Author Topic: Can the economy recover if stocks stay high?  (Read 1670 times)

KateFIRE

  • 5 O'Clock Shadow
  • *
  • Posts: 53
Can the economy recover if stocks stay high?
« on: April 20, 2020, 07:08:08 PM »
There seems to be a disconnect between stocks and the economy. While companies are reporting terrible earnings and unemployment is at 22 million people, the S&P 500 is down only 12% YTD. If the stock market doesnít go down, its usual after-recession rise will not help to propel the economy.

We want to buy a bigger home and I thought that this would be our chance, but prices havenít budged. The stock market has almost already recovered, the government is allowing people to skip mortgage payments, so I donít see much incentive for people to lower the price of their home.

Similarly to stocks, with the companies getting bailed out the rich and in debted keep their assets and there is no rollover in the economy which would propel a recovery. So if the stock market doesnít go down, is 22 million unemployment and stimulus checks for the average Joe while the rich keep their asset values the new normal?
« Last Edit: April 20, 2020, 08:29:00 PM by KateFIRE »

MaaS

  • Stubble
  • **
  • Posts: 239
Re: Can the economy recover if stocks stay high?
« Reply #1 on: April 20, 2020, 07:51:49 PM »
There seems to be a disconnect between stocks and the economy. While companies are reporting terrible earnings and unemployment is at 22 million people, the S&P 500 is down only 12% YTD. If the stock market doesnít go down, its usual after-recession rise will not help to propel the economy.

We want to buy a bigger home and I thought that this would be our chance, but prices havenít budged. The stock market has almost already recovered, the government is allowing people to skip mortgage payments, so I donít see much incentive for people to lower the price of their home.

Similarly to stocks, with the companies getting bailed out the rich and in debted keep their assets and there is no rollover in the economy which would propel a recovery. So if the stock market doesnít go down, is 22 million unemployment and stimulus checks for the poor while the rich keep their asset values the new normal?

The stock market rising doesn't propel the economy. The markets (typically) rise ahead of the economy because they are forward-looking and anticipate economic recovery.

On housing prices - I really hope it doesn't get to the point of mass foreclosures, but be patient. If there's going to be a big downturn in prices, it won't be an instant event. It'll trail job losses by a few months or even quarters as people blow through their savings, get cash advances off credit cards, sell assets, etc.

magnet18

  • Bristles
  • ***
  • Posts: 321
Re: Can the economy recover if stocks stay high?
« Reply #2 on: April 21, 2020, 09:11:45 AM »
The stock market isn't down because this is expected to be a short blip in earnings.  Some of the blue chip companies have been around for in excess of 400 quarters, if you look forward 40 more 2 quarters of meh earnings isn't that big of a hit, the assumption being that this is an externality that will recover quickly (2 - 4 quarters or so).

More skeletons may come out of the closet and / or the pandemic may get worse, but current data indicate the pandemic is well under control, and the death rate isn't nearly as bad as the initial data indicated.

If you want a cheap house now, you might be able to find someone desperate to sell, nobody is buying at the moment.  Otherwise, wait and see if things get worse.  Skipping mortgage payments doesn't work forever, and skipping rent payments definitely can't last long without bailing out landlords.  This wasn't a mortgage crisis like 08/09, real estate will be a secondary or tertiary impact from unemployment dragging out and not enough stimulus injections to keep things alive.



ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 2251
Re: Can the economy recover if stocks stay high?
« Reply #3 on: April 21, 2020, 03:09:06 PM »
Be patient. What severe economic crisis has ever lasted just 2 months? This is not December 2018.

@magnet18 is right. There are enough market participants who think this will all blow over in a few weeks that we are only experiencing a typical correction instead of an actual crash. Most people who are still trading see some reason not to be in cash.

IMO, they are a bit too enthusiastic, buying at an average PE of 21 when unemployment is projected to exceed 25%, at large percentage of small businesses will be gone by early summer regardless of the stimulus, and the impact on mortgages, bonds, and financial institutions is still around the corner.

But then again, my favorite news sources have a huge impact on my opinion. Reuters, CBSnews, ABCnews, Vox, and Marketwatch all agree things are friggin' dire and will be for at least he next 6 months. However, if I consumed Fox News, The Blaze, Briebart, or other right-wing information outlets, I might be convinced that the social distancing guidelines, school closings, etc. are an overreaction to an epidemic that has only killed as many Americans as a typical flu season or two, and government overreach too! I might think the executive branch of government was doing a competent job managing the crisis situation, and that the economy will spring upward as soon as the limitations are lifted. I might be looking forward to a mid-May back to normal date, because the rate of new infections is already flattening.

Thing is, if our opinions = our news sources, we will only be as correct as they usually are, at best. So it's good to remain humble and not latch too firmly onto any one narrative.

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 2052
  • Religion isn't the opiate, politics is.
Re: Can the economy recover if stocks stay high?
« Reply #4 on: April 21, 2020, 04:23:39 PM »
Some really good comments above. What I can add:

- The S&P 5+495 is at a PE of 19.62 as of tonite. Letís call it 20. Based on trailing (past) earnings from before COVID. To me thatís just too low of a return given risk. Iím just not that interested. The PEs for international stocks are lower and offer the bonus (or liability) of foreign currency exposure.

- it seems to me that the market is either being naively optimistic about the future or, perhaps more likely, looking at the expected returns of other investments such as bonds and deciding that this is the best investment available.

- The Fed has very much got the back of the financial sector. No part of the 1% left behind! I am skeptical of the Fed being willing or able to backstop financial markets indefinitely. See Japan.

magnet18

  • Bristles
  • ***
  • Posts: 321
Re: Can the economy recover if stocks stay high?
« Reply #5 on: April 21, 2020, 08:55:21 PM »
A thought along the P/E lines that's been rattling in my head... Do we still have another, totally independent, crash right around the corner?

Picture an alternate universe where coronavirus never happened.  We were on year 11 of one of the longest bull runs in history.  Inevitably, *something* is gonna happen to end that, recessions are usually something fiscal policy, or speculation related. 

Because this recession has been artificially manufactured, was whatever was going to cause the next crash independent of corona virus?  Is it still lurking around the corner, waiting to crash us another 30%, or has this recession defused the bomb?  Perhaps this oil business would have caused it anyway, and we accidentally put that fire out by dumping gas on it and nobody cares?  Perhaps the whole market is speculatively oversold?

Just musings.  Continuing to buy with every paycheck.

Tl;dr - do you think this really "counts" as an end to the bull market, or is it artificially generated turbulence with a real crash still around the corner

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 2942
Re: Can the economy recover if stocks stay high?
« Reply #6 on: April 21, 2020, 09:33:53 PM »
P/E has a 0.4 correlation with future returns according to a white paper by Vanguard.
http://fairwaywealth.com/wp-content/uploads/Vanguard-Research-11-30-2014.pdf

During a lock down, someone working from home and someone collecting unemployment have the same behavior.  Normally unemployment numbers reveal people who travel less and shop malls less - but both of those are now true for everyone on lock down.  In this rare case, unemployment is not revealing new behavior or new information, which is why markets are ignoring it.

... the S&P 500 is down only 12% YTD. If the stock market doesnít go down, its usual after-recession rise will not help to propel the economy.

We want to buy a bigger home and I thought that this would be our chance, but prices havenít budged. The stock market has almost already recovered, the government is allowing people to skip mortgage payments, so I donít see much incentive for people to lower the price of their home.
...
Markets dropped since you posted, and the S&P 500 is now -15.5% for the year.  If you extend that to include international stocks and U.S. small caps, you see -20% YTD in Vanguard Total World (VT).

https://www.nclc.org/issues/foreclosures-and-mortgages/covid-19-state-foreclosure-moratoriums-and-stays.html
California:  "Rule No. 2 suspends judicial foreclosures. Stays all judicial proceedings to foreclose on a mortgage or deed of trust, including an action for a deficiency."
New York: "... ensure under reasonable and prudent circumstances that regulated entities provide to any consumer in the State an opportunity for a forbearance of payments for a mortgage for any person or entity facing a financial hardship due to the COVID-19 pandemic"

You can check on your specific state, in the link above.  Most states have stopped all foreclosures for now.  That would mean people who can't pay their mortgage can keep their home, and won't sell at distressed prices (or at least, the bank won't force them to sell).

If the goal is profiting off lower real estate prices, Vanguard REIT (VNQ) is down -21% YTD.  That's worse than the overall market (VTI -17%), but not by much.

CrankAddict

  • 5 O'Clock Shadow
  • *
  • Posts: 55
  • Age: 46
Re: Can the economy recover if stocks stay high?
« Reply #7 on: April 21, 2020, 10:06:35 PM »

But then again, my favorite news sources have a huge impact on my opinion. Reuters, CBSnews, ABCnews, Vox, and Marketwatch all agree things are friggin' dire and will be for at least he next 6 months. However, if I consumed Fox News, The Blaze, Briebart, or other right-wing information outlets, I might be convinced that the social distancing guidelines, school closings, etc. are an overreaction to an epidemic that has only killed as many Americans as a typical flu season or two, and government overreach too! I might think the executive branch of government was doing a competent job managing the crisis situation, and that the economy will spring upward as soon as the limitations are lifted. I might be looking forward to a mid-May back to normal date, because the rate of new infections is already flattening.

Thing is, if our opinions = our news sources, we will only be as correct as they usually are, at best. So it's good to remain humble and not latch too firmly onto any one narrative.

I agree that there are certainly two diverging tales being spun.  I've acquired 95% of my reporting from PBS, WSJ, and NYT (and 0% from cable news) and find them all to be describing a single reality, albeit from different perspectives.  But anytime I come across a friend that has the "this is just a liberal plot to make Trump look bad" narrative stuck in his brain, I ask why is it that Putin locked down Russia?  Or why did Iran lock down?  Hell, why did China do it originally?  Are all these iron-fisted states going soft and pandering to twitter snowflakes now?!  My friends don't have much of a response as you might expect.  But that is one upside of a global situation - it's much harder to paint everything with the "US liberal media bias"/"fake news" brush.

John Galt incarnate!

  • Handlebar Stache
  • *****
  • Posts: 1417
  • Location: On Cloud Nine
Re: Can the economy recover if stocks stay high?
« Reply #8 on: April 22, 2020, 10:09:11 AM »


We want to buy a bigger home and I thought that this would be our chance, but prices havenít budged.

 A website that covers housing issues posted 

1. Over 22 million jobless claims filed with an additional fifteen million jobs losses expected to be documented in the next report

2. Nearly 3 million mortgages already in forbearance

I think 1 & 2 augur many foreclosures to come  so there will be opportunities to buy homes  priced lower than what they're priced at now.

Conclusion?

Your chance will come.
« Last Edit: April 22, 2020, 10:14:51 AM by John Galt incarnate! »

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 2251
Re: Can the economy recover if stocks stay high?
« Reply #9 on: April 22, 2020, 10:29:43 AM »

But then again, my favorite news sources have a huge impact on my opinion. Reuters, CBSnews, ABCnews, Vox, and Marketwatch all agree things are friggin' dire and will be for at least he next 6 months. However, if I consumed Fox News, The Blaze, Briebart, or other right-wing information outlets, I might be convinced that the social distancing guidelines, school closings, etc. are an overreaction to an epidemic that has only killed as many Americans as a typical flu season or two, and government overreach too! I might think the executive branch of government was doing a competent job managing the crisis situation, and that the economy will spring upward as soon as the limitations are lifted. I might be looking forward to a mid-May back to normal date, because the rate of new infections is already flattening.

Thing is, if our opinions = our news sources, we will only be as correct as they usually are, at best. So it's good to remain humble and not latch too firmly onto any one narrative.

I agree that there are certainly two diverging tales being spun.  I've acquired 95% of my reporting from PBS, WSJ, and NYT (and 0% from cable news) and find them all to be describing a single reality, albeit from different perspectives.  But anytime I come across a friend that has the "this is just a liberal plot to make Trump look bad" narrative stuck in his brain, I ask why is it that Putin locked down Russia?  Or why did Iran lock down?  Hell, why did China do it originally?  Are all these iron-fisted states going soft and pandering to twitter snowflakes now?!  My friends don't have much of a response as you might expect.  But that is one upside of a global situation - it's much harder to paint everything with the "US liberal media bias"/"fake news" brush.

I think my media sources are reliable enough for now, but like investors, media outlets can get stuck on a particular narrative for too long. I remember this in 2009-14 when, after a year of being wrong speculating the recovery was around the corner, many commentators and information cultivators were calling for a double-dip, L-shaped outcome, hyperinflation, etc. Thus, budget standoffs, Greek debt issues, and various political spats seemed to these influencers like the next shoe to drop and knock us below the 2009 lows. They ignored economic growth, falling unemployment, low interest rates, a well-controlled foreclosure process, QE, etc. and did special reports on down-on-their-luck people.

Meanwhile, just like those who think C19 is "fake news" we all have a tendency to latch onto false beliefs when they make us feel better emotionally. When we think we know what is going to happen next, we feel comforted because we have reduced uncertainty. Even if we think something bad will happen, at least we know! Knowing feels better than being uncertain. It feels smart. You make moves that you expect will feel wise in hindsight.

Living in a world where idiots protest against public health and decry vaccination should not make us feel smart, it should be a warning that belief itself is a factor of the people around us and the emotions we humans want to feel. We are running the same model brains as them. Like them, we feel smart for repeating what we hear from our trusted information sources.

In terms of investing, this means we are likely to latch onto information sources that feel reliable right now, but these sources are likely to maintain a narrative even after that narrative is no longer true. In the simplest terms, this means my bearish sources will be even more bearish 9 months from now when things seem even worse, and yet that will be the time to flip bullish. The same could be said for the criticality of the pandemic, the potency of economic stimulus, etc.

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 2942
Re: Can the economy recover if stocks stay high?
« Reply #10 on: April 22, 2020, 10:39:31 AM »
1. ...
2. Nearly 3 million mortgages already in forbearance

I think 1 & 2 augur many foreclosures to come  so there will be opportunities to buy homes  priced lower than what they're priced at now.
Owing to COVID-19, many (all?) states do not allow foreclosures right now.  The opportunity might be smaller or even non-existent if courts are not allowed to act on foreclosures until things are back to normal.

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 2251
Re: Can the economy recover if stocks stay high?
« Reply #11 on: April 22, 2020, 12:35:03 PM »
A thought along the P/E lines that's been rattling in my head... Do we still have another, totally independent, crash right around the corner?

Picture an alternate universe where coronavirus never happened.  We were on year 11 of one of the longest bull runs in history.  Inevitably, *something* is gonna happen to end that, recessions are usually something fiscal policy, or speculation related. 

Because this recession has been artificially manufactured, was whatever was going to cause the next crash independent of corona virus?  Is it still lurking around the corner, waiting to crash us another 30%, or has this recession defused the bomb?  Perhaps this oil business would have caused it anyway, and we accidentally put that fire out by dumping gas on it and nobody cares?  Perhaps the whole market is speculatively oversold?

Just musings.  Continuing to buy with every paycheck.

Tl;dr - do you think this really "counts" as an end to the bull market, or is it artificially generated turbulence with a real crash still around the corner

I think the "everything bubble" in stocks, bonds, and housing was an accident waiting to happen. Without C19, I think there would have been a characteristic melt-up in one of these asset classes (arguably that was already occurring) followed by a 2000-style reversion to normal valuations plus a Japanese-style disinflationary spiral. A financial crisis might have also occurred if a few financial institutions suffered big investment losses.

Due to a combo of government stimulus and a pandemic of bullishness, the C19 crisis has yet to pop the everything bubble. This makes little sense if one forecasts anything like the unemployment and GDP numbers being speculated by the Federal Reserve governors. So yes, I think there is still another crisis possible in the future. It's weird to me that the everything bubble didn't pop at the same time as the C19 crisis first started getting bad. So perhaps I'm completely wrong or perhaps we get a break for a while.

magnet18

  • Bristles
  • ***
  • Posts: 321
Re: Can the economy recover if stocks stay high?
« Reply #12 on: April 22, 2020, 12:47:11 PM »
A whole heck of a lot of text regarding covid and the news

Just some points to weigh into the "things aren't the end of the world" narrative you're dismissing

1. Not a single person in the usa has died from lack of medical equipment or treatment, that's Cuomo's own words on the situation in NY
https://www.nationalreview.com/news/as-new-york-posts-highest-one-day-death-toll-cuomo-says-no-victim-died-because-we-couldnt-provide-care/

2. The curve in most cases is pretty darn flat, my state has trended towards a flat 300 new cases per day for about 2 weeks, which is nothing.  The rural hospitals in my area are pretty much totally empty.  Only about 25% of our ventilators are in use, the majority of those being used for things totally unrelated to covid.
https://www.coronavirus.in.gov/

3. Turns out being young and in your 20s does, in fact, mean you're pretty low risk.  Out of 45,000 deaths in the US, number of deaths for people under 30 is... About 45.
https://www.washingtonpost.com/health/2020/04/08/young-people-coronavirus-deaths/
I know a lot of young people that are currently unemployed and staring down student loan payments, that would really very much like to get back to work.  Anecdotally, SIL is a healthcare professional that had her job offer revoked when lockdowns started, finally got a low wage job caring for nursing home patients, got COVID, tested positive, and her sum total of symptoms was... She had a fever for literally about 4 hours and was back on her feet. 
 Her husband either magically didn't fet it, or was totally asymptomatic. But her and her husband continue to be nearing week 8 of unemployment.  Hospital activity here is so low and unemployment is so high she is literally a doctor that can't find work.  This is not isolated, this seems to be the case for most rural areas.

I know a grounds keeper in Montana who is unemployed.  They have 400 cases total in one of the largest states in the union.  They have 13 total hospitalized.  13.  Yea, they're gonna start reopening.

4. Death rates and general severity was initially drastically overestimated because of the high number of totally asymptomatic cases.  We may actually end up hitting herd immunity before the vaccine is developed.

https://www.washingtonpost.com/outlook/2020/04/20/we-tested-all-our-patients-covid-19-found-lots-asymptomatic-cases/

https://www.cnn.com/2020/04/01/europe/iceland-testing-coronavirus-intl/index.html

https://www.foxnews.com/science/third-blood-samples-massachusetts-study-coronavirus

When cnn and fox agree on something, it's probably true.



So in general, yea, i believe my governor will follow through on a gentle, restricted, phased reopening in mid-may, in an attempt to start income flowing again and preventing businesses from going under.

I'm not disagreeing with you that things may be dire for the next 6 months, but the scientific data out there says that having the whole country sitting at home collecting unemployment checks for the next 6 months is likely highly unnecessary.
« Last Edit: April 22, 2020, 12:54:40 PM by magnet18 »

magnet18

  • Bristles
  • ***
  • Posts: 321
Re: Can the economy recover if stocks stay high?
« Reply #13 on: April 22, 2020, 12:52:45 PM »
A thought along the P/E lines that's been rattling in my head... Do we still have another, totally independent, crash right around the corner?

Picture an alternate universe where coronavirus never happened.  We were on year 11 of one of the longest bull runs in history.  Inevitably, *something* is gonna happen to end that, recessions are usually something fiscal policy, or speculation related. 

Because this recession has been artificially manufactured, was whatever was going to cause the next crash independent of corona virus?  Is it still lurking around the corner, waiting to crash us another 30%, or has this recession defused the bomb?  Perhaps this oil business would have caused it anyway, and we accidentally put that fire out by dumping gas on it and nobody cares?  Perhaps the whole market is speculatively oversold?

Just musings.  Continuing to buy with every paycheck.

Tl;dr - do you think this really "counts" as an end to the bull market, or is it artificially generated turbulence with a real crash still around the corner

I think the "everything bubble" in stocks, bonds, and housing was an accident waiting to happen. Without C19, I think there would have been a characteristic melt-up in one of these asset classes (arguably that was already occurring) followed by a 2000-style reversion to normal valuations plus a Japanese-style disinflationary spiral. A financial crisis might have also occurred if a few financial institutions suffered big investment losses.

Due to a combo of government stimulus and a pandemic of bullishness, the C19 crisis has yet to pop the everything bubble. This makes little sense if one forecasts anything like the unemployment and GDP numbers being speculated by the Federal Reserve governors. So yes, I think there is still another crisis possible in the future. It's weird to me that the everything bubble didn't pop at the same time as the C19 crisis first started getting bad. So perhaps I'm completely wrong or perhaps we get a break for a while.

Everything bubble is a good way to put it.  I agree, it doesn't seem like the pandemic has popped it.  I expected to drop twice as much and recover to what we saw as a low, and instead I'm seeing my accounts hitting new net worth highs!??

It definitely feels like everyone is currently piling in greedily anticipating a springboard recovery, and i fear a nasty popping around the corner.
« Last Edit: April 22, 2020, 12:59:03 PM by magnet18 »

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 2251
Re: Can the economy recover if stocks stay high?
« Reply #14 on: April 22, 2020, 01:13:05 PM »
It seems like when the virus broke out in China, most countries in the world said it'll never come here. So we employed lackadaisical countermeasures. Then, when it came to some states in the U.S, each mostly-unaffected state said it won't get bad here. So they employed lackadaisical countermeasures.

It's as if each state government - perhaps each city/county government - has to wait until the pandemic arrives on their doorstep before they accept the problem justifies sufficient countermeasures. Perhaps this is a political problem. How does a politician tell businesses to shut down when there is not an immediate problem yet? The political justification can only arrive in each little community once the pandemic is spreading out of control in that community. Foresight is impossible. There can be no "stitch in time".

Strangely, if this was a hurricane, people in Florida or the Carolinas would start taking countermeasures like boarding up windows and getting bottled water while the storm was still 1,000 miles offshore. Yet, because this is a pandemic, each state takes a "wait and see" approach, even as they fall like dominos.

It is the psychology of this moment - the frustration with social distancing and the appeal of making everything normal again by fiat - that guarantees the pandemic will continue in the US for the next 6-12 months.


magnet18

  • Bristles
  • ***
  • Posts: 321
Re: Can the economy recover if stocks stay high?
« Reply #15 on: April 22, 2020, 01:56:13 PM »
Flattening the curve prevents healthcare from being overloaded.  There is an ideal amount that the curve should be flattened. What we did was completely lock down literally everything possible short of declaring martial law.

That was fine, it was what the data indicated was correct, and what medical professionals advised (after they got done telling Trump travel restrictions are dumb)

We've been receiving new data, indicating we flattened the curve too much, which causes undue suffering for no benefit.  We can start carefully increasing activity while monitoring things to be sure the curve remains acceptable such that there is no additional death due to lack of care, and hopefully help avoid a second great depression while doing so.


My attempt at a psychology free and data driven analysis indicates, good job, we can pat ourselves on the back, we more than sufficiently flattened the curve.  Now we can start toeing the water and seeing what we can start doing again.

For example, lack of elective procedures is currently bankrupting a lot of medical companies.  Maybe we can let people start getting joint replacements again.

Maybe we don't need to cut our own hair until there is a vaccine.

Paper Chaser

  • Bristles
  • ***
  • Posts: 271
Re: Can the economy recover if stocks stay high?
« Reply #16 on: April 22, 2020, 02:37:32 PM »
A thought along the P/E lines that's been rattling in my head... Do we still have another, totally independent, crash right around the corner?

Picture an alternate universe where coronavirus never happened.  We were on year 11 of one of the longest bull runs in history.  Inevitably, *something* is gonna happen to end that, recessions are usually something fiscal policy, or speculation related. 

Because this recession has been artificially manufactured, was whatever was going to cause the next crash independent of corona virus?  Is it still lurking around the corner, waiting to crash us another 30%, or has this recession defused the bomb?  Perhaps this oil business would have caused it anyway, and we accidentally put that fire out by dumping gas on it and nobody cares?  Perhaps the whole market is speculatively oversold?

Just musings.  Continuing to buy with every paycheck.

Tl;dr - do you think this really "counts" as an end to the bull market, or is it artificially generated turbulence with a real crash still around the corner

I think the "everything bubble" in stocks, bonds, and housing was an accident waiting to happen. Without C19, I think there would have been a characteristic melt-up in one of these asset classes (arguably that was already occurring) followed by a 2000-style reversion to normal valuations plus a Japanese-style disinflationary spiral. A financial crisis might have also occurred if a few financial institutions suffered big investment losses.

Due to a combo of government stimulus and a pandemic of bullishness, the C19 crisis has yet to pop the everything bubble. This makes little sense if one forecasts anything like the unemployment and GDP numbers being speculated by the Federal Reserve governors. So yes, I think there is still another crisis possible in the future. It's weird to me that the everything bubble didn't pop at the same time as the C19 crisis first started getting bad. So perhaps I'm completely wrong or perhaps we get a break for a while.

Seems like most of the debt forgiveness plans that I've seen are really just temporary grace periods. Those rent/mortgage/student loan/car payments are still going to need to be paid eventually. We've got about 20% of the workforce idled, and that number will only grow in the next few weeks. Many of the remaining workers are taking forced pay cuts that are likely to continue for a couple of quarters at least. Prices on things like groceries are climbing thanks to increased demand, limited supply and higher wages (justified, imo) for grocery employees.
So my point is, that the everything bubble hnight have been paused, and when things resume, we'll have a bunch of people with lower incomes and higher expenses that have a bunch of bills to pay. That might be where we see loans default, foreclosures, etc but it won't really start until after the debt forgiveness programs wrap up.

Buffaloski Boris

  • Handlebar Stache
  • *****
  • Posts: 2052
  • Religion isn't the opiate, politics is.
Re: Can the economy recover if stocks stay high?
« Reply #17 on: April 22, 2020, 05:38:53 PM »
It seems like when the virus broke out in China, most countries in the world said it'll never come here. So we employed lackadaisical countermeasures. Then, when it came to some states in the U.S, each mostly-unaffected state said it won't get bad here. So they employed lackadaisical countermeasures.

It's as if each state government - perhaps each city/county government - has to wait until the pandemic arrives on their doorstep before they accept the problem justifies sufficient countermeasures. Perhaps this is a political problem. How does a politician tell businesses to shut down when there is not an immediate problem yet? The political justification can only arrive in each little community once the pandemic is spreading out of control in that community. Foresight is impossible. There can be no "stitch in time".

Strangely, if this was a hurricane, people in Florida or the Carolinas would start taking countermeasures like boarding up windows and getting bottled water while the storm was still 1,000 miles offshore. Yet, because this is a pandemic, each state takes a "wait and see" approach, even as they fall like dominos.

It is the psychology of this moment - the frustration with social distancing and the appeal of making everything normal again by fiat - that guarantees the pandemic will continue in the US for the next 6-12 months.

Normalcy bias. People donít see people keeling over around them so this must not be a problem. Unfortunately itís one of those things where if you wait to see the evidence of people keeling over, itís too late. So I guess we get to see the worst of both worlds: economic shutdown and plenty of dead people. But admittedly, the less people dead idea relied somewhat on a vaccine being developed soon which is not necessarily going to happen. It looks like weíll get widespread immunity the old fashioned way. Sucks but it looks like thatís the way itís gonna be.

PDXTabs

  • Handlebar Stache
  • *****
  • Posts: 1975
  • Age: 37
  • Location: Portland, OR, USA
Re: Can the economy recover if stocks stay high?
« Reply #18 on: April 22, 2020, 06:55:02 PM »
Normalcy bias. People donít see people keeling over around them so this must not be a problem.

I think that it might have been a SARS bias.

FINate

  • Handlebar Stache
  • *****
  • Posts: 1799
Re: Can the economy recover if stocks stay high?
« Reply #19 on: April 22, 2020, 08:24:25 PM »
We want to buy a bigger home and I thought that this would be our chance, but prices havenít budged. The stock market has almost already recovered, the government is allowing people to skip mortgage payments, so I donít see much incentive for people to lower the price of their home.

I've been waiting to see how this unfolds for housing as well.

The old adage "real estate is local" rings true. My area went into this as a very hot market. Now inventory has dried up as sellers pull/hold back listings, yet buyers are still buying. Maybe places without an acute housing shortage are softening?

And the nature of local employment matters. Most of the people buying houses in my area work in tech and they are working from home. Even the non-tech salaried people I know are all continuing on remotely. Of the 100+ salaried folks I know, zero have been laid off. The only white collar person I know out of work is a commercial pilot - but they have savings and unemployment is helping. Longer term, they may be in trouble, but that's like 1% of the professionals in my circle.

Hourly employees ... now that's a different story. They've been hammered on the employment front. However, these folks aren't typically homeowners around here. That's sad, but it's the reality of an extreme HCOL area. And the stimulus check + expanded unemployment means most are doing fine for now.

So, it's interesting, and not sure how to read it. I expect prices will soften a bit this summer, but that's based on a gut feeling and not very confident about it.

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 2942
Re: Can the economy recover if stocks stay high?
« Reply #20 on: April 25, 2020, 10:30:14 PM »
...
4. Death rates and general severity was initially drastically overestimated because of the high number of totally asymptomatic cases.  We may actually end up hitting herd immunity before the vaccine is developed.

https://www.washingtonpost.com/outlook/2020/04/20/we-tested-all-our-patients-covid-19-found-lots-asymptomatic-cases/

https://www.cnn.com/2020/04/01/europe/iceland-testing-coronavirus-intl/index.html

https://www.foxnews.com/science/third-blood-samples-massachusetts-study-coronavirus
...
I hope you'll keep posting different viewpoints backed by sources - it's refreshing to see.

The main idea of those studies is probably accurate, but they poorly controlled the selection of participants.  Among studies of undetected COVID-19, the L.A. study used the best methods to randomly select participants.

http://publichealth.lacounty.gov/phcommon/public/media/mediapubhpdetail.cfm?prid=2328
"Based on results of the first round of testing, the research team estimates that approximately 4.1% of the county's adult population has antibody to the virus.  ... That estimate is 28 to 55 times higher ..."
"The study's results have not yet been peer reviewed by other scientists."
"Participants were recruited via a proprietary database that is representative of the county population."

That last line is key, since both people sheltering at home and those spending more time outside are both included - at random.  Randomly selecting people avoids biased participation you might get if they only test people who are spending time outside.  The Fox News story points at testing in Chelsea, MA, but goes on to say:
"[Chelseaís city manager] called Chelsea the epicenter of the crisis in Massachusetts"

My guess would be most places fall somewhere between the L.A. study's results (4%) and the virus epicenter of Chelsea (~32%).


I'm surprised Alaska isn't opening up first - that state's population is so low, they don't need to change much to get social distancing.  But it looks like Georgia will be the first... I picked this article not because of content, but because it's a new source in Atlanta:

https://www.ajc.com/news/rest-for-kemp-from-critics-launches-reopening-amid-covid/iFRXx4Ws0sAqqIdMJpnKSN/
"His barber wore a blue surgical mask. Only a couple of customers at a time were allowed into the shop."