Black Swan Event Under Way

[The Atheist]

Holy crap, make that TVIX quote $76.

Buy orders everywhere.

[lobosrul5]

Originally Posted by The Atheist

Yeah, who would have thought that paying people to borrow money would lead them to load up on shares in a bull market.

It's all a bit Weimar, except the shares have gone up and not the dollar down.

This could change that thinking if it turns into a rout, and I think that's a distinct possibility.



The question is how countries manage the outbreaks.

Just due to the sheer volume of cases likely, I think they have to take extreme measures or health services will break down completely. People keep banking on a lot of mild cases, but the ratio of severe cases says that an enormous number of people will get bloody sick.

Iran's infected Minister, Iraj Haririchi, is definitely as crook as a parrot, and he doesn't look very old. I can't see his age easily, but I'd put him about 50.

Unchecked, the virus will strike fast and wide, as being shown in SK, Italy & Iran. The sickest cases are needing weeks in intensive care. Let's say two weeks on average.

In USA, if even 40% of people get it over the course of three months, you'd have a requirement for 16 million intensive care beds during that period, or over 2 1/2 million at any give time during the outbreak.

How many intensive care beds in USA? About 100,000, apparently.

Good luck with that, and America's probably got a better ratio than most countries.

Thats overstating things though. Only 18% of cases are "serious" which would (I think) equate to needing an ICU bed. So, if your 2.5 million cases estimate is right, we'd need 450,000 ICU beds.

Stats as shown here: https://www.worldometers.info/coronavirus/

That said, I just bought 200 lbs of brown rice on the internet, a little generator, and a few other odds and ends. If theres a case in NM I'll quit my job and sit at home. 100% chance I'll be exposed if I kept showing up to work, and this job isn't worth dying over.

[dudalb]

Originally Posted by Sideroxylon

Maybe we shouldn’t just be relying on a pandemic to take care of this problem.

God,I am beginning to understand where you are coming from, and it is not a pretty place.

[dudalb]

Originally Posted by angrysoba

It still applies. Unload it now, when people think it is worth X, rather than later, when people think is is worth X- n

The upside is there might be some real bargins to be had if you think long term investments.

[Sideroxylon]

Originally Posted by dudalb

God,I am beginning to understand where you are coming from, and it is not a pretty place.

That was sarcasm so your response is actually a better insight into your workings and I just had a good belly laugh. Some strong Chris Mathews vibes. Lol

[The Atheist]

Originally Posted by lobosrul5

Thats overstating things though. Only 18% of cases are "serious" which would (I think) equate to needing an ICU bed. So, if your 2.5 million cases estimate is right, we'd need 450,000 ICU beds.

At that percentage I'd be well under-stating it.

I'm saying only 40% of Americans will get it, being 120 million cases and only 15% of them needing intensive care. That's the 16 million.

If 18% of cases need intensive care, you're going to need 20 million.

Expert opinion seems to be centered on 60% of populations getting it, so I could be miles under. Even at 5% serious rate, that would be 14 million, so I don't see a lot of fun happening if it goes fill-blown.

I'm guessing administrations should be able to do that simple maths and realise they have a choice between hurting the economy to slow the outbreak, or destroy the economy and millions of lives by taking no action.

Might be a good time to have a germophobic president!

Originally Posted by lobosrul5

100% chance I'll be exposed if I kept showing up to work, and this job isn't worth dying over.

That's much how I feel about it, too. 5-10 chance of dying from it has no appeal to me.

Unfortunately, I have a kid at primary school, which is the perfect vector for infections.

___________________________________________


Meanwhile, TVIX has been over $80 twice today and is currently at $76.

[The Atheist]

I see the Dow 1500 points off its 2020 high.

Still 2200 higher than 2019 low, but I expect it will test that next week.

[The Atheist]

Very interesting watching the Dow futures today.

Early on - shortly after close - they were up 220 points on today's close. No doubt a few hopefuls thinking they were bargain-hunting.

Right now, that's reduced to 65 points over the close, so the selling pressure even now is wiping out the hopefuls. I'd be amazed if they were in the red within the next four hours, still 12 from opening.

TVIX looks at $100 by close of play Friday, US time is my pick. It's overcoming every profit take at the moment, bouncing from $73 and back up to $76 every time.

[The Atheist]

Originally Posted by The Atheist

I'd be amazed if they were in the red within the next four hours, still 12 from opening.

Couldn't get back in four, but it's only five hours now and hey presto - Dow futs are down 15 points. Still fluctuating around the close.

[The Atheist]

And Dow futures are now 139 158 - a change of 19 points in 3 minutes - points in the red...

Every sign of buyers entering the market is a signal for the hawks to jump in and eat them.

[The Atheist]

Looks like investors outnumber the sellers, with a nice bounce today in the Dow.

For some reason, dead cats keep springing to mind.

[The Atheist]

It was a dead cat - back into negative territory, although only 50 points.

Futures, however, are down another 120 points already.

[marting]

Ya ain't seen nothing yet. We have been overdue for a bear market for a year or two delayed by spending increase from the tax cut at the cost of increased deficits.

And now there's this.

Funny how some financial commenters wondering whether we will officially go into "Correction" territory.

In Market speak, A bear market is when prices drop >20%, a correction is 10%.

God help us (channeling Pence)

[Meadmaker]

My Carnival Cruise Line stock has really dropped a lot this week. Fortunately I didn't have a lot of it.

[The Atheist]

Originally Posted by marting

Ya ain't seen nothing yet.

You will, starting tomorrow. The first case of unknown transmission has occurred in USA and Dow futures are currently down 350, having taken another 100 points in the past 5 minutes. That's one a single case.

There will be blood on the floor tomorrow.

20% will be the least of anyone's worries in a week's time.

The GFC caused a 50% drop in market value and I expect this to be worse. You'd be much better off investing in a share of the Brooklyn Bridge or a hidden gold mine than the Dow right now.

[Samson]

The 500 hit 10% after hours, it is a flu virus that will follow cold weather, but the bigger picture is gluttony and proximity.
The virus should subtract human biomass from the wretched planet.
Maybe a white swan.

[The Great Zaganza]

Markets expect this to be the first real crisis the Trump administration will have to actually deal with.

Of course they are freaking out.

[catsmate]

Oh good grief, more pathetic doom-mongering.

Originally Posted by lionking

Yes I know this is in economics, but I’m yet to be convinced this will be a global disaster. There have been 1000 cases outside mainline China, half on that cruise ship in Japan. A couple of passengers died, but given the age profile of passengers, it’s always likely a couple would die anyway.

Meanwhile active quarantines will limit spread and work is progressing on a vaccine. SARS had little economic impact. My prediction is that this will be the same.

This.

[The Atheist]

Originally Posted by Samson

The 500 hit 10% after hours, it is a flu virus...

Mate, I thought you'd be a little more up with the play that that - it is not a 'flu virus. It's also much, much worse than one.

Originally Posted by Samson

...that will follow cold weather...

That's an assumption with no evidence at all. Some coronaviruses - notably MERS - are not temperature dependent.

It might be, but it's dangerous to assume it is.

Originally Posted by Samson

Maybe a white swan.

For the planet via 90% reductions in CO2 emissions, quite possibly.

Economically, it's going to be disastrous.

Originally Posted by The Great Zaganza

Markets expect this to be the first real crisis the Trump administration will have to actually deal with.

Of course they are freaking out.

Dow down 500, having dead-cat-bounced back from 1000 down. It'll be back down there tomorrow.

TVIX hit $90.

Long way to go yet. People are only just waking up to the impact of this disease.

[The Atheist]

Good, expert analysis here: https://www.bloomberg.com/quote/INDU:IND

[The Atheist]

More here: https://finance.yahoo.com/news/marke...120837786.html

TVIX above $90 and climbing...

[Samson]

Originally Posted by The Atheist

More here: https://finance.yahoo.com/news/marke...120837786.html

TVIX above $90 and climbing...

Well called.
They will call it a losing bet if it doesn't get 200.

[The Atheist]

Dow down 1000 today, so we're already 10% off the high, and we've only just got started.

TVIX trading at near $100.

If people have followed my advice, they will be cashed out of half the investment so the 50% remaining investment is free of cost. Based on a $5000 initial investment, you'd be sitting as follows:

$40 a share = 125 shares. 62.5 sold at $80 for full refund.
62.5 current shares are worth $95 right now.
62.5 x $95 = $5937-50 in profit.

I'd call that a win.

And, of course, for the brave who kept going, holding all 125, they'd be sitting at $11,875.

I think my prediction of hitting $300 will be realised without too many dramas.

(Hitting $97 in the time it's taken to type that)

[marting]

Chuckle. Predictions are hard. Especially about the future.

But sometimes, if one pays attention at all, it's much easier.

Oh, and Dow closed down 1190.

[dudalb]

Originally Posted by catsmate

Oh good grief, more pathetic doom-mongering.





This.

This totally ignores how much markets are often driven by emotion...fear being one of the strongest.
That is economics 1A.

[Samson]

SP 500 down 13% from high, and accelerating. It is particularly difficult to see free movement for the next few years, this is the shock the world of people richly deserves.

I fall short of being a misanthrope but always empathised with Jonathan Swift and where he got to.

[dudalb]

A couple of people here have the Mr.Spock syndrome. They expect people to behave in a 100% logical way without emotions impacting their decisions.
Sorry, but Human beings are not Vulcans.

[The Atheist]

Originally Posted by marting

Chuckle. Predictions are hard. Especially about the future.

But sometimes, if one pays attention at all, it's much easier.

Oh, and Dow closed down 1190.

Yes indeed.

My predictions are based on simple maths and they're all coming home to roost.

TVIX just hit $100, with Dow futures signalling another red day tomorrow.

Buyers seem to have disappeared.

Originally Posted by Samson

SP 500 down 13% from high, and accelerating. It is particularly difficult to see free movement for the next few years, this is the shock the world of people richly deserves.

Bloomberg is calling it "The fastest correction in history". I think correction isn't the right word.

I agree it will take years to recover, because the damage will be astronomical.

The really scary part is, even safe havens aren't being bought. Gold is well off its high when I expected it to be going higher; oil is dead in the water, and even Bitcoin is down almost 10%, when it looked like a safe haven early on.

I'm still laughing about predictions the NZ residential market will go up 10% before June. Good luck with that - if it pans out as expected, you'll see it go the other way, with a big surplus of houses from old people dying and younger people being foreclosed.

I don't agree on the deserve it part, sorry.

[marting]

Originally Posted by The Atheist

Yes indeed.

My predictions are based on simple maths and they're all coming home to roost.

Mine, which aligned with yours, were based on the financial impact of measures taken by China and those that will be taken by other countries to slow and limit the spread.

Finally the market is moving out of La La Land into reality kicking and screaming as smart money makes it's moves. However, most people have no idea what we are in for and the consequences of what will be necessary to control this disease. But I'm pretty optimistic it will be controlled. Whether we wind up losing 100k or 500k will depend a lot on how successful the govt. is at surveillance, and various degrees of social distance measures.

[TragicMonkey]

God must love me. I was actually cashing some things out to pay for upcoming dental work, and sold my Disney stock last week when it was at 140. Today it's at 118.

[The Atheist]

Few dead cats in the futures market.

Silly people, they'll get crushed.

[Meadmaker]

Originally Posted by The Atheist

Yes indeed.

My predictions are based on simple maths and they're all coming home to roost.

TVIX just hit $100, with Dow futures signalling another red day tomorrow.

Buyers seem to have disappeared.

If buyers seem to have disappeared, it seems a bad time to sell.


The trick with all of this market timing stuff is to know when the change in direction will come. The market will not go down forever. If it was already overpriced, it won't come back to its recent highs for a long time, but it will eventually.

When the financial crisis hit in 2008, it was clear that the market was going down. So, a lot of people said "sell!" and it went down some more. Until it stopped going down, and started going up.

The people who were correct about how long it would go down for sold as it started to go down, bought at the bottom, and got rich, or at least made a sizeable return, if they only invested a small amount.

The people who just held their stock when it started to go down, also made a lot of money, though not nearly so much as the people who timed the market exactly.

Some people held on for a little while, and then got nervous but decided to stay the course, and then saw how much they had lost (on paper) and finally admitted defeat, and sold the day before things started going up, and ended up losing a lot of money.


When all is said and done, this coronavirus thing will be a blip. It might be a very big blip, but ten years from now it will be a temporary downturn. I just don't know how far it will fall before it turns around, or how long it will take.

[Segnosaur]

Originally Posted by Meadmaker

Quote:

A major factor is the fact that markets are over valued by an enormous amount right now.

By what measure? Yields are not incredibly low. P/e is not incredibly high.

Well there is this:

From: https://www.cnbc.com/2020/01/16/stoc...e-measure.html
Stocks are the most overvalued since at least the 1980s based on one measure
“The S&P 500 is running on fumes,” Bank of America equity and quant strategist Savita Subramanian said in a note to clients Thursday....The current price-earnings ratio is at 18.4 times, hitting a level the ratio hasn’t seen since 2002, according to Bank of America... Goldman Sachs pointed out to clients last week that the stock market relative to the size of the economy, or the U.S. equity market cap-to-GDP ratio is at an all-time high. Plus, the cyclically adjusted price-earnings ratio, created by Nobel Prize winner Robert Shiller, is near the highest since 2000 dot-com bubble.

And lets face it... we know that a recession was likely going to hit fairly soon (if for no other reason that they hit every decade or so), and the Trump administration has been doing everything they can to ensure the next recession is really bad. (Cutting regulations that could keep the economy stable, driving up the deficit and cutting taxes to make it difficult to respond to the next economic downturn.) Even without the corona virus, investors should be cautious that the economy was going to falter.

[William Parcher]

Originally Posted by Meadmaker

When all is said and done, this coronavirus thing will be a blip. It might be a very big blip,

You mean like the 1929 crash which led to the Great Depression?

[dudalb]

Originally Posted by Meadmaker

If buyers seem to have disappeared, it seems a bad time to sell.


The trick with all of this market timing stuff is to know when the change in direction will come. The market will not go down forever. If it was already overpriced, it won't come back to its recent highs for a long time, but it will eventually.

When the financial crisis hit in 2008, it was clear that the market was going down. So, a lot of people said "sell!" and it went down some more. Until it stopped going down, and started going up.

The people who were correct about how long it would go down for sold as it started to go down, bought at the bottom, and got rich, or at least made a sizeable return, if they only invested a small amount.

The people who just held their stock when it started to go down, also made a lot of money, though not nearly so much as the people who timed the market exactly.

Some people held on for a little while, and then got nervous but decided to stay the course, and then saw how much they had lost (on paper) and finally admitted defeat, and sold the day before things started going up, and ended up losing a lot of money.


When all is said and done, this coronavirus thing will be a blip. It might be a very big blip, but ten years from now it will be a temporary downturn. I just don't know how far it will fall before it turns around, or how long it will take.

On TV this evening, a few economist were using the "R" word.

[dudalb]

Originally Posted by Segnosaur

Well there is this:

From: https://www.cnbc.com/2020/01/16/stoc...e-measure.html
Stocks are the most overvalued since at least the 1980s based on one measure
“The S&P 500 is running on fumes,” Bank of America equity and quant strategist Savita Subramanian said in a note to clients Thursday....The current price-earnings ratio is at 18.4 times, hitting a level the ratio hasn’t seen since 2002, according to Bank of America... Goldman Sachs pointed out to clients last week that the stock market relative to the size of the economy, or the U.S. equity market cap-to-GDP ratio is at an all-time high. Plus, the cyclically adjusted price-earnings ratio, created by Nobel Prize winner Robert Shiller, is near the highest since 2000 dot-com bubble.

And lets face it... we know that a recession was likely going to hit fairly soon (if for no other reason that they hit every decade or so), and the Trump administration has been doing everything they can to ensure the next recession is really bad. (Cutting regulations that could keep the economy stable, driving up the deficit and cutting taxes to make it difficult to respond to the next economic downturn.) Even without the corona virus, investors should be cautious that the economy was going to falter.

I think that this is the first real, major non self generated crisis in the Trump administration, and Trump incompetent handling of it is not helping matters.

[TragicMonkey]

Originally Posted by dudalb

On TV this evening, a few economist were using the "R" word.

I know Trump brings out powerful emotions in people, but I'd think professional economists doing news interviews would remember the term these days is "developmentally challenged" instead.

[Meadmaker]

Originally Posted by dudalb

On TV this evening, a few economist were using the "R" word.

They've been using it for a while now, and one of these days they'll be right. The coronavirus crash could be the thing that tips the economy into recession. (Consumer confidence tends to fall as 401k balances fall.) However, the last big stock market drop, at the end of 2018, didn't do it. I haven't looked, but I don't think it's down to what it was then.

Lots of money will be made. Lots of money will be lost. Lots of money will change hands. Stock prices will fall farther, unless they don't.


If the coronavirus does significantly restrict commerce, then there will be a recession. That's almost the definition of a recession, and stock prices will almost certainly fall, but they actually shouldn't. Assuming the companies will be able to resume normal business, then this temporary glitch should just be a bump in the road. If I could see the bumps more accurately, I would be rich.

[The Atheist]

Originally Posted by The Atheist

Few dead cats in the futures market.

Silly people, they'll get crushed.

And they already have - futures now down 70 off the Dow close.

More to come tomorrow...

[Segnosaur]

Originally Posted by Meadmaker

Quote:

On TV this evening, a few economist were using the "R" word

They've been using it for a while now, and one of these days they'll be right.

You're right... people often predict recessions when there are none evident. But, there are patterns that suggest that a recession is likely.
The coronavirus crash could be the thing that tips the economy into recession. (Consumer confidence tends to fall as 401k balances fall.) However, the last big stock market drop, at the end of 2018, didn't do it. I haven't looked, but I don't think it's down to what it was then.[/quote]
Its not.

In December 2018 the Dow hit 22445. This was a drop of from 25538 in November 2018 (so a drop of ~3000 points).

Currently, stock prices sit at 25752, so they still have a ways to go to reach that level. But, they've already dropped ~3000 points this week... if next week follows the same patter, they could easily match that level.

Lots of money will be made. Lots of money will be lost. Lots of money will change hands. Stock prices will fall farther, unless they don't.

Quote:

If the coronavirus does significantly restrict commerce, then there will be a recession. That's almost the definition of a recession, and stock prices will almost certainly fall, but they actually shouldn't.

There are a lot of reasons why stocks might fall (even if you think investors would be better of sticking things out)....

- Some people engage in 'short selling', so actually benefit from a drop in stock price

- A recession may make some companies non-viable, so shareholders will want to dump their stocks if they think the company may go bankrupt

- Shareholders may require some liquidity for non-investment reasons

- If the profitability of a company drops (e.g. smaller dividends), shareholders may want to trade their shares for some other investment with a higher rate of return. Many won't want to buy shares in a struggling company so the seller has to drop the price.