BF2S Forums Investment

The market right now does not reflect the reality in business/the labour force. The majority of companies are eating away at reserves and government aid, incurring huge losses. It's investors and hedge funds that keep pumping in money to avoid big hits to their portfolios, nothing else. You can expect some short term gains but that isn't going to last. Moreover there's too much uncertainty in the air. I expect the remaining quarterly reports this year to for the most part present a bodycount honestly.

The biggest variable up in the air is whether or not there will be a second wave, how bad it will be and how governments will react. If total quarantine measures need to be reinstated in the near future the markets will tank like never before, the hit to economies may be so damaging no business is left unaffected as capital evaporates. We already have this issue: besides stock drops, billions of capital is out of circulation in the real economy. People around the globe have put hundreds of billions more into their savings accounts than they would under normal circumstances and part of the coping strategy in most businesses has been to drastically reduce contractors, consultants and other external workforce. Every business involved in the mobility of people or traditional workspace is also suffering. Not to mention that the vast majority of companies with a storefront or factory production dependence (particularly in china) has been disproportionately affected and probably has laid off employees.

That said, and knowing the unemployment numbers in the US + the effect of economic trends in the US on global markets, the already existing damage to global business is not accurately reflected in stocks at all right now. But what the indexes should look like is something nobody really knows - I think there's very few people around the globe who have anything resembling a comprehensive picture (nevermind a reliable one), as the scale of this mess, its trickle down/up effect between sectors and economies and the variables involved are hideously complex. I believe some market analysts have made the same point (I've read it elsewhere), in the present situation a lot of investors are just winging it and pumping stocks without any real logic to it. Like the TSLA rocketship prior to the crash, which took off for no discernible reason - at least not based on its earning reports and performance, rather it was all (internet) hype and investor faith. Similarly now people are doubling down on what they believe to be winning stocks in this pandemic or gambling on the future, i.e. that the worst has now passed. Meanwhile the very big multi-billion investment fund players and governments worldwide are only trying to stabilise things through capital injections.

Now even if we assume they succeed, the build-up of debt we're seeing is economy/nation-breaking. Esp. in places like southern Europe which already has huge public debt. When everything stabilises I reckon we'll see both deliberate inflation and more quantitative easing to get rid of debts and stimulate capital flow, including new rounds of austerity on public services. That much has been speculated in the economist, bloomberg etc. As for the stock market, I can't find the article anymore, but there would be 3 phases probably. One of it tanking (more than it has done so far), one of investor euphoria in which stocks skyrocket immediately after a return to normal, probably when a vaccine is announced, then another phase of tanking to get it back down to normal. In a depression 'normal' would definitely still be below 2019 levels.

Personal opinion:

Financially we haven't seen anything like the worst of this yet. Whether or not there's a second wave, India is just starting its first wave and the US seems to be in a steady swell, the costs locked in already are colossal.
There's been a short term recent rebound, this is purely the money which has been taken out being put back in in the hope of a quick rebound thus creating its own rebound. This is going to splutter and collapse over the next month or two. I've made 20% here and there recently, time to take that profit.

Stimulus spending is going to dry up in the next few months, consumer spending is going to take years to even get back to normal people need to rebuild their savings and then build themselves an actual cushion for the first time -  energy demand is going to take years to get back to normal, I think it might never, there's a lot of discretionary spending on energy which isn't going to happen - air travel and cruise ships are going to be buggered for a looong time. The oil price is likely to stay below the level US shale oil producers can make a profit, bankruptcies are costly.

Wall Street numbers have been bogus for about 20 years, its not quite the same in many other markets where there's some relationship between earnings and share value.

On top of that China is causing mayhem with tit-for-tat childishness, if demand for Chinese products dips 10-20% they'll go berserk, my linkedin is being bombarded by hot asian supply managerettes, it could easily collapse 30-40%, then they're fucked.
When China stops buying US bonds and/or the US announces its cancelling its bonds to recoup the costs of the Wuhan Lab Bat Flu we're going to have major trouble.

Even if there's a climb-out are companies going to be putting people on tenured salaries or is everyone going to be put on an hour-by-hour gig?

That all said Wall Street is fairly well disconnected from reality, I guess we'll see.
And intelligent use of infrastructure spending could work, but I doubt we'll see it either since no-one in government anywhere seems to have an ounce of wit.

Last edited by Dilbert_X (2020-06-07 17:45:32)

What a last name

He should have become a psychiatrist.

The stocks mega-rally hit a roadblock: A somber economic outlook from the US Federal Reserve and the 2 millionth coronavirus case in the United States has investors questioning whether they had boosted the stock market too far, too fast.

US stocks plummeted in New York, with the Dow (INDU) falling more than 1,400 points or 5.3% around midday. The S&P 500 (SPX) plummeted 4.4%, and the Nasdaq Composite (COMP) fell 3.6%. The Nasdaq had soared to all-time highs on each of the past three sessions and climbed above 10,000 points for the first time ever.

https://www.cnn.com/2020/06/11/politics … index.html

-1500 as of this post. That's not good.

lol of course. it's just funny.

I read an article that argued we have a looming banking crisis. COVID is going to lead to a string of foreclosures and bankruptcies. That's a lot of missed debt payments to banks. The banks don't have the resources to handle all of it. This makes me wonder if all economic crises eventually end as banking crisis.

I'd like to belatedly add that if I'd been the one to point out that chart wasn't a complete picture, I'd have probably been immediately berated for "pedantry," "obsession," and how they didn't want to engage with me.

Elsewhere, in other threads, getting my choice of computer peripherals viciously picked apart out of nowhere.

If the economy dies all of us with the exception of Jay will be fine. Childless and unmarried people have only themselves to protect.

Gram'pa Jay will begin to feel increasingly alienated at his family neither commiserating with nor sharing in his political viewpoints, and will retire shirtless to the garage (ironically not air conditioned) during family gatherings to play darts and sulk over a box of wine.