Author Topic: Who's Shorting?  (Read 8096 times)

ChpBstrd

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Who's Shorting?
« on: April 01, 2020, 03:46:19 PM »
I saw the COVID-19 model put out by the Institute for Health Metrics and Evaluation, which is being used by the executive branch of government to make decisions.

http://www.healthdata.org/covid

I am astounded by their estimate of an April 15 peak in the U.S. with only 93k TOTAL deaths. This seems blithely optimistic to me - ridiculously optimistic, actually. Plus these low numbers are being used to justify the U.S's currently modest restrictions and lack of preparation for a worse scenario. The estimates are based on logarithmic S curves observed in the only countries to have flattened their curves, China and South Korea, which did so with fast and harsh countermeasures and widespread testing. The U.S. on the other hand... see spring break and your local Walmart/Lowes/church parking lot in most states. Also see the current rate of spread is occurring even with schools closed and many people WFH. I anticipate this will get much worse and continue for several months, flattening the US economy and leading to a secondary financial crisis in MBS, consumer credit, corporate bonds, derivatives, or somewhere else.

Most of my positions have hit as low as they can go because I employed a collar options strategy* prior to the crisis, thereby limiting losses. I also trimmed my unhedged positions between February and mid March. The net effect is my NW is only down 16% - pretty good considering I did not hedge my 401k and left it in a "balanced" allocation. With plenty of cash on hand, and a bearish outlook, I'm looking to capture some gains on the way down. Eventually, I'll go unhedged long.

So with a modest percentage of my portfolio, I went short. Let's see how it goes... or maybe I can faceplant on the internet as so many others have done! It can't go too badly because these are all limited-potential-loss positions.

  • February 21: Closed the long stock and short call portion of one of my QQQ collars, leaving myself with one long put on QQQ at $180 strike with a Jan 15, 2021 expiration. I purchased the put last year for $1,049
  • March 24: Bought 5 put contracts on LC, $5 strike, Jan 15, 2021 expiration, for $85 each, or $425
  • March 30: Bought 200 shares of SDS, a 2x bearish ETF, for $6,326
  • March 30: Bought 5 put contracts on SPY, $261 strike, June 19, 2020 expiration, for $10,525
I also sold various puts on the ride down in early March for about $4k, before the gravity of the situation sunk in, but was not assigned. I won't be doing any more of that until I plan to get assigned and go long.

So far (as of today) my gains are:
  • $1,014 or +97%, Note: this put was purchased a year ago and was deeply underwater until recently.
  • $85, or +20%
  • $308, or +4.9%
  • $3,821.67, or +36%

So who else out there is shorting or hedging, and how are you doing so?


* See https://www.optionseducation.org/strategies/all-strategies/collar-protective-collar

kenmoremmm

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Re: Who's Shorting?
« Reply #1 on: April 01, 2020, 05:46:48 PM »
i'm too lazy to find my OP on this, but there's a related thread:
https://forum.mrmoneymustache.com/investor-alley/short-selling-triple-inverse-etf's/

i have given this thought. different mechanism than what you're doing, of course. probably a lot more risk. beyond my league.

my "shorting" is holding funds in cash/bonds now until things get really ugly.

johndoe

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Re: Who's Shorting?
« Reply #2 on: April 01, 2020, 07:24:05 PM »
Thanks for posting, I'm going to have to research those topics.  "Option" is still a scary word to me so I haven't gone down that rabbit hole.  I doubt the response here will be very positive, but it's nice to hear opposing opinions.

I did tinker with 3x inverse S&P500 (SPXU) with low trailing stop percentages in my taxable account.  Probably stupid but maybe a learning experience.  I've been pulling back into cash, at about 25% of all investments now.

Joe Schmo

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Re: Who's Shorting?
« Reply #3 on: April 01, 2020, 09:35:09 PM »
Should hit a million reported cases worldwide noonish PST tomorrow...if anybody (or the market) cares.

mrmoonymartian

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Re: Who's Shorting?
« Reply #4 on: April 02, 2020, 03:47:03 AM »
I think the market stopped caring once the trillions started flowing. Cases and deaths are expected now, and the hope is that economic damage is contained. I could see a sudden rush of bankruptcies causing another tumble. Think Lehman Brothers.

bwall

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Re: Who's Shorting?
« Reply #5 on: April 02, 2020, 03:55:16 AM »
I've never really been one to do much shorting outright. But, I have written covered calls, usually out of the money. If we have a rally like we did last week, I'll write some that are at the money.

Generally, I can earn 50% or more in a day or two. Profits per trade are in the hundreds, not thousands, though.


Joe Schmo

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Re: Who's Shorting?
« Reply #6 on: April 02, 2020, 06:45:32 AM »
6,600,000 unemployment claims and da market don't care

MustacheAndaHalf

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Re: Who's Shorting?
« Reply #7 on: April 02, 2020, 08:21:27 AM »
Do unemployment claims provide new information?
I think an example helps - retail stores.

"In a research note sent to clients today, investment firm Cowen and Company estimated total foot traffic to US retailers was down 97.6% for the week through March 27 compared to the same time last year."
https://qz.com/1829531/covid-19-has-caused-us-retail-traffic-to-almost-entirely-vanish/

Nobody is shopping in retail stores.  Normally people out of work might alter shopping habits - you might gain information on their spending.  But we already know people are in lock down, and people aren't shopping at retail stores.  The unemployment filing might make it easier to pay for food and rent, but won't change their shopping habits.  So retailers are in the same situation regardless of the number of unemployment claims.

maizefolk

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Re: Who's Shorting?
« Reply #8 on: April 02, 2020, 08:25:35 AM »
6,600,000 unemployment claims and da market don't care

The CARES act broke a lot of our default assumptions about the relationship between economic variables.

For a lot of folks their regular unemployment + the extra $600/week (~$30k/year) will be more income than they were making from their jobs before they were laid off.

So while under regular circumstances a 6.6M person increase in unemployed workers would create a decrease in aggregate demand, right now that news probably created an increase in aggregate demand.

Joe Schmo

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Re: Who's Shorting?
« Reply #9 on: April 02, 2020, 09:03:05 AM »
Speaking to the OP

MustacheAndaHalf

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Re: Who's Shorting?
« Reply #10 on: April 02, 2020, 09:16:58 AM »
@ChpBstrd - I haven't heard that 93k estimate anywhere else.  Days ago Dr Fauci said 100k to 200k, which President Trump then repeated.  However, even that seems out of date:
"Donald Trump warns of up to 240,000 coronavirus deaths in US"
https://www.ft.com/content/ce4098c9-8d34-4036-9a84-ca40b0294b88


Does data support the U.S. economy being flattened?  The largest state by population and GDP is CA (14% of U.S. GDP), which is under lock down.  So the current situation in CA is well known, and the only question is how long.

When I look for very fast exponential growth in the CA data, I only see it March 17-20.  Cases almost tripled in that time, with +44% and +51% growth rates on two of those days.  More recently I see a +23% day in isolation, but mostly declining growth in the 12-16% range.

The media doesn't follow exponential growth (I'd be happy to be proved wrong on that for the first time in 2 months!), but they do follow new cases per day.  Some days there's over 1000 new cases, some days less.  If growth drops any farther, and doesn't go up, the media will start reporting on declining numbers of new cases.

I see something similar in NY (8% of U.S. GDP) data.  Are there areas of the country where outbreaks are expected to do significant damage, other than NY and CA?  Do you see a different pattern in the COVID-19 data?
« Last Edit: April 02, 2020, 09:30:14 AM by MustacheAndaHalf »

Joe Schmo

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Re: Who's Shorting?
« Reply #11 on: April 02, 2020, 10:53:36 AM »
@ChpBstrd correct me if'n I'm wrong but your general premise is that the severity of this entire situation is grossly underestimated, correct?

BobTheBuilder

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Re: Who's Shorting?
« Reply #12 on: April 02, 2020, 11:26:29 AM »
I bought put options in January, did some volatility trades on earnings season back than. I was already above my tax free gain amount (which is only 801€ for single-filers in socialist Germany) and thought ok, all time high, COVID lurking around the corner, that's dumb of "the market".

Although I was right, I sold my puts too early, and was not hedged 100%.

Bought some puts on S&P500 again today as the volatility premium decreased. With 10%+ unemployment there is no way for a quick recovery. I know the FED pumps dollars into the system at an unprecedented speed, but that will only help for a while in the stock market.

I will go long on tech and health stocks in Europe, South Korea, Japan, Australia, and Gold.

These are the markets that will prosper in any scenario over the next years, and inflation is going to hit in late 2020+.
People care about being alive and comfy. That is what tech and health is about.

I will not touch the energy sector with a stick. Don't care about the direction, I don't want to guess there.
If Germany lifts the social distancing measures at April 19th, I will long the DAX too.
People will buy cars after that. Public transportation will be seen as unsafe for years.


PDXTabs

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Re: Who's Shorting?
« Reply #13 on: April 02, 2020, 12:10:30 PM »
6,600,000 unemployment claims and da market don't care

The monthly rate is released tomorrow, right? I'm suspicious that there will be more selling tomorrow, if only to avoid holding assets over the weekend.

waltworks

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Re: Who's Shorting?
« Reply #14 on: April 02, 2020, 01:08:42 PM »
IMO for the time being everything is too big to fail, so various interventions and backstops (probably priced in right now) are going to prevent too much short term crashing.

There will be tons of longer term economic damage but I don't think shorting will be easy to do for timing reasons.

I'm just going to keep plugging money in, while holding onto some cash in cash RE goes on stupid cheap sale in a year or two.

I'm honestly hopeful that I'm kicking myself for holding that cash in 2 years. Given the resources being devoted to this problem, I'm optimistic.

-W

thunderball

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Re: Who's Shorting?
« Reply #15 on: April 02, 2020, 03:00:21 PM »
I've been shorting using some deep in-the-money SPY puts (long since closed) and some custom out-of-the-money SPY spreads, plus some ATM put spreads on select equities.   

Still long equities in Roth - lots of pain there but no intention of selling anytime soon.

Overall, mostly in cash until  SPX ~1700 (which is 50% retracement from '30s low to ATH) or we see meaningful recovery thanks to a cure.  Once that happens, will look to be all-in Wellesley (domestic and international). 

I understand the buy-the-dip mentality but during the '08 crisis my company trimmed staff;  I need to be extra-conservative at the moment. 

ChpBstrd

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Re: Who's Shorting?
« Reply #16 on: April 02, 2020, 08:31:49 PM »
I think the market stopped caring once the trillions started flowing. Cases and deaths are expected now, and the hope is that economic damage is contained. I could see a sudden rush of bankruptcies causing another tumble. Think Lehman Brothers.

There was a rush of euphoria over the last several days that the Fed was going to save things again, as they did in '08 and '09 with helicopter money and bailouts and open market purchases. For over 10 years, anyone who has fought the Fed has been severely beaten, and I acknowledge my positions are bets against their activities working.

However, I don't see how throwing a massive amount of money at treasury purchases, corporate bonds, repo markets, or even helicopter money checks will cause the virus to go away. I also don't see how it will cause my neighborhood restaurants to stay in business, or will lead to more people flying to cruise ship ports, refill the malls, or increase consumption in any number of ways. 1929 and 2008 were issues of banks running out of liquidity due to investments not performing as expected. This is an entirely different problem - a massive drop in consumption problem. Even if governments ordered these businesses and schools to reopen, for one, many people would avoid entire industries like restaurants and tourism until the pandemic was actually over, and two the economy would suffer extreme productivity losses due to a significant percentage of the population (let's say only 20%) being out of work sick for a month in 2020. That's a lot of car repossessions. A 1-2% reduction in the population would also be a hit to GDP, and would result in real estate liquidations and foreclosures.

The U.S. GDP in 2019 was $21.44T. The $2T in new stimulus spending seems big even in that context, but I question the multiplier effect for most of that money.

My waitress neighbor who is earning $20-40 a day (restaurants in my state have still not closed) may avoid homelessness for a while thanks to her stimulus check, but her problem will not be resolved in May as the president seems to believe. She's not spending a dime she doesn't have to spend because homelessness and hunger are days away for her and her child. What does it matter to her in the next 6 months if Jerome Powell buys bonds, recapitalizes Goldman Sachs, or cuts rates to zero? There are still no customers, and even if there were, there's no TP so the restaurant will have to close due to supply chain failures.

@ChpBstrd correct me if'n I'm wrong but your general premise is that the severity of this entire situation is grossly underestimated, correct?

Yes, that's the premise. We have insufficient and inconsistent containment measures across state lines, a lack of testing capability which means infections are more widespread than any media report, an already minimalistic and dysfunctional healthcare system, and an executive branch that is betting everything on this thing ending in April/May. So far, in the whole world only China and South Korea have flattened their curves, and they only did so using draconian measures as soon as the virus was discovered:

https://www.visualcapitalist.com/infection-trajectory-flattening-the-covid19-curve/

The U.S. on the other hand, missed the opportunity to control the spread before it got too big to control through standard methods like contact tracing. The U.S. is also not considering the sort of strict lockdown actions that worked in China and South Korea. Yes, NYC and parts of California are mostly locked down, but people are still free to travel in and out of the area. That was not the case in Wuhan, which ironically enough might now be the safest place in the world for anyone wishing to escape the virus.

The only outcome I see is the virus has to burn though most of the U.S. population before it is eliminated by herd immunity. In the meantime, bad things will happen in the economy. Meanwhile the stock market is only at correction levels. It's such a juicy opportunity I can't resist going short.

Joe Schmo

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Re: Who's Shorting?
« Reply #17 on: April 02, 2020, 08:45:38 PM »
Amen.
The man has got his theory and his convictions about him. I say getcha some brother. I agree with you but lack the stones to make your moves :/

ChpBstrd

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Re: Who's Shorting?
« Reply #18 on: April 02, 2020, 08:54:35 PM »
Threats to my assessment:

1) Sudden appearance of billions of tests, PPE, and antivirals or vaccine doses proven to work in independent trials. If an already-approved med is shown to be an effective vaccine, that might kill my shorts. Forgive me for not trusting Trump's assurances.
2) An online shopping splurge by consumers with their helicopter money checks.
3) Sudden curve flattening due to temperature (note on the chart how hot countries like Bahrain, Qatar, Indonesia, and Iraq are starting out with lower, but still steep trajectories). A slowly flattening curve could lead to another rally, but I think the long term economic consequences of doubling every five days instead of every two are minimal when you have over a million infected Americans by that time. Most people still get it in a matter of weeks.
4) Mandatory grace periods on consumer and business loans, backed up by government payments to creditors so they don't go into crisis. (very unlikely)
5) The surge in unemployment stops with currently affected industries like hotels, airlines, and tourism.
6) A nationwide, mandatory, enforced 2-4 week lockdown. (unlikely to the point of being almost impossible)

It's very tempting to make a YOLO-sized bet and potentially be FI in a month or two, instead of several years from now. However, this handful of reasons is holding me back for now. I'll probably regret not going big when the bankruptcies and layoffs really get started.


ChpBstrd

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Re: Who's Shorting?
« Reply #19 on: April 02, 2020, 09:03:00 PM »
Amen.
The man has got his theory and his convictions about him. I say getcha some brother. I agree with you but lack the stones to make your moves :/

Thanks, but what I'd really like is for someone to tell me I'm being foolish for very good reasons X, Y, and Z. Conviction comes from engaging the opposition to one's own viewpoint, seriously considering these points in light of all the other times one has been wrong, and then defeating those counterarguments in one's own mind. I know the bulls are kinda shy right now, but I welcome the debate.

An example of my thought process: VIX rarely hangs out above 50 for long. How will those puts do when VIX drops to 25 even during a bear market?

kenmoremmm

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Re: Who's Shorting?
« Reply #20 on: April 02, 2020, 09:11:32 PM »
two points to add (1 for your short, 1 for a long):
1. the CIA is questioning china's numbers (related note: japan likely severely undertesting/reporting)
2. $2T bailout is just the beginning. i see this number ending up at $6-10T by the end. we have march - end of may (at a mininum) and then (oct - march?) to go through. that's 9 months, or .75 years or .75 x $20T annual....

ChpBstrd

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Re: Who's Shorting?
« Reply #21 on: April 02, 2020, 09:30:38 PM »
two points to add (1 for your short, 1 for a long):
1. the CIA is questioning china's numbers (related note: japan likely severely undertesting/reporting)
2. $2T bailout is just the beginning. i see this number ending up at $6-10T by the end. we have march - end of may (at a mininum) and then (oct - march?) to go through. that's 9 months, or .75 years or .75 x $20T annual....

I don't think any countries have an incentive to over-report their cases and tests are in short supply, so the risk of poor information is almost completely on the side of estimates being too low. Random sampling studies are being done with initial results showing there are lots of asymptomatic cases walking around unaware they are spreading the virus. The long and variable latency of the virus could mean our standard epidemic models are trash.

Yes, there is a probability of more stimulus bills. Republicans are itching to reopen the economy before the pandemic is over, but are also willing to spend trillions in an attempt to keep markets from crashing. If a government spending spree is paired with no major changes in ground-level pandemic response (e.g. restaurants still open in many states, church on Sunday, WalMart still open, beaches...), I expect the stock market will still go down as the focus shifts to consumer spending, business losses due to tens of millions of sick workers, consumer debt defaults, corporate bankruptcies and downgrades, and falling productivity.

kenmoremmm

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Re: Who's Shorting?
« Reply #22 on: April 02, 2020, 09:40:32 PM »
yeah. i hear you.

i don't have anywhere the breadth of knowledge that you or others here have, but just stepping back and looking at the ripple effects coming from this thing, i can't but shake my head and cringe. it's going to be very ugly.

waltworks

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Re: Who's Shorting?
« Reply #23 on: April 02, 2020, 10:23:29 PM »
I think the biggest issue here is timing. Things could get bad super fast, bad slow, good fast, good slow, etc. You need more specific info on *when* the market is going to decide to drop to take any useful action.

-W

Joe Schmo

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Re: Who's Shorting?
« Reply #24 on: April 02, 2020, 11:34:30 PM »
Fine I’ll add what I know. Assuming the market has ALL current data priced in, including the likelihood that countries are underreporting.
That being assumed as FACT, market reflecting all known intel.
The market is looking at the Murray model as what will happen and that is driving the market. The one thing I know is that the model will change. For better or worse it will change. The “peak usage dates” and “daily deaths” levels and/or dates will be different that what they are now. For better or worse.
Of course there are other factors at play but to break it down in terms of da virus...again what you’re saying is that the current model is highly underestimating the levels of this whole thing and Wall Street is underestimating the impact that will have.
Or I don’t know jack shit and you get what you pay for on the interweb:)

MustacheAndaHalf

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Re: Who's Shorting?
« Reply #25 on: April 03, 2020, 04:44:21 AM »
Just to state my position up front, I'm 100% equities, with 1/4 of those being risky individual stocks that may go bankrupt, or may beat the S&P 500.  I hope to weather whatever the market throws at me for hopefully months, possibly ~1-2 years, and have that money come out ahead.

@ChpBstrd correct me if'n I'm wrong but your general premise is that the severity of this entire situation is grossly underestimated, correct?
Yes, that's the premise. We have insufficient and inconsistent containment measures across state lines, a lack of testing capability which means infections are more widespread than any media report, an already minimalistic and dysfunctional healthcare system, and an executive branch that is betting everything on this thing ending in April/May. So far, in the whole world only China and South Korea have flattened their curves, and they only did so using draconian measures as soon as the virus was discovered:

https://www.visualcapitalist.com/infection-trajectory-flattening-the-covid19-curve/
Would you stop using that graph if the "every 5 days" line were shown to be inaccurate?

South Korea has the following 3 data points: 8652 then 8799 then 9037.  I get growth rates of +1.7% and +2.7%.  That's inside the "cases double ... every 5 days" line, but +2.7% takes about 4 weeks to double, not 5 days.


Now look at CDC data, since the numbers are shown for every day.  The last few days of their data:
https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us.html
103321   122653   140904   163539   186101   213144

I get:        18.7%         14.9%      16.1%     13.8%       14.5%    for the rates of growth each day.

Growth of 14.5% or 14.9% will double in 5 days... but the graph on visualcapitalist puts the U.S. in the "doubles ... every 3 days" category.  Is that accurate?

Weeks ago, the U.S. lacked adequate testing, but as of now, the U.S. has performed more tests than any other country.  Not as good as Germany, Italy or South Korea on a per capita basis, but still in the top few countries:
https://ourworldindata.org/covid-testing

Overall I'm seeing testing show a clear picture of COVID-19, and that COVID-19 is growing more slowly.  At some point growth could slow so much that the news media notice (!), and give a boost to the U.S. stock markets.  Maybe there's a case for shorting stocks at that point - Congress fails to act, companies go under, people don't get their jobs back.  But I don't see a case for shorting U.S. stocks based on out of control growth of COVID-19 cases, looking at the above data.

hodedofome

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Re: Who's Shorting?
« Reply #26 on: April 03, 2020, 07:10:28 PM »
In my trading account, I shorted Russell2000 futures at *almost* the exact high. It was perfect. I followed All Star Charts in the trade and he times it perfectly. Only problem was I didn’t short enough to truly hedge my trading account and it eventually fell about 45%. Once I saw the market really falling apart, I did end up shorting enough R2k futures to keep my account from falling further. I closed that short a few weeks ago, and sold off my S&P 500 long futures position at the end of March as per my trading system.

Over the past few months, I started some small shorts in retail stores with lots of debt that would probably go bankrupt eventually even without a virus. I had no idea about the virus, just figured there are more companies out there like toys r us who will suffer from online sales competition. Things like build a bear, hibbet sports, along with FRGI as they are closing stores. Unfortunately even with these it was not enough to cover my super long exposure I had in February.

Over the past week or so I’ve been shorting quite a few stocks, but small positions in each. When the market and a bunch of stocks hit the underside of the 20 day moving average and were rejected, I figured it was a low risk entry. If stocks closed above the 20 day ma, I would have covered at a small loss. Most of the names I shorted have continued to drop and never showed me a loss, but a few did and I closed those quickly. I am short ARR, FRGI, BBW, UBER, USFD, INTU, STWD, TDG, YETI, PAYC, MAIN.

I am still long SHOP, RNG, DOCU, BILL, ZM as well as 10 year treasury futures in my trading account.

In my retirement accounts those are buy and hold and I’m long either index funds or tech names. Those are sucking wind obviously but that’s how it goes with buy and hold.

I am still down 20% in my trading account, if by some miracle I can dig myself out of this whole and end the year break even with the end of 2019, I’ll be happy.
« Last Edit: April 03, 2020, 07:15:00 PM by hodedofome »

Financial.Velociraptor

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Re: Who's Shorting?
« Reply #27 on: April 04, 2020, 01:44:51 PM »
Not actively short anything but started adding long dated puts on businesses I felt were overly leveraged about 18 months ago.  Have closed 5 of those hedges for tidy profits and have 11 more still open: GM, HCA, HTZ, LYFT, MCK, PTON, SC, T, THC, UBER, RAD.   All except MCK and PTON are in the green.  If I had closed those hedges at yesterday's closing price, I would have booked 11,976 in profits and raised 23,415 in cash.

PTON seems to be a COVID-19 winner.  Must be people who have had their gym closed are all buying over priced stationary bikes...

hodedofome

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Re: Who's Shorting?
« Reply #28 on: April 04, 2020, 09:26:43 PM »
Not actively short anything but started adding long dated puts on businesses I felt were overly leveraged about 18 months ago.  Have closed 5 of those hedges for tidy profits and have 11 more still open: GM, HCA, HTZ, LYFT, MCK, PTON, SC, T, THC, UBER, RAD.   All except MCK and PTON are in the green.  If I had closed those hedges at yesterday's closing price, I would have booked 11,976 in profits and raised 23,415 in cash.

PTON seems to be a COVID-19 winner.  Must be people who have had their gym closed are all buying over priced stationary bikes...

I don’t like shorting trendy companies who have sales increasing over 50%/yr. Only time I’ll take a chance on something like that is when I can find a low risk technical based entry that will kick me out fairly quickly.

ChpBstrd

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Re: Who's Shorting?
« Reply #29 on: April 04, 2020, 11:19:59 PM »
Just to state my position up front, I'm 100% equities, with 1/4 of those being risky individual stocks that may go bankrupt, or may beat the S&P 500.  I hope to weather whatever the market throws at me for hopefully months, possibly ~1-2 years, and have that money come out ahead.

@ChpBstrd correct me if'n I'm wrong but your general premise is that the severity of this entire situation is grossly underestimated, correct?
Yes, that's the premise. We have insufficient and inconsistent containment measures across state lines, a lack of testing capability which means infections are more widespread than any media report, an already minimalistic and dysfunctional healthcare system, and an executive branch that is betting everything on this thing ending in April/May. So far, in the whole world only China and South Korea have flattened their curves, and they only did so using draconian measures as soon as the virus was discovered:

https://www.visualcapitalist.com/infection-trajectory-flattening-the-covid19-curve/
Would you stop using that graph if the "every 5 days" line were shown to be inaccurate?

South Korea has the following 3 data points: 8652 then 8799 then 9037.  I get growth rates of +1.7% and +2.7%.  That's inside the "cases double ... every 5 days" line, but +2.7% takes about 4 weeks to double, not 5 days.


Now look at CDC data, since the numbers are shown for every day.  The last few days of their data:
https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us.html
103321   122653   140904   163539   186101   213144

I get:        18.7%         14.9%      16.1%     13.8%       14.5%    for the rates of growth each day.

Growth of 14.5% or 14.9% will double in 5 days... but the graph on visualcapitalist puts the U.S. in the "doubles ... every 3 days" category.  Is that accurate?

Weeks ago, the U.S. lacked adequate testing, but as of now, the U.S. has performed more tests than any other country.  Not as good as Germany, Italy or South Korea on a per capita basis, but still in the top few countries:
https://ourworldindata.org/covid-testing

Overall I'm seeing testing show a clear picture of COVID-19, and that COVID-19 is growing more slowly.  At some point growth could slow so much that the news media notice (!), and give a boost to the U.S. stock markets.  Maybe there's a case for shorting stocks at that point - Congress fails to act, companies go under, people don't get their jobs back.  But I don't see a case for shorting U.S. stocks based on out of control growth of COVID-19 cases, looking at the above data.

The daily percentage growth in a cumulative data series (calculated as: {day2-day1}/day1) might decline even as infections accelerate, due to growth in the denominator. i.e. when the first person infected the second, that was 1/1 or 100% growth, but when the second infected the third, that was 1/2 or 50% growth, and when the third infected two more people that was only 2/3 or 60% growth. Then three more people get infected and we stay at 3/5 or 60% growth. But in reality, we've gone from 1 a day to 3 a day! So the percent rate of growth declined or was flat even as the daily number of new infections increased three-fold. This is just a cautionary tale about doing percentages on the growth of cumulative data.

Said another way, between 3/15 and 3/16, the CDC reported 739 new cases.
Between 3/20 and 3/21 it was 5,836
Between 3/24 and 3/25 it was 13,987.
Between 4/2 and 4/3 it was 37,926.

I have heard good things in the media about the expansion of testing, but as these results come in they could actually shock the market into grasping the gravity of the situation. As I said before, a stock market with a PE of 18 or 19 is priced for faster-than-average growth, not this situation.

Quite frankly, if the U.S. rate of doubling declined to only every 5 days, that would still go from 350k cumulative cases to half the US population in 45 days. I'm not saying I think that's how it plays out, because that would be a simplistic extrapolation and much of the denominator would be recovered or dead by then, and therefore not contagious. I am saying things get very, very dicey in April, with any realistic numbers reaching tens of millions infected. Restrictions and behavior will hopefully change as the SHTF in April, and in May, herd immunity will start to be a factor, but that will only be because so many people are/were infected.

So yes, a plateau will occur - but when? How much does it matter (economically) if we go from doubling every 5 days to every 10 days, starting 4 weeks from now versus 6 weeks from now? I don't see mass vaccination happening until this time next year at the earliest, so regardless of model details tens of millions eventually get sick - just at different times.

Thank you for pushing me to look into these numbers. It's been approximately the virus' incubation period since our current modest level of restrictions started, so maybe we could see a flattening of the (nominal) growth next week! I'll hold my bet against it.

ChpBstrd

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Re: Who's Shorting?
« Reply #30 on: April 04, 2020, 11:27:07 PM »
I think the biggest issue here is timing. Things could get bad super fast, bad slow, good fast, good slow, etc. You need more specific info on *when* the market is going to decide to drop to take any useful action.

-W

Yes, I have to get the second decision right, particularly with options where a drop in volatility can reduce a put's value even if the market goes slightly down.

Hedging and then going short has been psychologically associated with reward, and my long positions were associated with punishment. This sets up the risk that I am too slow to return to the market because I have become inhibited from pivoting long. I have to ask myself "are you happy with avoiding 10% of the market's losses? 20%? 30%?". At some point, I pick a number or DCA back to long, even if I must watch markets continue to fall.

For now, there's enough market optimism to hold off on a decision.

mrmoonymartian

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Re: Who's Shorting?
« Reply #31 on: April 04, 2020, 11:57:42 PM »
If you're already short, shouldn't you be more pro-active about it? Like:

WE'RE ALL GOING TO DIE!*

Spoiler: show
* eventually
« Last Edit: April 05, 2020, 12:00:51 AM by mrmoonymartian »

MustacheAndaHalf

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Re: Who's Shorting?
« Reply #32 on: April 05, 2020, 03:15:26 AM »
https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us.html
103321   122653   140904   163539   186101   213144

I get:        18.7%         14.9%      16.1%     13.8%       14.5%    for the rates of growth each day.

... Overall I'm seeing testing show a clear picture of COVID-19, and that COVID-19 is growing more slowly.  At some point growth could slow so much that the news media notice (!), and give a boost to the U.S. stock markets ...
The daily percentage growth in a cumulative data series (calculated as: {day2-day1}/day1) might decline even as infections accelerate, due to growth in the denominator ...  I have heard good things in the media about the expansion of testing, but as these results come in they could actually shock the market into grasping the gravity of the situation.

Quite frankly, if the U.S. rate of doubling declined to only every 5 days, that would still go from 350k cumulative cases to half the US population in 45 days. I'm not saying I think that's how it plays out, because that would be a simplistic extrapolation and much of the denominator would be recovered or dead by then, and therefore not contagious. I am saying things get very, very dicey in April, with any realistic numbers reaching tens of millions infected. Restrictions and behavior will hopefully change as the SHTF in April, and in May, herd immunity will start to be a factor, but that will only be because so many people are/were infected.
I view (day2/day1) like this: what is the rate of infected people spreading the virus?  If every 2 people infected causes a third person to catch the virus (+50%/day), that's different from 5 people passing the virus to another person (+20%/day).  I agree it's limited, but it's a quick approach to see where things are heading, ignoring non-exponential factors (recovery and deaths, both of which lag new cases by weeks).

It's very helpful to hear new perspectives that match data, which helps me test my own views.  Unfortunately, my source of data shows suspect data for Michigan (9k positive tests in 6 days, zero negatives).  Digging deeper, local news for Detroit points out much higher testing, lower rates of positives (but still 1/4th of those tested), and a positive development.  New, faster testing is being used in Michigan, where they can get results in an hour (with a capacity of 2,000 tests/day, right now).

Here's week over week U.S. totals from covidtracking.com, for each Saturday:
306k.. 118k.. 23k.. 2.5k.. 0.3k
2.6x..  5.1x..  9.2x..  8.3x

And now total U.S. tests, also Saturday over Saturday:
1624k.. 736k.. 179k.. 20k.. 2k
2.2x..   4.1x..  9.0x..  10x

There's 3 interesting things to me, from this data and what ChpBstrd mentioned:
(1) spread slowing: growth falls near 0%, and states implement contact testing
(2) same spread:  testing slows, renewing uncertainty.  Virus spreads less checked than before.
(3) new tests scale up: one hour tests change the game if they can be scaled up to a million/day testing.

The data shows a mixture of (1) and (2) right now - my view and ChpBstrd's.  The flawed data for Michigan hints at new testing not being reflected yet, and could result in (3)... I hope.

ChpBstrd

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Re: Who's Shorting?
« Reply #33 on: April 07, 2020, 09:32:10 AM »
I closed my short positions today for a small loss. The multi-day series of declining new infections means there is a chance that stricter public health measures in places like California and NYC are working. I’m a believer in epidemiology and science in general, so these data forced me to consider that even if the president is a worse-than-useless entertainer in this situation, the governors, mayors, and pubic health bureaucracy have nonetheless organized an effective response in the absence of executive branch leadership. Congress has also filled the void with a major stimulus package.

We still face a red alert for a financial crisis in the next 12 months, and the recession could continue for a while, and worsen. Yet, unless stocks drop again, we might not get the sort of cleansing plunge I was hoping for, featuring reasonable valuations and a loss of investor confidence. I’m going back to limited-loss / unlimited-upside hedged positions, but might write some far-OTM puts too.

thunderball

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Re: Who's Shorting?
« Reply #34 on: April 10, 2020, 01:28:52 PM »
I closed my short positions today for a small loss. The multi-day series of declining new infections means there is a chance that stricter public health measures in places like California and NYC are working. I’m a believer in epidemiology and science in general, so these data forced me to consider that even if the president is a worse-than-useless entertainer in this situation, the governors, mayors, and pubic health bureaucracy have nonetheless organized an effective response in the absence of executive branch leadership. Congress has also filled the void with a major stimulus package.

We still face a red alert for a financial crisis in the next 12 months, and the recession could continue for a while, and worsen. Yet, unless stocks drop again, we might not get the sort of cleansing plunge I was hoping for, featuring reasonable valuations and a loss of investor confidence. I’m going back to limited-loss / unlimited-upside hedged positions, but might write some far-OTM puts too.

I think we still have more downside opportunity..  Instead of a far OOTM put, I'm considering a deep ITM (~75-90 delta) to reduce theta decay, either on SPY or QQQ.  I'm in the minority on this board, but as of yesterday the /ES just hit the 50% retracement from highs to lows.  Commence the shorts! 

Buffaloski Boris

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Re: Who's Shorting?
« Reply #35 on: April 10, 2020, 03:41:34 PM »
I think I come to a similar short to medium term conclusion as the OP, but for different reasons.  I don't think COVID is so much the issue but rather the reaction to it.  Let's say that this was a zombie invasion or a meteorite.  The issue from an economic perspective is the reaction to the event. For good or bad, we've shut down our economy since Mid March and the outlook appears that it'll be shut down till the end of May? Into June?  That's going to have an impact.  And I think that impact is going to be far more long lasting and impactful than what the Stock market seems to be pricing in.  The economy isn't going to bounce back in a matter of weeks. You don't just shrug off a (likely) 20-30% unemployment rate. It's going to take awhile to get back to where we were in 2019.  If we return to that. So I see a heck of a lot of bankruptcies and financial pain in the short to medium term.  And that would seem to imply lower equity prices. 

Nice and tidy, huh? 

Here is the problem that I see with my narrative.  The Fed, which is throwing trillions of dollars at this to keep the economy floating, in addition to what we're doing on the fiscal side. Throw enough trillions at it, and I wouldn't be surprised if you could figure out a way to both cure cancer AND turn lead to gold.  Given that the Fed and the government is throwing so many trillions at the markets, do the underlying economics even matter?

MaaS

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Re: Who's Shorting?
« Reply #36 on: April 10, 2020, 06:41:34 PM »
Do I think the market will head lower over the next few months? Yes.

Do I dare fight the Fed? No.

In the short term, it seems possible this mess gets propped up by unlimited (digital) printing. I'm not chasing this rally with my spare cash, but I'm not shorting anything.

ChpBstrd

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Re: Who's Shorting?
« Reply #37 on: April 11, 2020, 07:24:33 PM »
Given that the Fed and the government is throwing so many trillions at the markets, do the underlying economics even matter?

It will be a test of Modern Monetary Theory, that's for sure. There's now bipartisan agreement that you extinguish a financial fire by shoveling money into it - which is great progress.

I wonder if any number of trillions are enough to keep the stock and bond market cap afloat, in a present/future when consumption has been decimated, overcapacity is everywhere, margins are scant, etc. This trick worked in '08 when the crisis was bank failures due to unexpected rates of mortgage default. Today's crisis, on the other hand, is mass unemployment and a collapse in consumption. What does it matter if the banks stay solvent, but unemployment and hoarding of money start to compound, leading to a deflationary vortex? What does it matter to the car dealership if they can lend at 0% and borrow to expand their operations at 2% if unemployment is 10-15% and everyone is living in fear of losing their jobs? What does it matter to a restaurant if subsidized small business loans are available, but they can't qualify because their losses are too big?

There will be many companies that would go bankrupt if not for stimulus cash and loans. That was the case in Japan circa 1992, but it was also the case in the US circa 2008.

Buffaloski Boris

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Re: Who's Shorting?
« Reply #38 on: April 11, 2020, 10:14:52 PM »
Here’s JPMs latest prognostication:
https://www.cnbc.com/2020/04/09/jpmorgan-now-sees-economy-contracting-by-40percent-and-unemployment-reaching-20percent.html

TLDR: “With these data in hand we think the April jobs report could indicate about 25 million jobs lost since the March survey week, and an unemployment rate around 20%,” they wrote, “Given the expected hit to hours worked this quarter we now look for -40.0% annualized real GDP growth in 2Q, down from -25.0% previously.”  They expect the third quarter to rebound with growth of 23%, and a fourth-quarter increase of 13%.


2Birds1Stone

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Re: Who's Shorting?
« Reply #39 on: April 12, 2020, 01:38:48 AM »
TLDR: “With these data in hand we think the April jobs report could indicate about 25 million jobs lost since the March survey week, and an unemployment rate around 20%,” they wrote, “Given the expected hit to hours worked this quarter we now look for -40.0% annualized real GDP growth in 2Q, down from -25.0% previously.”  They expect the third quarter to rebound with growth of 23%, and a fourth-quarter increase of 13%.

*yawn*

Straight from big ERN's latest blog post (published before the CNBC piece)


Most/all of this is already priced in. The biggest risk is keeping the economy shut down through the summer.

https://earlyretirementnow.com/2020/04/08/financial-lessons-from-the-first-quarter-2020/

bthewalls

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Re: Who's Shorting?
« Reply #40 on: April 12, 2020, 03:11:44 AM »
TLDR: “With these data in hand we think the April jobs report could indicate about 25 million jobs lost since the March survey week, and an unemployment rate around 20%,” they wrote, “Given the expected hit to hours worked this quarter we now look for -40.0% annualized real GDP growth in 2Q, down from -25.0% previously.”  They expect the third quarter to rebound with growth of 23%, and a fourth-quarter increase of 13%.

*yawn*

Straight from big ERN's latest blog post (published before the CNBC piece)


Most/all of this is already priced in. The biggest risk is keeping the economy shut down through the summer.

https://earlyretirementnow.com/2020/04/08/financial-lessons-from-the-first-quarter-2020/
so hold the lump sums in until summer! cool


Buffaloski Boris

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Re: Who's Shorting?
« Reply #41 on: April 12, 2020, 07:21:13 AM »
TLDR: “With these data in hand we think the April jobs report could indicate about 25 million jobs lost since the March survey week, and an unemployment rate around 20%,” they wrote, “Given the expected hit to hours worked this quarter we now look for -40.0% annualized real GDP growth in 2Q, down from -25.0% previously.”  They expect the third quarter to rebound with growth of 23%, and a fourth-quarter increase of 13%.

*yawn*

Straight from big ERN's latest blog post (published before the CNBC piece)


Most/all of this is already priced in. The biggest risk is keeping the economy shut down through the summer.

https://earlyretirementnow.com/2020/04/08/financial-lessons-from-the-first-quarter-2020/

The market goes Monty Python.

« Last Edit: April 12, 2020, 07:28:26 AM by Buffaloski Boris »

ChpBstrd

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Re: Who's Shorting?
« Reply #42 on: April 12, 2020, 07:59:25 PM »
TLDR: “With these data in hand we think the April jobs report could indicate about 25 million jobs lost since the March survey week, and an unemployment rate around 20%,” they wrote, “Given the expected hit to hours worked this quarter we now look for -40.0% annualized real GDP growth in 2Q, down from -25.0% previously.”  They expect the third quarter to rebound with growth of 23%, and a fourth-quarter increase of 13%.

*yawn*

Straight from big ERN's latest blog post (published before the CNBC piece)


Most/all of this is already priced in. The biggest risk is keeping the economy shut down through the summer.

https://earlyretirementnow.com/2020/04/08/financial-lessons-from-the-first-quarter-2020/

ERN does some heavy qualifying too:

Quote
So, as long as we can keep the shutdown short enough and cross our fingers that enough of the damaged businesses survive we should be OK! That’s why the stock market is down by “only” 20% and not 80%!

The biggest risk is that COVID-19 doesn't go away within a month or two, and instead slow-burns through suburbia for the next 6-12 months. China, South Korea, and now New York City have proven that the only way to even flatten the curve is a draconian full quarantine and hard economic stop for multiple weeks. Thus, a bullish bet on the market is a claim about biology - a claim that the virus can only spread in dense megacities and not at Family Dollar or the McDonald's drive thru in cities with 10k people. I'm not so sure about that.

Buffaloski Boris

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Re: Who's Shorting?
« Reply #43 on: April 13, 2020, 06:15:43 AM »

ERN does some heavy qualifying too:

Quote
So, as long as we can keep the shutdown short enough and cross our fingers that enough of the damaged businesses survive we should be OK! That’s why the stock market is down by “only” 20% and not 80%!

The biggest risk is that COVID-19 doesn't go away within a month or two, and instead slow-burns through suburbia for the next 6-12 months. China, South Korea, and now New York City have proven that the only way to even flatten the curve is a draconian full quarantine and hard economic stop for multiple weeks. Thus, a bullish bet on the market is a claim about biology - a claim that the virus can only spread in dense megacities and not at Family Dollar or the McDonald's drive thru in cities with 10k people. I'm not so sure about that.

There was another qualification there; that enough damaged businesses survive. That’s just not going to happen under a much further extended lockdown. The restaurant industry is going to be decimated as are things like sports or movie theaters where the business model relies at least in part on lots of people congregating in one place. There is roughly zero chance I’m going to sit in a crowded restaurant until such time as this has blown over. I don’t think I’m at all unique in that respect.

mrmoonymartian

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Re: Who's Shorting?
« Reply #44 on: April 13, 2020, 07:18:07 AM »
The mutation rate is low, so there is a good chance that once you've had it you'll be ok. So if the government set up an antibody certification scheme to say you had it and recovered, you could vet mass attendees to keep out any coronavirgins. In Australia, the main problem is we're not letting enough people get it, so we'll have to stay locked down or risk expenentiation. The US has been doing a better job of ensuring it keeps spreading to gradually attain herd immunity at an economically bearable rate.

magnet18

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Re: Who's Shorting?
« Reply #45 on: April 13, 2020, 08:08:00 AM »

Things that might mess up your short calls, in no specific order, and not all necessarily working together, and without any sources cited

- a diabetes type finger prick serum test has been developed that gives antibody results in seconds.  Just about everyone would love to see if they've been an asymptomatic case, and if so get back to work.  An actual blood draw and 24 hour test is a big hurdle, but a finger prick and red light green light test?  That could change the game.
- data coming in from random samplings says the number of asymptomatic cases has been vastly underestimated.  Couple that with the fact that it seems to continue to be more contagious than expected, perhaps herd immunity is nearer than we think
- human nature dictates people simply aren't going to peacefully sit around and go bankrupt en-masse for 9 months while this slow burns.  Italy is already trying to reopen to prevent riots.  While a big boom reopening may have negative human life impacts, it would have very positive economic impacts.
- the trillions of dollars getting printed, to the point where it's actually a massive economic experiment.  If we are shut down for the rest of the year, and print money like it's going out of style to helicopter over everybody and prevent the aforementioned riots, the market could rise significantly due to inflation negating your shorts even if the real value does drop.  Even lacking hyperinflation, nobody really knows what impact this will have.
- the entire global economy could collapse, permanently shuttering the doors on whatever investment platform you were using.  Your short call may be correct, but the victory would have been pyrrhic


I see you've already closed your positions, and this post was obviously just some fun light-hearted speculation.  The market just had one of it's best weeks ever for no discernable reason, so I'm staying out of the timing game.

Buffaloski Boris

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Re: Who's Shorting?
« Reply #46 on: April 13, 2020, 08:22:50 AM »
The biggest problem with a short position that I see right now are the central banks. They’re dumping trillions into the economy that’s going to end up somewhere. Throw enough trillions at it and you’ll raise any market.

magnet18

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Re: Who's Shorting?
« Reply #47 on: April 13, 2020, 08:39:17 AM »
The biggest problem with a short position that I see right now are the central banks. They’re dumping trillions into the economy that’s going to end up somewhere. Throw enough trillions at it and you’ll raise any market.

Yeppers

I'm 100% certain there is a group of people currently trying to figure out exactly how much money they can print without the wheelbarrows of cash outcome

maizefolk

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Re: Who's Shorting?
« Reply #48 on: April 13, 2020, 08:51:52 AM »
The biggest problem with a short position that I see right now are the central banks. They’re dumping trillions into the economy that’s going to end up somewhere. Throw enough trillions at it and you’ll raise any market.

Yeppers

I'm 100% certain there is a group of people currently trying to figure out exactly how much money they can print without the wheelbarrows of cash outcome

So far we're starting to see some signs of modest deflation in China (RMB denominated) and the dollar has modestly appreciated against RMB. So my guess is that the answer to that question is: more.*

If major inflation does come in the future, it may be an additional nail in the coffin for physical cash.

Look at Venezuela. Four years ago their were weighting out cash on butcher scales to buy food. In the last four years inflation hasn't stopped (it's slowed a little, right now their currency "only" loses 97% of its value per year), but there's been a big push to shift everything over to electronic payments. Makes the logistics of living in a society with hyperinflation more practical than in the wheelbarrows full of cash era in Germany/Austria/Hungary we (or at least I) always think of when the word hyperinflation comes up.

*One could also argue the $4 trillion the federal reserve has created so far hasn't had time to work its way into the economy. But if it hasn't that's another sign that the velocity of money is slowing, meaning it'll take more dollars floating around to maintain the same price levels.

maizefolk

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Re: Who's Shorting?
« Reply #49 on: April 13, 2020, 11:12:21 AM »
There was another qualification there; that enough damaged businesses survive. That’s just not going to happen under a much further extended lockdown. The restaurant industry is going to be decimated as are things like sports or movie theaters where the business model relies at least in part on lots of people congregating in one place. There is roughly zero chance I’m going to sit in a crowded restaurant until such time as this has blown over. I don’t think I’m at all unique in that respect.

Fascinating new survey data out from the economics research bureau (a bit of a dense read but I enjoyed it). Median small business had only enough cash on hand to cover two weeks worth of expenses. The PPP loans (if they go out in time and if the program doesn't run out of money) might add a couple of extra months on to the end of that.

But if the crisis lasts just four months, only 47% of small businesses anticipate still being open (or reopening) but December of this year. Restaurants anticipate only a 30% chance of surviving or reopening if the crisis lasts four months.