Black Swan Event Under Way

[rjh01]

Originally Posted by The Atheist

Someone please kick that cat to see if it's still alive?

As the economic reality starts to sink into even the most optimistic and deluded brains, the Dow finishes the month 350 down and another 150 on futures already.

That is the trouble. The dead cat is having a major panic attack. The result is not pretty. Climbing up the country's best curtains.

The all ordinaries has been climbing most days since 23 March when it was 4564. On 30 April it was 5597.
Ref: https://www.marketindex.com.au/all-ordinaries

Edit: I must admit I have lost money in Virgin airlines. I loaned them money last year. Will only get some of it back.

[The Atheist]

Originally Posted by rjh01

That is the trouble. The dead cat is having a major panic attack. The result is not pretty. Climbing up the country's best curtains.

The all ordinaries has been climbing most days since 23 March when it was 4564. On 30 April it was 5597.

Those people are the 21st century incarnation of the guys who kept playing their instruments as the Titanic slowly sank.

[The Atheist]

Wow, Eurozone contracts by the most ever.

In the first quarter. Christ alone knows what Q2 will look like, because the earliest lockdown wasn't until part way through March.

US unemployment over 30 million...

Don't be expecting any markets to move up next week, especially in light of China's manufacturing numbers being under 50 right now. As someone may have intimated earlier, they have their factories open, but no orders.

https://www.cnbc.com/2020/04/30/chin...owns-ease.html

[rjh01]

Originally Posted by The Atheist

Wow, Eurozone contracts by the most ever.

In the first quarter. Christ alone knows what Q2 will look like, because the earliest lockdown wasn't until part way through March.

US unemployment over 30 million...

Don't be expecting any markets to move up next week, especially in light of China's manufacturing numbers being under 50 right now. As someone may have intimated earlier, they have their factories open, but no orders.

https://www.cnbc.com/2020/04/30/chin...owns-ease.html

If I was the Chinese leaders now I would be telling the people who print money to work overtime printing money (and every other similar way only Governments can of producing money out of nothing). Then use that money to develop the country. Like build communications networks (road, rail, airports, ports, telecommunications, Internet hardware). This will employ many Chinese. Then when the rest of the world opens up China is in a much better position than before.

Then the rest of the world can bow down to our new Chinese overlords.

[Samson]

Originally Posted by rjh01

If I was the Chinese leaders now I would be telling the people who print money to work overtime printing money (and every other similar way only Governments can of producing money out of nothing). Then use that money to develop the country. Like build communications networks (road, rail, airports, ports, telecommunications, Internet hardware). This will employ many Chinese. Then when the rest of the world opens up China is in a much better position than before.

Then the rest of the world can bow down to our new Chinese overlords.

Trump currently suggesting the black swan was genetically bred by China.
We now have a completely unhinged odds on favorite to lead the western world through this crisis which JinPing will be calculating.
Meanwhile, New Zealand sharemarket darlings cater to Chinese women who refuse to breast feed and geriatrics who need breathing machines to sleep.

[The Atheist]

Originally Posted by rjh01

If I was the Chinese leaders now I would be telling the people who print money to work overtime printing money (and every other similar way only Governments can of producing money out of nothing). Then use that money to develop the country. Like build communications networks (road, rail, airports, ports, telecommunications, Internet hardware). This will employ many Chinese. Then when the rest of the world opens up China is in a much better position than before.

Except, they already played that card - you can only build so many ghost cities.

Originally Posted by rjh01

Then the rest of the world can bow down to our new Chinese overlords.

Maybe.

With that orange wanker in the White House talking more economic penalties for China, with any luck he'll destroy both their economies.

I'm not sure how that's going to pan out, but starting a trade/economic war between the number 1 & 2 economies in the middle of a global recession would probably be the dumbest thing he's ever done.

And that's saying something!

Originally Posted by Samson

Trump currently suggesting the black swan was genetically bred by China.

If I didn't know for certain the bloke was a lying, hypocritical moron prior to winning the presidency I'd be surprised at just how thick he is.

Ditto his voters, but I always had the opinion only a complete moron would be capable for voting for him.

Originally Posted by Samson

Meanwhile, New Zealand sharemarket darlings cater to Chinese women who refuse to breast feed and geriatrics who need breathing machines to sleep.

You should be bloody glad they do.

Without dairy, we would be royally screwed right now.

[Samson]

Originally Posted by The Atheist

Except, they already played that card - you can only build so many ghost cities.



Maybe.

With that orange wanker in the White House talking more economic penalties for China, with any luck he'll destroy both their economies.

I'm not sure how that's going to pan out, but starting a trade/economic war between the number 1 & 2 economies in the middle of a global recession would probably be the dumbest thing he's ever done.

And that's saying something!



If I didn't know for certain the bloke was a lying, hypocritical moron prior to winning the presidency I'd be surprised at just how thick he is.

Ditto his voters, but I always had the opinion only a complete moron would be capable for voting for him.



You should be bloody glad they do.

Without dairy, we would be royally screwed right now.

Maslow would put dairy for vanity down the list.
The black swan is here to reform not perpetuate

[The Atheist]

Originally Posted by Samson

Maslow would put dairy for vanity down the list.

Bollocks.

Dairy foods are the single most important group to get vitamin B12 from. This is why vegans take supplements.

[Dave241]

Originally Posted by The Atheist

Bollocks.

Dairy foods are the single most important group to get vitamin B12 ice cream from. This is why vegans take supplements invented non-dairy ice cream.

FIFY.

[lionking]

Originally Posted by rjh01

If I was the Chinese leaders now I would be telling the people who print money to work overtime printing money (and every other similar way only Governments can of producing money out of nothing). Then use that money to develop the country. Like build communications networks (road, rail, airports, ports, telecommunications, Internet hardware). This will employ many Chinese. Then when the rest of the world opens up China is in a much better position than before.

Then the rest of the world can bow down to our new Chinese overlords.

Belt and Road.

https://en.wikipedia.org/wiki/Belt_and_Road_Initiative

Compared to other nations China will emerge (is emerging) relatively unscathed and has over a trillion dollars to invest outside China. The US will become more insular. China will go well past the US economically, and quickly.

[Orphia Nay]

Originally Posted by lionking

Belt and Road.

https://en.wikipedia.org/wiki/Belt_and_Road_Initiative

Compared to other nations China will emerge (is emerging) relatively unscathed and has over a trillion dollars to invest outside China. The US will become more insular. China will go well past the US economically, and quickly.

You beat me to it.

I almost can't wait for the Belt & Road initiative.

[Orphia Nay]

Maybe needs a new thread, but B&R might mean more open northern borders for Australia.

It'll certainly mean Australia becoming more open with Asia, or considered more open than it already is by many middle-aged people who still have boomers' fears.

What you you think?

[The Atheist]

Originally Posted by lionking

Compared to other nations China will emerge (is emerging) relatively unscathed and has over a trillion dollars to invest outside China. The US will become more insular. China will go well past the US economically, and quickly.

That's a naive view.

China is utterly dependent on exports for growth, while USA could shut itself in and survive on a highly-developed internal economy.

If anything, prolonged economic harm from Covid will hurt China much more deeply than USA, and there were already cracks appearing in China's economy prior to Covid.

Originally Posted by Orphia Nay

I almost can't wait for the Belt & Road initiative.

I hear China is putting a bloody great "NO ENTRY" sign up after the demands for an inquiry on the origins of Covid.

[Orphia Nay]

Originally Posted by The Atheist

That's a naive view.

China is utterly dependent on exports for growth, while USA could shut itself in and survive on a highly-developed internal economy.

If anything, prolonged economic harm from Covid will hurt China much more deeply than USA, and there were already cracks appearing in China's economy prior to Covid.



I hear China is putting a bloody great "NO ENTRY" sign up after the demands for an inquiry on the origins of Covid.

Hahaha Getting tips from Trump and his wall, no doubt .

[marting]

Trump's new pitch: The economy is going to recover fast:

https://news.yahoo.com/trump-pandemi...084901630.html

Quote:

Now Trump wants to extend that claim to great leadership by asking voters to put behind them the tragic events of the last months and to focus on his promise of "spectacular" economic recovery.
....
But Trump, tapping his salesman's optimism, says the nightmare will end soon.

"We built the greatest economy the world has ever seen," the president said last week. "And we're going to do it again. And it's not going to be that long, OK?"

It's not likely to happen. And the dichotomy between what Trump creates in expectations and reality will become increasingly hard for him to navigate.

Immunity from prior infection or from a vaccine that might happen later this year may, or may not be in the cards but one thing's for sure. The virus is immune to his sales pitch.

[The Atheist]

Originally Posted by marting

The virus is immune to his sales pitch.

So are professional investors.

The people listening to him on the economy are the same as the people eating their goldfish tank water cleaner.

[marting]

Originally Posted by The Atheist

So are professional investors.

The people listening to him on the economy are the same as the people eating their goldfish tank water cleaner.

One of the curious things about the lockdown here in the USA is that people are saving more on average. At least those with regular incomes. There's a lot of spending that isn't occurring. Perhaps some are seeing this as a great speculating opportunity and jumping into the market given that the upper middle class isn't spending elsewhere.

Others are getting hard hit. Especially self employed and small business owners.

I suspect it's going to look pretty abysmal in 3 or 4 months. Deaths way higher and social distancing mostly continuing with negative economic effects.

[The Atheist]

Originally Posted by marting

Perhaps some are seeing this as a great speculating opportunity and jumping into the market given that the upper middle class isn't spending elsewhere.

Sure, I made the comment a while back that the stimulus cheques have probably seen a significant amount going to the sharemarkets.

[Pixel42]

Originally Posted by marting

One of the curious things about the lockdown here in the USA is that people are saving more on average. At least those with regular incomes. There's a lot of spending that isn't occurring. Perhaps some are seeing this as a great speculating opportunity and jumping into the market given that the upper middle class isn't spending elsewhere.

Probably just lack of spending on things which simply aren't needed at the moment. I saw a report that clothes sales are way down, which is understandable - not much need for new clothes if you can't leave the house. No meals out, no holidays, no visits to the cinema/stadium/local attraction.

If none of the holidays I booked this year go ahead I'm going to end the year with about £4k more in the bank than expected.

[The Atheist]

I've been trying to figure out what it is exactly that the world has spent $20T on so far. Europe shows a 7.5% contraction for the March quarter, and it will be a lot worse for Q2. USA has spent up to $5T.

And for what?

None of the major countries have done more than slow the spread, so the number of deaths will be pretty much the same as they would have been from the start.

Did we just create the worst recession in 90 years for the sake of it?

[rjh01]

Originally Posted by The Atheist

I've been trying to figure out what it is exactly that the world has spent $20T on so far. Europe shows a 7.5% contraction for the March quarter, and it will be a lot worse for Q2. USA has spent up to $5T.

And for what?

None of the major countries have done more than slow the spread, so the number of deaths will be pretty much the same as they would have been from the start.

Did we just create the worst recession in 90 years for the sake of it?

I did hear that if we did nothing then about 60% of the population would have it at the same time. Even if the actual number is a bit lower it would still mean the country would be barely functional for a few weeks. By this I mean supermarkets not having enough staff to take your money and put new goods on the shelf. If you call emergency services you are told they will come tomorrow. Worse, you will not be able to get into hospital. And for sometime before or after that they will be turning away certain people because they have no room.

But then I wonder what is the difference between nearly everyone having four weeks or so off sick and the current situation?

Maybe the point of it is that it showed what Australia and New Zealand needed to do to avoid what was happening in these places. I think in these countries most people will not get the virus.

[The Atheist]

Originally Posted by rjh01

I did hear that if we did nothing then about 60% of the population would have it at the same time. Even if the actual number is a bit lower it would still mean the country would be barely functional for a few weeks.

Yeah, I said all that way back at the start of the pandemic. The big difference since then is we now know a hell of a lot of cases are so mild you either don't notice, or have a sore throat that wouldn't keep you at home.

There's no doubt hospitals would be crushed for a time, but is that more or less preferable to having a year-long high?

(That is a rhetorical question - I sure as hell don't know)

Originally Posted by rjh01

But then I wonder what is the difference between nearly everyone having four weeks or so off sick and the current situation?

Economically, we'd have been vastly better to have done nothing and let it run. I said what seems like years ago that a pragmatic approach of letting the virus run would save hundreds of billions, because most of the people dying are those who take up 80% of healthcare time and budgets and are mainly in receipt of pensions. As it turns out, those savings would be in addition to the ~$20T the virus has cost the global economy already.

In NZ, the expected death toll from an unchecked virus is 18,000 people. Of that, if we subtract the aged & infirm, we'd probably have fewer deaths among the healthy than the roads claim every year.

Originally Posted by rjh01

Maybe the point of it is that it showed what Australia and New Zealand needed to do to avoid what was happening in these places. I think in these countries most people will not get the virus.

Yeah, I agree - we seem to have squashed it, but our economy is going to suffer for decades as a result.

I think if you can squash the disease, it's money well spent, but I am certain USA will have spent $5T for nothing, because they're going to see no difference in the final numbers.

[Orphia Nay]

We've done wonders for the environment from lockdown at least.

I didn't "prescribe" that.

As for the economy, it was a typical rollercoaster over a short year due to fear and panic.

We are animals, tribesmen afraid of hidden dangers in the bushes.

We fight to be top dog, too.

Instinct.

Calm and/or logical investors hold on for the ride and eventual rise (in sustainable things) and contrarily buy artificially low things.

[The Atheist]

Hey, I'm going to call plagiarism!

Quote:

The biggest names in finance are coming around to a view that seemed unlikely a few weeks ago: Stocks are vastly overvalued.

Quote:

It’s a notion catching on among Wall Street money managers. And it’s coming as investors start to suspect that the Federal Reserve’s support, as well as $3 trillion in Treasury stimulus, may not be enough to compensate for soaring unemployment, a wave of bankruptcies and no end in sight to the pandemic.

https://www.bloomberg.com/news/artic...d=premium-asia

I rest my case.

[Meadmaker]

Originally Posted by Orphia Nay

Calm and/or logical investors hold on for the ride and eventual rise (in sustainable things) and contrarily buy artificially low things.

To be fair, typical investors also hold on to things, including stocks, long after they ought to realize that they are overvalued.

Eugene Fama got the economics Nobel prize for research quantifying that tendency.

A truly rational and well informed investor would recognize when economic or business conditions have changed, resulting in a company's real value changing, and they would sell shares until the price dropped to the new, more realistic, value that reflected current economic conditions. However, that doesn't happen. People tend to overvalue things that they already own. When applied to stocks, that means people tend to stick with a stock that they already own, even when it ought to be apparent that the true value of the company has dropped, which ought to make the stock price drop.

The result is that when something bad happens to a company, or in the current case to a whole lot of companies simultaneously, there tends to be a delay between the bad thing happening and the drop in stock price that the bad thing causes.

ETA: That still doesn't mean that I know whether current stock prices are overvalued. For companies that do not go bankrupt, many will recover, so their current really bad year shouldn't mean that their stock prices ought to reflect this year's awful performance.

[The Atheist]

Originally Posted by Meadmaker

To be fair, typical investors also hold on to things, including stocks, long after they ought to realize that they are overvalued.

Exactly the same as a gambler who bets right down to the last fifty cents.

I used to have a regular punter at the races who arrived every time in a neat suit & tie, and bet $20-50 a race, always in crisp $50 notes.

By the end of the day, he'd come up for the last race and have every last cent in bets. He'd scrape his pockets for 20 cent coins to get to the last dollar.

Long time ago, when $50 was worth $50.

Originally Posted by Meadmaker

A truly rational and well informed investor would recognize when economic or business conditions have changed, resulting in a company's real value changing, and they would sell shares until the price dropped to the new, more realistic, value that reflected current economic conditions.

Correct!

Holy crap, someone finally got there.

Right now, that rational investor would be selling. The market's made a spectacular and totally illogical reverse from a massive drop. The time to sell is today. Even if it goes up another 10%, there's at least 25% down left in it at the current level.

Originally Posted by Meadmaker

ETA: That still doesn't mean that I know whether current stock prices are overvalued.

Well, I don't expect anyone to listen to me, but those boys on Bloomberg I quoted seemed pretty clear. They're seriously heavyweight investors and they can see that light at the end of the tunnel is actually an iron ore train.

Maybe you're a victim of thee exact syndrome you describe?

If you think logically - what's the worst than can happen if you sell? Price goes up how far? Given the massive recession that is already happening, how much upside do you think there is today? Couple of percent?

If you get out and it does go up, you might cost yourself a percent or two of future profit. Buy back in, no capital lost.

If you hold and it goes down 25% you've lost 25% of your capital that may take decades to get back.

Add up the risk & reward and get back to me.

Originally Posted by Meadmaker

For companies that do not go bankrupt, many will recover, so their current really bad year shouldn't mean that their stock prices ought to reflect this year's awful performance.

Like the Bloomberg article noted, placing your wealth (for very small returns) on a bet that the economy will recover is a very dodgy proposition. A global recession of massive proportions does not create a good climate for company profits anywhere.

And remember, it's only just started. It feels like we've been doing Covid forever, when the reality is, the number of confirmed cases so far is under 5 million, so even if we think the real total might be 50,000,000, that is all of 1% of the total number of cases we'll ultimately have.

And if you want to be really disturbed about all this, check out the global supply chain and see how it's doing.

[Meadmaker]

Originally Posted by The Atheist

Like the Bloomberg article noted, placing your wealth (for very small returns) on a bet that the economy will recover is a very dodgy proposition.

The economy will recover. It's a question of whether it will recover in one year, or ten. The effects on company value will, or at least ought to, depend on that answer.

This year is going to suck, for sure.

[Meadmaker]

Here's a scenario that I think is actually fairly likely.

Eventually we give up, open up the economy, and a lot of people die. This will be good for stock prices. My heirs will then be fortunate if I don't sell all of my stock.

[The Atheist]

Originally Posted by Meadmaker

The economy will recover. It's a question of whether it will recover in one year, or ten.

I'd be towards ten than one.

Originally Posted by Meadmaker

Here's a scenario that I think is actually fairly likely.

Eventually we give up, open up the economy, and a lot of people die. This will be good for stock prices. My heirs will then be fortunate if I don't sell all of my stock.

A million deaths (or more) won't be good for share prices. Insurance companies will be wiped out, premiums will skyrocket and the knock-on effects will cost trillions. Health systems will be crushed and hundreds of thousands of people will die from not being able to access healthcare.

Looks good on paper, but completely wrong.

[Meadmaker]

Originally Posted by The Atheist

I'd be towards ten than one.



A million deaths (or more) won't be good for share prices. Insurance companies will be wiped out, premiums will skyrocket and the knock-on effects will cost trillions. Health systems will be crushed and hundreds of thousands of people will die from not being able to access healthcare.

Looks good on paper, but completely wrong.

But think of the Medicare savings.

[The Atheist]

Originally Posted by Meadmaker

But think of the Medicare savings.

I mentioned that way, way back - then think of the savings on pensions.

I see a big bounce today, I'd be getting rid of everything.

[Meadmaker]

One of the underexplored aspects of our economy that this situation is demonstrating is that a huge part of the economy can go away completely, and it wouldn't matter.

I miss restaurants. I want to book a vacation because I like travel. All that junk that I don't need in a whole lot of retail stores? Yeah, whatever. I would like it, and yet, somehow, I'm not really suffering for the lack of it. That's bad news for a lot of companies that manufacture all that stuff or that provide the non-essential services.

In my fantasy head, I'm imagining that what comes out of this is more vacation time and earlier retirement, as we decide that it just isn't worth it to work so much so that I can have marble countertops or a convenient flight to Machu Picchu.

[Meadmaker]

Originally Posted by The Atheist

I mentioned that way, way back - then think of the savings on pensions.

I see a big bounce today, I'd be getting rid of everything.

Would be? Or already have?

[Emily's Cat]

Originally Posted by Meadmaker

But think of the Medicare savings.

A very irreverant group of fellow actuaries floated around ideas for renaming COVID early on. These included:

Pension Reform
Social Security Saver
Boomer Remover
Coroner Virus
Extrovert Eradicator

[The Atheist]

Originally Posted by Meadmaker

One of the underexplored aspects of our economy that this situation is demonstrating is that a huge part of the economy can go away completely, and it wouldn't matter.

Yeah, a lot of people are finding that, I think.

Whether they go back to their dark ways or not, time will tell.

Originally Posted by Meadmaker

Would be? Or already have?

I got out of TVIX at $400. It's down to $180 now. I had some thoughts about getting back in for a few at $140 last week, but I'm quite happy to sit on the sidelines and watch now.

The shares I own are locked in pension funds and not easily sellable, or they'd be gone today.

Originally Posted by Emily's Cat

Boomer Remover

I started using "Boomer Hoover" until it stopped being funny. A Hoover being a brand name that generically means vacuum cleaner in the British Commonwealth.

[The Atheist]

US Federal Reserve issues a warning: https://www.bloomberg.com/news/artic...d=premium-asia

[Roger Ramjets]

Originally Posted by Meadmaker

One of the underexplored aspects of our economy that this situation is demonstrating is that a huge part of the economy can go away completely, and it wouldn't matter.

Except it can't, because people need money to buy the stuff they actually need - and to do that they have to sell stuff nobody needs.

Quote:

I miss restaurants. I want to book a vacation because I like travel. All that junk that I don't need in a whole lot of retail stores? Yeah, whatever. I would like it, and yet, somehow, I'm not really suffering for the lack of it. That's bad news for a lot of companies that manufacture all that stuff or that provide the non-essential services.

I am the same, and it started before Covid-19.

But for many others the withdrawal symptoms from not shopping were too much to bear, and they will compensate by overdosing. I expect the economy to bounce back until people are once again drowning in junk.

Quote:

In my fantasy head, I'm imagining that what comes out of this is more vacation time and earlier retirement, as we decide that it just isn't worth it to work so much so that I can have marble countertops or a convenient flight to Machu Picchu.

It's a nice fantasy, but I'm afraid it will just be 'business as usual' with everybody going back to old habits. Maybe when the next wave hits...

[Meadmaker]

Originally Posted by Roger Ramjets

Except it can't, because people need money to buy the stuff they actually need - and to do that they have to sell stuff nobody needs.

I am the same, and it started before Covid-19.

But for many others the withdrawal symptoms from not shopping were too much to bear, and they will compensate by overdosing. I expect the economy to bounce back until people are once again drowning in junk.

It's a nice fantasy, but I'm afraid it will just be 'business as usual' with everybody going back to old habits. Maybe when the next wave hits...

All true.

[Roboramma]

Originally Posted by Meadmaker

Here's a scenario that I think is actually fairly likely.

Eventually we give up, open up the economy, and a lot of people die. This will be good for stock prices. My heirs will then be fortunate if I don't sell all of my stock.

It's not entirely clear that ending lockdowns opens up the economy and gets things rolling again. Some of the economic slowdown is mandatory, but some is voluntary. People are still worried about getting infected, and changing their behavior because of those fears. That doesn't change just because lockdown ends.

[Samson]

Originally Posted by Roboramma

It's not entirely clear that ending lockdowns opens up the economy and gets things rolling again. Some of the economic slowdown is mandatory, but some is voluntary. People are still worried about getting infected, and changing their behavior because of those fears. That doesn't change just because lockdown ends.

New Zealand is functionally covid free yet the restaurants are open and deserted.