without context. Certainly not what the value of a company should be.
2. Fed helped and did what they are supposed to, which is good for everyone.
3. Market is forward looking and it should be, otherwise it would be dumb. In other words corona will pass, it is not the end of the world and if stocks went too deep, potential earnings from stocks within 5-10 years down the line would be huge, so anyone looking at that timeframe would be buying at discount.
High p/e does not mean things are overvalued. It means whoever buys into market estimates strong future potential. Now knowing that you can start to argue whether they are over or under estimating.
I felt like the biggest dolt that I didn't sell my stocks en masse a couple of weeks before the plunge, when it was already obvious C19 was going to be a big deal. I reasoned "The Fed will just inflate the currency to maintain stock prices anyway, so why would I want to go long on the dollar?"
Now a month later, my initial instincts don't seem so wrong anymore: My portfolio is doing fine... All I missed out on was a bunch of theoretical day trading gains.
(Too bad the things that really matter, like my friends that run local businesses, and everyone's mental health, haven't fared as well)
It's studying for the test. It's too common to see a stock index as the stock market as the economy, buy they're all distinct things. Ideally an index _should_ represent that market, but when an economy becomes massively centrally planned by an overreaching fed, it's too easy to prop up those in the index to make the "economy" look strong. Ultimately, purchasing power, people's ability to save, liquidity of assets, etc were pretty bad before this recession. Those are the things we should actually care about - maximizing utility.
It's especially galling because the people pushing for these nigh-Stalinist levels of fed intervention and central planning (look how much support oddly favoured industries like manufacturing and coal get) are also posturing as champions of the Free Market. It's like we can't make any progress because nobody in charge is willing to argue in good faith.
If the dollar gets less valuable due to the government printing cash (or buying bonds or issuing loans they are expected to later write off), then things denominated in dollars increase, even if the real value remains unchanged.
It's hard to tell if the dollar is weakening, because most other currencies are in the exact same position.
Yes in fact the only thing you wouldn't want to hold is dollars; you'd want to hold things that will earn more dollars in the future (an inflation hedge), such as equities. Then you'd only care about FX rates (to the extent you are purchasing internationally), and I don't see any indication the FX futures market is moving against the dollar.
The S&P is a reflection of where traders are betting things will go. It is not a reflection of the economic reality at that moment in time. It's also down 10% YTD which is fairly substantial.
More important than anything though is that the market right now is absolutely rigged. It's not just irrational and forward looking, it is completely rigged. Central banks all over the world are directly propping up the market up. The market has never been more of a ponzi scheme for the rich than this exact moment in time.
The S&P crashed 35% before going up again, and is still significantly lower than it's high a few months ago. So I think it is more that the virus is not as bad as we thought a month ago (which seems to be true - projections in the US and Canada have gotten significantly better over the last month). The market does not go up or down when we get bad or good news, it goes up or down when we get news that is better or worse than expected.
Also, the S&P 500 is made up of mostly large companies, many of which could benefit long term from the virus. Sure in the short term there will be a revenue hit, but in the long term if their smaller competitors can't survive that hit and they can, they will become more dominant in the future. As far as I know, small business indexes have not recovered much.
The virus's effect on the US economy is significantly worse than it was estimated to be a month ago. Back then the thought was that we'd be fully operational in a few weeks. Now there's increasing evidence that we may be economically degraded for months or years.
It seems to me that the stock market or GDP are very bad measures for the economy. Maybe we should look more at average purchasing power or something like that which actually has real meaning for the regular citizen. The stock market seems to have turned into its own system that’s detached from the experience of most citizens.
Metrics like that would be a lot more directly meaningful, but the problem is they're impossible to measure. How would you find out what the average purchasing power is on a day-to-day basis?
Stock market is essentially a sentiment graph. There's no need for it to be linked to any underlying useful metric - it's entirely likely people are investing in stocks simply because all other investments are worse.
Obviously sentiment is a factor, but there are a million analysts with very complicated and dense spreadsheets trying to include every single detail to come up with their forecasts. It's nut just instinct.
It's mostly companies that do well in any market or have a habit of surviving massive market disruptions. Sort by founded date. Almost all of them are 2000 or older.
To add to this: even within the S&P-500, the better ones seem to do much better than the average ones, so the NASDAQ-100 outperforms the S&P-500.
As an investor: Very happy with my "QQQ" (NASDAQ-100 ETF) investment, but my more diverse retirement portfolio is nowhere near as good. I have recently been buying hard hit stocks that I think will survive over the long term: Disney, Marriott..
As an employee: well, the trick is to remain employed.
The wealth bubble is still alive and well. Mass layoffs of low-wage workers don't change that very much, and the wealth bubble drives demand for investment vehicles as a class of goods. As long as it keeps inflating, the price of investment vehicles will keep going up, which includes the stock market. And as long as you expect it to keep inflating, you should expect the stock market to keep going up, unless there's a mass exodus into some other type of investment.
This may also help explain why many people are terrified of the wealthy getting less wealthy: it'll cause a massive market correction as the demand for investment vehicles decreases to a more reasonable level.
Well, that's a 12% increase following a huge drop. So the market is still 15% or so under its February peak.
A significant number of S&P 500 investors (roughly 40%) hold their investments in retirement accounts. These people are not going to sell unless forced to because they lost their jobs. If you're looking for a huge drop in the S&P 500, then keep an eye out on laws that allow for penalty-free withdraws from retirement accounts and reports that Americas are taking money out of their retirement accounts to live.
Also, there are plenty of people betting on the market going down.
> So the market is still 15% or so under its February peak.
The S&P 500 was up 29% last year. It's now back to the level of October last year - when there was no pandemic or economic crisis. So you could say that the market is remarkably blasé about the current situation.
The CARES act waived penalties for up to $100k in withdraws from an eligable retirement account, and lets you pay off the taxes on that ratably over the next 3 years, assuming you don't contribute them back to the plan, which you can do at any time during those 3 years.
AFAIK stocks are up due to the announcements that the lock downs will be ending. However, the surge seems rather short sighted: you can coax stores into reopening, but you can’t force people to go out and shop in them like they used to.
You will get 100 different answers. I like the argument that inflation is actually high, but our outsourcing of goods that make up the consumer inflation algorithm to cheaper countries makes it seem like inflation is low, but goods that can't be outsourced (education, housing, startup unicorns, financial assets like stocks) were eating the excess inflation that had no other place to go.
So the real value of stocks is lower when adjusted for true inflation, but everyone claims inflation is minuscule / nonexistent so we can pretend that printing trillions of dollars and handing it to banks is having no effect.
Can't post this enough these days. TLDR is that the stock market is forward looking. It goes up or down based on whether conditions are better or worse than EXPECTED. If reality is in line with expectations then nothing happens. If it's better than expected stocks go up, if it's worse than expected stocks go down. The current shitty economy has already been priced in as far as can be known.
Related to this is that the current circumstances are different from, say, 2008, which was a sort of internal collapse. A lot of this is external, regulation-driven. Not saying it's not a bad situation, or all government shutdowns of the economy, but there is a big element of it.
A lot of businesses are cutting back because people can't go out and do what they'd normally do legally. So when governments start easing restrictions, people [stockholders] are probably more optimistic because the situation seems more tractable. It's a lot more predictable than 2008 when people were talking about the collapse of fundamental financial institutions and systems involved in monetary supply because of their underlying structural composition.
I do think there's some disconnects in interpreting the stock market, but it seems to me investors are just seeing restrictions being eased, daily COVID case counts on a downward trajectory, etc. They're reinvesting in markets they see a path of recovery in, early.
What's less certain to me is if in say, July, this all gets worse again with overrun hospitals, etc. in a second wave. Then markets might really take a nosedive.
The last time the S&P price was at today's level, it was October 2019. The market is essentially saying that the forward-looking expectations of the companies in the S&P today are similar to what they were in October 2019. I'm not an expert here -- who knows, maybe they're right -- but I find that judgement very hard to take seriously.
The S&P500 is an index of some of the best performing companies in the US. Their performance isn't completely correlated with the broader market. Additionally, this damage to the economy is not permanent, most companies in that index will survive and continue to / return to paying dividends for a long time going into the future.
The top percent have spent the last fifty years severing worker productivity from worker compensation. In doing so they have made the stock market less and less related to the status of the average American. Only the two wealthiest people I know cared at all when the initial covid panic dropped the market by thirty percent.
Remember that in late March and early April, it was completely unknown when the economy would restart, with many people floating the idea of maintaining lockdowns for 18 months. It makes sense that the market is up from that low now that people in many areas are getting back to work.
Not sure how widespread this is, but my company is doing fine, business is up, yet due to COVID-19, is delaying raises and retirement contributions. Companies have a good excuse for layoffs and for not increasing salary.
The market ostensibly has a much longer view of things.
The word 'recession' is essentially meaningless without knowing the impetus for it.
The 'outsourcing of Jobs to China' is a huge, permanent, secular shift that may affect stocks one way or another, but the 'coronavirus' is something I think business believes we will recover from quickly - for the most part.
Tim Cooke told Trump he thinks it will be a 'v-shaped recovery'.
But remember that this recession was 'self imposed' in the sense that we ordered businesses to shut down. We can open them again just as quickly. Obviously that won't the entirely the case but I think this is the sentiment.
When a new CEO takes over a business, he might 'write off' a bunch of crap. Even though the company loses money that quarter, analysts see it as a 'positive sign' because the company is getting rid of dead weight on their balance sheet.
So like a 'one time charge' type thing.
I think markets are seeing corona as a 'one time charge'.
How many people do you know who are going to buy the latest iPhone this year or next? I can tell you that among my acquaintances, that number is vastly lower than it was if I asked the same question in February. And that's assuming that everything with the virus goes as well as possible, which it isn't.
This month has been pretty good news for the economy. Vaccines entering trials, states passing the peak of infection, potential positive news with treatments, large amounts of government intervention indicating that the government and the fed are very focused on putting a floor on the economy, bernie sanders suspending his campaign, lowering how much influence he can have on the democratic platform, and so on and so forth. All things the market likes.
also, even if there is a decrease in earnings, interest rates are also lower, making stocks more attractive.
The market is still down from overall highs. We're not as far down as we were since we don't think it's going to be as bad anymore as we had feared. For 500 large cap stocks listed on US stock exchanges, perhaps about 12% better.
Also, in any recession situation, there's very high volatility. The days with highest stock gains tend to occur right before and during recessions. Even if there's a net downward trend, we'd expect things to be swinging all over the place as people keep overcompensating to the daily news
The market is a Keynesian contest. Prices are not based on some imaginary formula of GDP or profits. It’s based on sentiment, and thinking what other ppl feel about the market.
You wouldn’t bet the economy will be normal by the end of the year but you might bet others think it might.
?? What is the purpose in comparing metrics about our economy recessing based on production of goods vs a market for pieces of company ownership. They are not and never have been the same and there is no law they must follow the same trend
This is the most optimistic market participants (bulls) buying at low prices and creating momentum that others follow.
Waiting for them at higher prices are the pessimists (bears) ready to sell into the rally.
Since there really hasn't been a capitulation, where everyone who would ever sell actually sold, it's likely the bears are still in control. I think some people are mistaking the extreme volatility as capitulation.
> Since there really hasn't been a capitulation, where everyone who would ever sell actually sold, it's likely the bears are still in control.
I have heard this before, but I am having trouble feeling this. How do you determine capitulation? We had several days where trading was halted for a time due to steep losses, and 3/16 was the second biggest percentage loss in history (for the Dow at least).
If that isn't capitulation, what is? Hitting the 20% circuit breaker a few days in a row? Only in 1987 has the market fallen more than 20% in a day.
One reason I think the market is rising is because "everyone who would ever sell actually sold". Therefore, only the eternal optimists are left; the pessimists are sitting this one out.
It's pretty insane that the S&P500 is higher than it was during October last year, hell even something like 7% higher than it was last year May. There was a post on reddit joking about a guy going into a coma last year after having purchased a share of an S&P500 ETF, waking up today and hearing the news of a global pandemic, people were told to quarantine at home for more than a month, a quarter million people died, more deaths in the US than 20 years in the Vietnam war, unemployment at 20%. But when he looks at his stock account, it's in the green.
It feels like this is trickle-down economics again. Bail-out large companies by issuing cheap money, stock markets stay pumped, big companies don't go bankrupt, and hope employees don't get fired, and give each individual about 1 week of average income in the US as a little boost.
Meanwhile, 20% of people have last their jobs, the $1200 hasn't arrived or was already spent.
I know this is bad math but just as an estimation:
Fed balance sheet increased about $2T, and Congress spent $2.2T so far with more to come. That's at least 20% of GDP ($20T). Optimistic forecast is that the economy shrinks like 30% of GDP, so that's a 10% net reduction in NOMINAL spending/earnings.
SPX is down like 15% from it's previous high. The market seems to expect things to return to normal next year, which is probably short-sighted, but it's a market.
The real value of any company is down because it's producing less, but the nominal price of the company is inflated by the government spending. So the price of SPX is is not insane (if optimistic), given the government's actions. No comment on whether the actions themselves are sane.
Exactly. In 12 months from now stocks may even be worth the roughly same dollars they are today, but the surge in money supply means more dollars chasing the same amount of stock anyway.
The S&P/Gold Spot charts will be the interesting ones to watch over the next few years. While S&P shows consistent 6-7% returns historically, that's valued against the dollar. When you chart it against gold the returns are closer to 3-4%, and there are periods where S&P goes down in value against gold for years at a time.
This could also just be a 'bull-trap', and the major stock indices could collapse soon. There was a major bull-trap at the beginning of the great depression.
I know, this is just terrible. The rich insulated themselves from any risk and in case of calamities like they double up. I don't know what we're on to next.
NB this is for the first quarter of 2020, which had hardly any impact from Covid-19 - lockdowns mostly happened late March and the start of April.
So the second quarter will be a better reflection of the impact of shutdowns and changes in consumer behaviour/travel, but we won't see figures for that for a while.
Almost more worrying, 20% of the value of the S&P 500 is now concentrated in the top 5 tech stocks, which are vulnerable in these conditions (advertising spend is dropping dramatically and unemployment is rising).
While you’re right that Q2 will be worse than Q1, don’t underestimate how early the pain started. Restaurant bookings on OpenTable began dropping in early March, before the lockdowns began. By 3/16 OpenTable has bookings down 50%, before most municipalities had lockdown orders in place.
And that’s not even including the drop in travel and supply chain difficulties, which started earlier still.
Large scale government lockdowns may have started in late March. By the beginning of March, corporations, local governments, and people were starting their own lockdowns. I had a 3 day business trip in early March. I wasn't sure if it was going to be cancelled because of the virus. Both flights weren't even half full. Security lines were either almost or entirely non-existent. In Philly, traffic was significantly less and far fewer people in restaurants than previous visits. Before I got home, local schools were already starting close. From my point of view, everything started at the end of February or very beginning of March.
Vulnerable, yes but the google earnings from yesterday show even in advertising, there seems to be a temporary floor.
Entirely possible the floor is a temporary illusion and falls out over next 3mo, but the market is betting that won’t happen (I don’t know why, I’m not an expert on ads)
Yes, it could conceivably go either way at present, and I guess the market is being optimistic, but most countries are locking down for months, not weeks, and there may unfortunately be a second wave for some.
Do bear in mind those google results were for a quarter which was pretty much untouched outside China.
I don't think US companies felt much pain, certainly it was nothing compared to being forced to shut for months, or having most of their customers forced to shut/stay at home.
So I still think there's a huge disconnect between market perception of what's going on and what's actually going on. Last month I was saying "don't treat this is a temporary dip". Many have never known anything other than a bull market. The S&P 500 has rallied some ~20% since then (after a >30% fall mind you) so I've had a couple of people point to this like I'm wrong.
The perception many seem to have is that everything is going to go back to normal in a month. But some businesses and jobs are just... gone. This will absolutely impact demand and this will be much slower to recover.
I was also surprised to learn that S&P 500 earning shave been flat since 2014 while the market has gone gangbusters. That had to come crashing back to Earth eventually.
Also, some things like social distancing are here for the long term. I've already gotten emails from airlines saying they won't be filling certain seats on the plane. It's probably going to be a lot nicer to fly in coach, which I guess many will enjoy, except it's going to have to get more expensive. Less passengers, same plane, higher price per passenger. It's just simple math.
And who's going to be traveling anyway? Business travel (the lifeblood of most airlines) is going to take a long time to recover.
The economy just doesn't shrink 5% and everything is back to normal the next month. People who think so are hopelessly naive or just plain delusional. And that GDP contraction isn't going to end here.
> I was also surprised to learn that S&P 500 earning shave been flat since 2014 while the market has gone gangbusters. That had to come crashing back to Earth eventually
I was also surprised recently to learn how flat earnings have been. The stock prices going gangbusters can be explained (at least partly) by earnings per share going up due to stock buybacks. If you go look, most companies have significantly fewer shares outstanding than they did in 2014.
Not when you factor in that shutdowns didn't really start until the very end of the quarter. According to Wikipedia[1], earliest state stay-at-home order was March 19 in California and 19 states either waited until April or never issued a stay-at-home order.
It wasn't just large government shutdowns. It was local governments taking action, people traveling less, businesses cancelling/denying trips, people eating out less, etc. All of that started weeks before the large scale shutdowns.
Let's assume that 2 weeks of Q1 were significantly impacted. Let's make the very poor assumption that it scales linearly. That would imply that in Q2, we'll have about a -7% GDP, -28% annualized.
I wish I could say I disagree, but to be perfectly honest, I was fully expecting a recession last year. As someone may have already mentioned though, between FED basically keeping the market afloat, stimulus working its way through the economy and dollar still riding as a safe haven, it is not that surprising that US economy did not crash, while a good chunk of population is at home and out of commission.
The thing that worries me is that by attempting to prolong it as long as we are, we are basically setting up a stage for a greater depression. We already saw 'sell everything' panic in March.
If Thanos snapped his finger and disappeared the oldest 10% of the population, ~33 million people, I'd wager that would do far less economic damage than keeping everyone on lockdown for 365 days. The rate of the economy shrinking is going to get worse and worse as more companies go out of business.
I wish we could not communicate in bumper stickers. I did not argue this in any way, but you jumped to a conclusion and I am not certain what that conclusion is based on.
I do not want to make trite comments about how US economy is not the same as S&P500, but I will point that those losses were largely gained back for now. The US economy is still going ( and that is despite lockdown ). Hell, government could declare no business is essential and it would still go on in the form of black market.
Because keeping it afloat indefinitely creates a fake value that does not correspond to real situation on the ground. That reality will eventually burst the bubble and because the bubble appears to encompass just about every asset class, it will hurt everyone.
Readit News
My job just cut benefits and hours but we're "essential." Remember those $1200 checks? Im still waiting on mine. Lenders and banks were supposed to start going easy on loans but ive had two emails and a phone call about the loan for my Silverado this month and wouldnt you know, the caller was excited to mention my stimulus check.
A guy who used to be my bartender now couch surfs a few days a week at my place while he looks for work. His mother is getting evicted from an assisted living center in a few days and his girlfriend is sick. She 'works at the Amazon' so she cant take any time off, but hes hoping if he gets a job at the Flying J at the edge of town he can switch places with her and she can take a few days off.
Shops are closing and nobody seems to care. Ive counted 2 furniture stores, a consignment shop, a few barber shops, and half the god damn bars in this town including one that was burned to the ground "mysteriously" over the last two weeks. Someone spray painted a swastika on the late night pizza joint.
So yeah this is a recession but it is so much worse than a lot of people think. No school means poor kids roam the street like packs of feral dogs asking for money for food around here. Half the country is out of work and the best Bloomberg can come up with is "its the start of a recession dont you know!"
Thanks for posting this comment. I know it sounds trite, but I’m sending well wishes your way, hoping you and your loved ones make it through this crisis as minimally impacted as possible.
I think you likely see the big picture better than others. The economy is absolutely crushed. That the markets go up must be especially frustrating to those not able to partake in any gains. My take on the market is that it will go up on good or bad news for the moment. Going up on good news is self explanatory, going up on bad news could be related to speculation that the Fed and Congress will pump even more money into the economy —- the wealthy expect to be propped up by the government as they were in the great financial crisis.
My cynical take on this is that the rich expect to get richer, no matter the outcome, and are investing accordingly. My question is how much, if any, social unrest this will lead to.
The only social unrest that has happened so far have been the protests about wanting to lift or ease restrictions on states, and they were widely panned as a bunch of nutjobs. I doubt there will be any "unrest" beyond the protests.
My question is how many people have absolutely no ties to the stock market? I'm pretty far from any definition of rich, but I still have a 401k, so you're not likely to see me rioting because the S&P 500 is in the green.
Individuals must answer this question, not just ask it.
A better alternative is the less sexy but more productive political action obviously with buy in from the power brokers.
Unrest is what happens in Venezuela or Yemen, etc. it doesn’t always have to be like that as those are extreme; never the less unrest is a medicine that is in most instances worse than the disease.
One possible exception, and it's quite a small group really, may have had a lot of money in cash and bonds. They may be able to do quite well by buying or investing in businesses at relatively low prices and earn gains during the recovery. This is _not_ a bad thing. The economy desperately needs fresh investment to re-grow businesses, re-hire employees, pay salaries, rebuild supply chains. That takes a lot of capital investment.
I suppose another way would be to confiscate all their wealth and give it to the government to invest, but who do you trust to do that most efficiently and to the best economic effect. Government bureaucrats, or businesspeople with track records of investing in and growing businesses?
So on the business side now is not at all the time to bet on Socialism. We can't afford it at the best of times, let alone the worst. On the other hand, this crisis has starkly exposed the weaknesses of naked market capitalism. It's pretty obvious already that the European model of social democracy with single payer health systems and a robust social safety net has proved far better able to cope with this crisis. It's a system specifically designed to help people suffering hardships, and now it's doing exactly that on a massive scale. I think this comes out of the European experience in the two world wars. Existential crises in which all of society pulled together because we flat out had no other choice. We were all in it together. Now we're all in this together.
I suspect this will lead to similar realisations in the US. If big companies hit by disaster deserve bailing out for the common good to save jobs and economic resources, why are individuals hit by adverse circumstances any less deserving at a personal scale? If it's reasonable to help a business hit by a health crisis, why is it unreasonable to help a family? I'm no socialist, check another post on this discussion where I defend Conservatism here in the UK, but recognising that as a society we have obligations to each other isn't socialism, for me it's just pragmatism.
Deleted Comment
There is deep rot at the heart of the American system, and something is going to have to give. The economy has been broken for the lower 50% for a long time now. This course is unsustainable.
I try not to get explicitly political on here, but Bernie Sanders was, as far as I can see, our last shot at reversing the trend from within the current system. He is the only person on Capitol Hill with the motivation to make the real changes that desperately need making. Joe Biden will just pretend the problem doesn't exist for another four years. Trump, as a leader, is just an agent of chaos with no ideals and no plan. I can't totally blame people for taking a chance on that over the continued, slow march of rot.
I think we're going to start seeing escalating social unrest until something breaks. All we can hope for is that something breaks sooner rather than later, and that we get whatever new deal needs making before things get too bad.
Startups are having massive layoffs right now, and each week bring companies further and further down the chain lay people off. I strongly suspect we'll see more major layoffs next week.
Most big tech companies are driven by either consumer spending and advertising. Before 2008 at lot of these companies still had not capture their full market share, so even in a recession there was room for growth. Now profits in these companies are based on market dominance. Even the big names will likely take a hit as the severity of this recession starts to take hold.
Finally in the Bay Area there's the looming problem that huge amounts of everything is paid for in RSUs (restricted stock units). The more ridiculous those total compensation packages may seem to outsiders the more they are built up from RSUs. In theory you should just live off base salary and RSU are the (very thick) icing on the cake, but this is unrealistic in SV. This stock part of the compensation goes a long way to paying for the insane housing in that region. Stocks drop and instantly Bay area income does to.
Tech will be effected, but a combination of naiveté and denial make conversations here seem like tech is safe.
The problem with a lot of startups is that they aren't making a profit when everything is going fine, let alone during a world wide pandemic, sometimes for years.
I see it as a wake up call for tech. It will suck for many people but in the long run it might be positive for the industry.
As soon as things pass, money should start to flow back into startups.
Says who? Are you really claiming knowledge of what the future portends?
If you are certain of the future-- you would make a bit bet. Have you bet money on it? I doubt it. If you truly thought this was the case, you'd have purchased some options ;)
The FED and Treasury have "united" in some sense, and we have unlimited (trillions) QE flowing into equities. So unless the FED stops the money printing party, I'm not so confident this will happen.
Don't settle for this. My niece had her car repossessed 3 weeks ago. They said for $18k cash she could have it. We told them to pound sand. She's borrowing cars and getting rides, but next week she'll have a decent car, and I'm going to record a lien on it with the county so nobody can take it if things get worse and she has to declare bankruptcy.
Make them an offer: for $1000 cash, you'll park it in the driveway, unlocked, with the keys in the visor on any day they want to schedule. You're going to buy it back at the auction for 1/3 of what you owe. Or they can work with you, politely. If they take your car, they're just as screwed as you - possibly more so. The used car market is a bloodbath and they all know it's going to be far, far worse in 6 months.
The rich get richer because they know how to take advantage of situations like this. As a diesel tech, you almost certainly have the knowledge to nurse an old beater along and take advantage of your lenders weakness. Please do it.
Now we don't know the full extent of the original poster's loan issues but the best bet is to try to arrange payment changes with the lien holder. Never ever advise anyone to walk away, that is the worst thing you can ever do.
This is brilliant. I have never considered using such a tool in my travels, but have added it to my tool belt. Thank you.
> The rich get richer because they know how to take advantage of situations like this.
Preach!
I think this is possibly the single biggest long term problem we're going to face as a result of all this. Economic recessions will come and go. But missing 5/8ths of a school year is going to be absolutely devastating for this generation of kids. They will be left permanently behind without a serious concerted effort by every school district to make up for lost time. The bar (which is already dismally low) will have to be lowered further for them to graduate, and how/when will it ever be raised back again?
There is so much redundancy in elementary school education that you can take out a large chunk of it and still teach the same amount of information. School could be way, way denser than it is. Hell, even in high school, a full year would cover the same amount of material as a single semester of one of my college classes, and my college classes only met 3 times a week (for the same exact class length as my high school classes; or fewer than 3 times a week for longer class length).
You don't have to lower the bar. There are other options. There is no fundamental law of physics that says a generation has to graduate at age X, so we -- the society -- should be perfectly able to delay that process for a year, instead of lowering the bar.
That said, there's something deeply wrong either with the society as a whole or with the HN audience if you read "poor kids roam the street like packs of feral dogs asking for money for food" and you say that the biggest long term problem is the lowering of the bar because kids skipped school.
- I was in 4th grade where school was less rigorous
- I went to a private international school
- While my parents were busy working, I still had a stable home environment to count on
But kids in poor home situations who were already barely scraping by--if that--will basically lose the year and everything that implies. In some areas, double-digit percentages of students have basically gone incommunicado from their schools.
If only there was a way we could give them access to the entirety of the world's knowledge, a million lifetimes of recorded video, and the world's best teachers for near zero incremental cost, right in their homes. If only.
We're gonna flub this one because "Netflix and chill" is the best this tech generation can muster in the face of the worst crisis in recent history.
Squandered.
I weep almost every day because our entire communications infrastructure and online experience has been tailored for our own. goddamn. greed.
Yes I'm sure many did not plan on having a snap year. Though it does seem to be the case. Looked cool in the movies, real life - not so much.
Let alone the whole financial impact upon university students whose lifelong debts they build up in education fees, will also entail the everyday costs of living as well. Most of which work summer to pay for that and now, had a real kick upon that. Now that whole aspect hasn't even been touched up and does seem to be one that needs addressing. Heck, i'm sure some parents will be impacted equally. After all if a child is effectively held back a year, then equally government support should for that child equally be extended a year beyond the normal age cut-off's.
Though I'm 50+ and no children, I'm mindful that the impact has much minutia.
May I ask you a question though - when you do get back to school after this `snap`, will your drive for learning and making the most of the class's be more, or the same as it was without this pause? I ask as I suspect many student will be more focused and keener to learn after this break as for many if you deny somebody something or remove it - they tend to appreciate what they are missing more - something we all do in many respects.
It's not. The amount of learning that happens in a typical school year is not very high. The world can skip an entire year of school, and the educational cost it will pay will not be very high.
The cost of missing a year of childcare, that school provides, on the other hand, is pretty massive.
Of course this is all "crazed cinema depicting crazed societal horror", but are we truly expecting a return to such times and activities?
We could come out of this with a generation of kids that have learned better how to play and how to let boredom cultivate creativity. Depends a lot on the home situation though.
Left behind who, exactly? Everyone is out of school.
Which subject can they study at school that they cannot study at home?
I think a lot of HN readers are simply unable to believe such a thing can occur; the recessions of the past thirty years were mild compared to what's happening right now. Personally, I'm absolutely terrified.
We don't know. And without that knowledge, you can't plan for the future. I wouldn't want to invest money into any business right now. Who knows what shape we will be in in 12 months time?
This is something I see from coverage of "lock-down protesters." There's a concentration of imagery, so bad associations can be made, pandering to those with left-leaning viewpoints. The underlying message is, "see, we don't have to pay any attention to the ravings of these crazy deplorables."
Such patterns were also at play in the media coverage of minorities in the 1900's and early 20th century. They're just being used by a different set of people with different directional vectors.
What you have to remember, is that a lot of people have been given this "deal:"
How about you have a period of unplanned, involuntary unemployment with little prospect of finding alternative employment in your areas of expertise? Okay, thanks, bye!
The top is, well, obviously, useless.
State leadership is all doing different things, which is, in some ways, a good thing, but I don't hear much in a concrete way about what the plan is to address this all over the next 12-18 months. We hear a lot about when we'll "open things back up" or phased re-openings, but nothing whatsoever about a strategy -- THESE are the tests we'll use, THIS antibody test to let people work THOSE jobs, THIS kind of contact tracing.
I'm not quite sure if the states are hoping the federal government will come out with some unifying strategy/process/materials/procedures at some point, or what, but it sure ain't happening.
And really, no one can argue with them on that. A governor or president can order businesses closed, they can lift that order, but they can't force businesses to go back to work before the business leaders and customers are ready to.
What governments need to do is clarify the new rules of the road for businesses. For example companies that used to be heavily restricted on how they can use health information are now going to need to test all their employees, make decisions based on those test results, provide protective medical equipment, etc.
They're not - most of the megaregions are forming interstate compacts to coordinate medium to long term strategy. Colorado and Nevada just joined the Western States Pact which CA/OR/WA started a few weeks ago around the same time the East Coast created their own. I think the Great Lakes states have one as well.
[1] https://swprs.org/a-swiss-doctor-on-covid-19/
A lot of people care. Many of those who care believe that the situation we're in right now is caused (or at least greatly exacerbated) by incompetent leadership at the national level, but unfortunately that view is not shared by a substantial fraction of the American people, and against that kind of headwind there is only so much we can do.
So it's not that it was being dismissed as not significant before this but, rather, it hadn't been going on long enough yet to officially be called a recession.
How would that help...?
Retail like that is very underrepresented in the stock market, so those losses wouldn't be reflected.
That the stock market doesn't reflect main street yet after the biggest stimulus in history is perhaps unsurprising but also a little worrying.
https://www.principles.com/big-debt-crises/
Basically when money printer goes brrr then prices of financial assets tend to go up. The unfair bit about this is that these kind of assets are mostly owned by the rich, which makes the wealth gap even bigger.
It takes a while to kick in, though while the numbers go up, the values don't.
The bigger picture is not any more visible from a STEM job. I haven't left the house aside for a jog in at least a month, and I work from my kitchen. I am living in a smaller bubble than ever, the only thing I'm missing is a hamster wheel. Wait, no, there's already a treadmill in the basement.
I hope online shopping is helping the shipping industries limp along, if only a little.
1) Have you tried the IRS website to check the status of your payment? My status finally flipped from "GO F YOURSELF" to "Please give us your bank information"
https://www.irs.gov/coronavirus/get-my-payment
2) As your hours are cut, you may qualify for Unemployment from your state under modified rules from the CARES act, have you applied?
Deleted Comment
Over time the more tourist-serving towns seemed to recover.
I am pessimistic that we're heading for the same situation again. The companies that the stock market cares about will recover, we will all go on pretending that things are back to normal. Meanwhile there will again be large swaths of the population in dire straits.
Here in the UK if you said you were going to buy a car, most people would instantly assume you mean second hand. There's not much of a culture of buying or leasing new cars here, and even less of leasing cars that you really can't afford (outside of petrolheads anyway)
Americans also spend a lot of time in their cars, I went from a short commute to a long commute (1 hour each way), and found I got almost exponentially more critical of my car the longer the commute.
Suddenly the practical vehicle I didn't mind driving 15 minutes, was an eyesore to look at after an hour, and the NVH (noise, vibration, harshness) wears on you exponentially with time.
I started browsing cars to buy that would have been borderline financial suicide for how much I made, just because of how important the comfort and aesthetics became to me.
Couple this with their tendency towards financing things, and how cheap automotive related expenses are in the US, and it's the perfect storm.
I ended up changing jobs to one 10 minutes from my house, and it's downtown so parking is just done at various pay lots a few blocks from my office so nobody ever sees what I drive, and suddenly what I drive is irrelevant again, I was back to being content with my 15 year old Camry.
So while I agree if someone says they are buying a “new car” it just could mean “new to them” I do think a lot of people do lease. I see a lot of young people with new BMWs etc, probably paying with money that they will regret not having put into their pension in years to come. Or maybe I should have lived a little bit more at their age.
The issue seems to be in previous generations cars were more of a status symbol for many (as well as being generally more affordable), so lots of people were raised with that expectation. So they buy/lease flashy overpriced German maintenance money-pits and scoff at used Toyotas because they're boring.
That or they're just trying to put on a veneer of financial success as part of their "hustle".
This is true in America as well. I think wealthy Americans forget that regular Americans often live their whole lives while never owning a "new" car.
(This is even true of car loans in the US -- the majority of those are for used vehicles).
That’s quite different to somewhere like New Zealand, where the average age is twice that and almost nobody buys a brand new car - instead most cars are imported second hand from overseas.
I guess part of it is that it's a very car oriented culture, but the other part is that people value owning a new shiny thing over financial cautiousness.
Frankly, as an American, the UK's car market seems nuts to me. The kinds of cars that folks get as "company cars" is laughable.
Hope better days for you man, but those other jobs in leisure sector will not recover for a long time unfortunately. Do you think that they can somehow use the itnernet to keep businesses alive?
Also essential doesn't really mean their more in demand now than before in all industries. Mechanics for example are essential and still at work but cars if anything will be needing less maintenance now than before because so many people are out of work and not driving anywhere for vacations.
Additionally the places where there is simply an increased demand and need are a lot of 2 types of job 1) warehouse workers or 2) manufacturing. Warehouse workers don't have that strong of a bargaining position because places like Amazon are already used to constant turnover, surge by up to 200k a year already, and only really need warm relatively able bodied people of which there are loads right now that'd love a job. Manufacturing people are in a slightly better position as it's harder to just throw bodies at it but factories have limited ability to ramp up. Grocery store workers are kind of (1) employees where it's very easy to replace workers so it's tough for ununioned employees to demand hazard pay or raises because it's very easy to find replacements, especially so now when there's so many other service industry jobs that are out of work right now.
Having money is a feedback loop. You can't negotiate if you're skint.
With 22 million out of work, it's easily to replace an "essential" meat packer. It's far harder to replace an engineer or doctor even if they aren't essential
That's why white collar workers make so much money in the first place...
I don’t want anyone to have to put themselves at risk of catching covid in order to survive. And, the survival of working class people has to be placed above the convenience of upper middle class people who want a haircut or to go to fuddruckers.
At the same time, working class people are the ones who will suffer first and most from an economic downturn. So if they want businesses reopened, you can hardly blame them.
I think we need ubi, right now. Can’t think of any other solution.
In a lot of areas, schools are still open to serve breakfast and lunch to kids, school buses are dropping off food, and in states like mine, half the families are getting extra cash for food right now. Families will receive $193.80 total for March and April for each eligible K-12 student, and another $182.40 total for May and June.
Having tasted some of the bitter existence out there, it felt needlessly cruel. In a land of abundance, there's really no reasonable explanation for anybody going hungry, being without shelter, live in dilapidated conditions, fear one's neighbors, fall into irrecoverable debt for healthcare, or any of the million ways that poverty ruins people.
I've been down and out in the U.S., where whole neighborhoods were struggling. It's enough to drive one crazy. Much respect to those able to rise above (or just hang on) and still manage to keep their spirits up.
Mass media and journalism often feel way out of touch with the day-to-day realities on the streets. Much of the time they're in the business of shaping the public narrative, rather than giving people a voice or reporting the truth.
Some businesses will fail (for whatever reason). New ones will step in to fill the void-- perhaps very similar ones, or ones somewhat similar to those they replace.
I think of it as economic evolution.
The world outside of those businesses has evolved-- if those businesses and their management are not simultaneously evolving, then they risk being left behind.
I think the covid-19 situation has exposed weaknesses in the economy, which will be shored up-- but not without painful economic corrections.
"No one seems to care" Eh, the reality is that the owners, families, and adjacent/partner/affiliate companies may care. Other people care-- about other things which are higher priorities from them (things which you may not be aware of).
Ultimately, those businesses may have failed in part because their owners/management didn't care enough to evolve their skills and offerings to what is in demand in the economy (outside of the impact from covid, of course).
To be honest, if you really want to understand economics, you might not be trained to the degree necessary-- i.e. diesel mechanic does not equal knowledgeable economist. So, you are allowed to have an opinion, but others like myself might remind you that it is not a qualified economic opinion, but rather the opinion of a mechanic.
For example-- Do you take investment or other economics advice from your local mechanic? Do you think others would? I certainly wouldn't. As such, if I were a mechanic, I would not have confidence in my assessments of economic situations-- instead I would read the thoughts of those who I am confident are knowledgeable on the topic.
Assertions are easy to make. Valid assertions depend on knowledge, experience, data, perspective, etc.
People don't want lockdown to stop because they need to go to their hairdresser, or because they need to go hangout at the pub, or whatever idiotic reason these privilege a-holes put in their tweets. People want to get back to work, because they need money, to have a roof above their head. To feed their kids.
Edit: Just to clarify because I see a lot of misunderstanding in the replies: I am not advocating to end the lockdown. I am criticizing the tone deaf, patronizing, rude, caricatural comments attacking people who want to end it to get their paycheck back.
How about we just take care of those who need taking care of during this disaster. How about we put all national efforts to keep the lights on, providing safe housing and keeping the food supply chains intact.
Instead we are worried about corporate quarterly profits and when the Ruby Tuesday can reopen, because somehow serving burgers for $3/hr plus tips is going to secure that person's financial situation.
If no one can pay their mortgage, loan holders HAVE to make exceptions.
That shared spirit of sacrifice isn't a reason to institute lock down orders, but my opinion is that it will allow us to lesson the economic damage long term.
Deleted Comment
That's awful. I know some localities have "paused" evictions and payment "holidays," but there's been a lot of unevenness. Frankly, I think there should have been a national to that effect, so there'd have been uniformity and no gaps.
Feedback welcome.
Dead Comment
Dead Comment
You don’t think that describing poor kids who cannot go to school and likely cannot afford to eat on their own as packs of feral dogs is problematic at all?
I would be very interested to hear from someone who find the current phrase acceptable but not if the comment had written "black" rather than the word "poor".
We need to begin opening our country back up and implementing more targeted lockdowns and isolations for the most vulnerable.
Not only will this bring us to herd immunity faster, we will have a huge pool of recovered people available to donate plasma antibodies to those suffering from the virus.
Taking the recent deluge of antibody test data that's been released in the last few weeks from around the world indicating infection rates are far higher than official numbers indicate and the growing threat of economic misery for tens of millions, this is the best way forward.
Though, if "go back to work!" also means the unemployment assistance and stimulus payments stop, it could get more exciting.
It is clearly not, otherwise that 4.8% would be a much bigger number. Hyperbole doesn't help here.
No one claims things are good. A global pandemic is a disaster any way you cut it. We're all affected, some much more than others, and we all have to help. But there's no magic wand we can wave where we all go back to work, either.
Even "essential" industries are affected. Very few people want to go to a crowded restaurant or theater right now, lockdown rules or no. Almost no one wants to travel on an airplane. That's just not coming back until we get the disease under control, and releasing lockdowns pushes that date farther into the future.
Remember the disease is disruptive all by itself. We have something like 25% of the nation's pork butchering capacity off line right now, not due to lockdowns (obviously they were "essential") but due to actual outbreaks. And that's what we should expect everywhere we permit commerce: random, uncontained, very disruptive outbreaks.
There's no magic. This sucks. But we have to work together to fix it, and harping about only one side of the problem hurts and doesn't help.
Uh buddy, you know the first quarter is January, Feb, March right? The country was in shutdown mode for maybe half of March at most. Extrapolate that out to the full quarter (ie multiply 5% by 6) and you get a 30% drop. And on top of that, in March many businesses were still trying to partially pay or at least remain in business on paper. That's all done, plus now we start getting secondary effects.
The Administration's mismanaging of this situation is one of the single most costly screw ups in our country's history.
High unemployment in tech or finance would potentially drop GDP much more than high unemployment in low-income fields would, even though low-income workers are often VERY important - nurses on the front lines right now don't bring in big money, neither do people staffing grocery stores or fulfillment warehouses.
What, concretely, does this mean, especially if creditors are pressuring people to return to work to keep up with their payments, and returning to work is a public and personal health hazard?
Is most of the 12% just market speculation that the virus issue will pass without a long-term earnings hit?
1. People keep saying about the market being up recently, but skip the part about it still being down about 10% since the start of the year.
2. S&P is heavily weighted towards the strongest companies. Amazon, Apple, Facebook, Microsoft and Google account for 20% of S&P market cap. Most of those companies have been helped by the pandemic, or at least not hurt nearly as bad as smaller companies.
3. The market is always very forward looking. It is essentially betting that things are as bad as they'll get. I don't know if I personally necessarily agree, but if you look at countries starting to open up it's not an unreasonable bet.
I want to add emphasis on (2). The effects are not spread out uniformly across all businesses. The hard hit businesses including restaurants, bars, and hair and nail salons have seen almost all of their business evaporate. You're not going to find the corner nail salon in the S&P 500.
And the only thing that can explain where the stocks are now is that the Fed has pushed 2 trillions of liquidity into the market in matter of weeks, which is just unprecendented (the previous QE were much more gradual) and that lifted all asset classes.
But at one point stock prices will need to get back in line with earnings. I don't really hear anyone talking about v-shaped recovery anymore.
So, down 10% from the previous bubble.
> 2. S&P is heavily weighted towards the strongest companies
Good point. Dow is also up almost as much though.
> 3. The market is always very forward looking.
I may be cynical, but I see perhaps 2 to 3 years to regain the jobs we are losing, to see the employment rate return to earlier levels. That's years of depressed spending, and all the other woes of society from high unemployment.
So the market is looking to, what, 2025 or something?
Sorry to pick on you, I still just don't get it.
I would also add a #4 to your list that people often miss. There is risk and there is uncertainty (think unknown unknowns). The market hates uncertainty because it is so hard to price. Risk though can be priced. This is often why the market will go up with numbers that look really bad when they come in. They are no longer uncertain.
I thought I'd look up the performance of various indexes for the past month (as of the time I looked them up):
* S&P 500: +15.2%
* Dow Jones Industrial Average: +14.1%
* Nasdaq Composite Index: +17.9%
* Russell 2000: +21.7%
* Russel 3000: +16.0%
* Wilshire 5000: +16.3%
I then looked at the YTD, and didn't bother comparing them because they all essentially looked identical to one another.
Note that the DJIA and NDQ are mostly contained within the S&P are they are highly correllated. Weighting aside (I'm not actually sure what differencs their might be), the S&P is contained in R3k and W5000, but not R2k.
So no, I don't think the idea that Apple and Facebook are doing well (thus keeping hte S&P numbers inflated) holds weight. In fact, the Russell 2000 does not include the top 1000 companies (like the Russell 3000) and shows the highest return for the past month.
Rather, it seems like all of these indices are correlated. It reminds me of the Hillary Clinton autoregression of prediction markets during the 2016 election: immune to new information.
The market incorporates news quickly, such as that there is a pandemic and it is going to have bad effects. Then it essentially forgets about it. I suspect most of the 12% is a response to government actions to control the pandemic and to the recent news that it is coming under control. You will see another drop if relaxing controls leads to another covid spike, and when economic effects appear on corporate financial reports, and when long term job losses are reported. Those are perfectly foreseeable, but in the meantime the market will likely go up as the memory of why they went down in the first place fades.
The market doesn't need to reflect the reality when you have an excess of cheap cash on the market.
This is despite the economic slow down as B2C companies losing 20-100% of their customers and B2B companies lose their B2C customers who no longer have income.
Deleted Comment
Dead Comment
It's also at the same level as one year ago. The economic situation, and outlook, is surely worse than one year ago? What has improved is the Fed inclination to make it true that stonks can only go up.
If you're interested in preserving purchasing power 15 years from now, would you rather hold dollars or things today?
As a value investor, all of my theses were blown out of the water by the unprecedented Fed intervention. It is an environment in which the fundamentals are uncertain. I'm standing pat and waiting for things to make sense before moving again.
The trailing (!) S&P P/E is greater than 20 right now. The Fed is supporting prices above their historical mean/median of 15. It makes zero sense, from a financial standpoint, unless the market is pricing in substantial inflation.
Pretty much this. The Fed is backstopping losses. Betting against them post-2008 is a tough position to be in.
No, it's just pricing in low returns across all asset classes (to simplify, low interest rates) - assets are priced by excess returns not absolute.
There's nothing unreasonable about a P/E over historical norms if you think interest rates will continue to stay well below historical norms.
2. Fed helped and did what they are supposed to, which is good for everyone.
3. Market is forward looking and it should be, otherwise it would be dumb. In other words corona will pass, it is not the end of the world and if stocks went too deep, potential earnings from stocks within 5-10 years down the line would be huge, so anyone looking at that timeframe would be buying at discount.
High p/e does not mean things are overvalued. It means whoever buys into market estimates strong future potential. Now knowing that you can start to argue whether they are over or under estimating.
Now a month later, my initial instincts don't seem so wrong anymore: My portfolio is doing fine... All I missed out on was a bunch of theoretical day trading gains.
(Too bad the things that really matter, like my friends that run local businesses, and everyone's mental health, haven't fared as well)
It's especially galling because the people pushing for these nigh-Stalinist levels of fed intervention and central planning (look how much support oddly favoured industries like manufacturing and coal get) are also posturing as champions of the Free Market. It's like we can't make any progress because nobody in charge is willing to argue in good faith.
If the dollar gets less valuable due to the government printing cash (or buying bonds or issuing loans they are expected to later write off), then things denominated in dollars increase, even if the real value remains unchanged.
It's hard to tell if the dollar is weakening, because most other currencies are in the exact same position.
More important than anything though is that the market right now is absolutely rigged. It's not just irrational and forward looking, it is completely rigged. Central banks all over the world are directly propping up the market up. The market has never been more of a ponzi scheme for the rich than this exact moment in time.
Also, the S&P 500 is made up of mostly large companies, many of which could benefit long term from the virus. Sure in the short term there will be a revenue hit, but in the long term if their smaller competitors can't survive that hit and they can, they will become more dominant in the future. As far as I know, small business indexes have not recovered much.
It's mostly companies that do well in any market or have a habit of surviving massive market disruptions. Sort by founded date. Almost all of them are 2000 or older.
As an investor: Very happy with my "QQQ" (NASDAQ-100 ETF) investment, but my more diverse retirement portfolio is nowhere near as good. I have recently been buying hard hit stocks that I think will survive over the long term: Disney, Marriott..
As an employee: well, the trick is to remain employed.
This may also help explain why many people are terrified of the wealthy getting less wealthy: it'll cause a massive market correction as the demand for investment vehicles decreases to a more reasonable level.
A significant number of S&P 500 investors (roughly 40%) hold their investments in retirement accounts. These people are not going to sell unless forced to because they lost their jobs. If you're looking for a huge drop in the S&P 500, then keep an eye out on laws that allow for penalty-free withdraws from retirement accounts and reports that Americas are taking money out of their retirement accounts to live.
Also, there are plenty of people betting on the market going down.
The S&P 500 was up 29% last year. It's now back to the level of October last year - when there was no pandemic or economic crisis. So you could say that the market is remarkably blasé about the current situation.
https://www.fedweek.com/issue-briefs/covid-19-stimulus-bill-...
Wait 'til the music starts and there's a scramble for seats.
The 17 min documentary from Netflix might be interesting here: https://www.youtube.com/watch?v=ZCFkWDdmXG8
So the real value of stocks is lower when adjusted for true inflation, but everyone claims inflation is minuscule / nonexistent so we can pretend that printing trillions of dollars and handing it to banks is having no effect.
Can't post this enough these days. TLDR is that the stock market is forward looking. It goes up or down based on whether conditions are better or worse than EXPECTED. If reality is in line with expectations then nothing happens. If it's better than expected stocks go up, if it's worse than expected stocks go down. The current shitty economy has already been priced in as far as can be known.
A lot of businesses are cutting back because people can't go out and do what they'd normally do legally. So when governments start easing restrictions, people [stockholders] are probably more optimistic because the situation seems more tractable. It's a lot more predictable than 2008 when people were talking about the collapse of fundamental financial institutions and systems involved in monetary supply because of their underlying structural composition.
I do think there's some disconnects in interpreting the stock market, but it seems to me investors are just seeing restrictions being eased, daily COVID case counts on a downward trajectory, etc. They're reinvesting in markets they see a path of recovery in, early.
What's less certain to me is if in say, July, this all gets worse again with overrun hospitals, etc. in a second wave. Then markets might really take a nosedive.
I don't think any of the market growth from this month reflects actual economic growth, most just optimism or perhaps reined-in pessimism.
The word 'recession' is essentially meaningless without knowing the impetus for it.
The 'outsourcing of Jobs to China' is a huge, permanent, secular shift that may affect stocks one way or another, but the 'coronavirus' is something I think business believes we will recover from quickly - for the most part.
Tim Cooke told Trump he thinks it will be a 'v-shaped recovery'.
But remember that this recession was 'self imposed' in the sense that we ordered businesses to shut down. We can open them again just as quickly. Obviously that won't the entirely the case but I think this is the sentiment.
When a new CEO takes over a business, he might 'write off' a bunch of crap. Even though the company loses money that quarter, analysts see it as a 'positive sign' because the company is getting rid of dead weight on their balance sheet. So like a 'one time charge' type thing.
I think markets are seeing corona as a 'one time charge'.
also, even if there is a decrease in earnings, interest rates are also lower, making stocks more attractive.
The market is still down from overall highs. We're not as far down as we were since we don't think it's going to be as bad anymore as we had feared. For 500 large cap stocks listed on US stock exchanges, perhaps about 12% better.
Also, in any recession situation, there's very high volatility. The days with highest stock gains tend to occur right before and during recessions. Even if there's a net downward trend, we'd expect things to be swinging all over the place as people keep overcompensating to the daily news
You wouldn’t bet the economy will be normal by the end of the year but you might bet others think it might.
Dead Comment
It's going up because poor people are being forced back to work.
It's not that they're merely different, the modern stock market bears almost no relationship to "the economy". It's HFT algorithms all the way down.
This is the most optimistic market participants (bulls) buying at low prices and creating momentum that others follow.
Waiting for them at higher prices are the pessimists (bears) ready to sell into the rally.
Since there really hasn't been a capitulation, where everyone who would ever sell actually sold, it's likely the bears are still in control. I think some people are mistaking the extreme volatility as capitulation.
I have heard this before, but I am having trouble feeling this. How do you determine capitulation? We had several days where trading was halted for a time due to steep losses, and 3/16 was the second biggest percentage loss in history (for the Dow at least).
If that isn't capitulation, what is? Hitting the 20% circuit breaker a few days in a row? Only in 1987 has the market fallen more than 20% in a day.
One reason I think the market is rising is because "everyone who would ever sell actually sold". Therefore, only the eternal optimists are left; the pessimists are sitting this one out.
People were saying that when the market jumped back above 2250. It's improbable we'll get that low again.
It feels like this is trickle-down economics again. Bail-out large companies by issuing cheap money, stock markets stay pumped, big companies don't go bankrupt, and hope employees don't get fired, and give each individual about 1 week of average income in the US as a little boost.
Meanwhile, 20% of people have last their jobs, the $1200 hasn't arrived or was already spent.
Fed balance sheet increased about $2T, and Congress spent $2.2T so far with more to come. That's at least 20% of GDP ($20T). Optimistic forecast is that the economy shrinks like 30% of GDP, so that's a 10% net reduction in NOMINAL spending/earnings.
SPX is down like 15% from it's previous high. The market seems to expect things to return to normal next year, which is probably short-sighted, but it's a market.
The real value of any company is down because it's producing less, but the nominal price of the company is inflated by the government spending. So the price of SPX is is not insane (if optimistic), given the government's actions. No comment on whether the actions themselves are sane.
The S&P/Gold Spot charts will be the interesting ones to watch over the next few years. While S&P shows consistent 6-7% returns historically, that's valued against the dollar. When you chart it against gold the returns are closer to 3-4%, and there are periods where S&P goes down in value against gold for years at a time.
So the second quarter will be a better reflection of the impact of shutdowns and changes in consumer behaviour/travel, but we won't see figures for that for a while.
Almost more worrying, 20% of the value of the S&P 500 is now concentrated in the top 5 tech stocks, which are vulnerable in these conditions (advertising spend is dropping dramatically and unemployment is rising).
https://www.cnbc.com/2020/01/13/five-biggest-stocks-dwarfing...
And that’s not even including the drop in travel and supply chain difficulties, which started earlier still.
Entirely possible the floor is a temporary illusion and falls out over next 3mo, but the market is betting that won’t happen (I don’t know why, I’m not an expert on ads)
Do bear in mind those google results were for a quarter which was pretty much untouched outside China.
Except the economy was impacted, since manufacturing in China was slowed during the first quarter.
The perception many seem to have is that everything is going to go back to normal in a month. But some businesses and jobs are just... gone. This will absolutely impact demand and this will be much slower to recover.
I was also surprised to learn that S&P 500 earning shave been flat since 2014 while the market has gone gangbusters. That had to come crashing back to Earth eventually.
Also, some things like social distancing are here for the long term. I've already gotten emails from airlines saying they won't be filling certain seats on the plane. It's probably going to be a lot nicer to fly in coach, which I guess many will enjoy, except it's going to have to get more expensive. Less passengers, same plane, higher price per passenger. It's just simple math.
And who's going to be traveling anyway? Business travel (the lifeblood of most airlines) is going to take a long time to recover.
The economy just doesn't shrink 5% and everything is back to normal the next month. People who think so are hopelessly naive or just plain delusional. And that GDP contraction isn't going to end here.
I was also surprised recently to learn how flat earnings have been. The stock prices going gangbusters can be explained (at least partly) by earnings per share going up due to stock buybacks. If you go look, most companies have significantly fewer shares outstanding than they did in 2014.
It's quite impressively small really, considering everyone is sitting at home, and many aren't working at all.
[1] https://en.wikipedia.org/wiki/U.S._state_and_local_governmen...
If I get murdered in December, it's not super helpful to note that I was 92% alive on average that year.
you are either dead or alive. Economic growth is a percentage.
The thing that worries me is that by attempting to prolong it as long as we are, we are basically setting up a stage for a greater depression. We already saw 'sell everything' panic in March.
Killing thousands of people in the name of the economy would also set the stage for an even longer, deeper recession...
S&P500 crashed 30% in Feb/Mar.
Why?
The same could be said of stock market crashes.
https://www.bea.gov/news/2020/gross-domestic-product-1st-qua...