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Comment by 01100011 | Hacker News Reader

Any idea why the stock market is still holding up? Whether or not you think the virus will be resolved quickly, the economy has now taken a serious hit. Is the feeling that the government stimulus actions will be enough to completely erase the Covid damage? Will they resolve the shaky fundamentals and sky-high valuations we saw heading into this mess? Perhaps I'm a simpleton for expecting rational markets, but it seems like equities should be falling further.

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I'm not sure the economy is getting a hit as big as it looks, but it's rather on "pause".

I think many of these workers are laid off so they can get unemployment benefits, and they'll be hired again by the same companies as soon as the quarantine ends - which should take a couple month if we look at what happened in China.

Sure, some companies will die from losing all of their business during the quarantine, but the number of jobless claims is not representative of the workers who will still be out of a job after the quarantine.

The million dollar question is, will this be a 'V shaped recovery', a.k.a. 'pause' or will it turn into something worse. I hear a lot about companies with cash flow problems which may not survive the hit. Is that true? Beats me. It seems credit is cheap right now. What about long term though? For many industries, it takes a while to spin things back up and see cash flow. Will the economic mitigation measures be enough to see those companies through?

We may also be looking at permanent changes in behavior. Sure, there is a lot of pent up demand for getting out and socializing, but if people are being bled dry by meager stimulus checks, they're not going to rush to fill the restaurants and malls when this is over.

Edit: Just saw this, an interview with El-Erian on liquidity issues, https://www.youtube.com/watch?v=MjzBKtVTdtQ

Credit being cheap only works if you have a good plan and expectations that the business is going to survive. Most small businesses are not in that position (and even large businesses like Macy's, Cheesecake Factory and Subway). Shops that are not getting foot traffic now have no idea when they'll be able to reopen, getting a loan to pay their lease would probably be unpayable afterwards. Business owners also need to make a living, so they are looking into getting jobs or starting alternative businesses. Their original businesses are most likely not coming back.

And there's no way the economy will fully reopen before at least a year. China is not a good comparison, because 1) the US did not follow the same approach as China in dealing with the virus, 2) China has been lying about their economy and number of cases and 3) even if China was fully open for business now, the biggest markets are not buying - Europe and the US are just beginning a huge recession, that in turn will hit China back and will affect the recovery of the world economy.

A V shaped recovery is, in my opinion, a made up dream to keep people from panicking.

Credit is cheap right now if you can get it.

But just like before, it's "subject to status".

Which roughly means, if you really need it, the answer is no.

It's a great point

Unfortunately there is no evidence to suggest that the US will get out of this anywhere as quickly or efficiently as China.

On the contrary, so far it appears US cases will peak much higher and later than in China, and a lack of resources at the state and local level will massively slow any subsequent recovery.

Nobody has any idea what is actually happening in China, and most of the numbers are more propagandistic than informative, so we should probably just stop speculating entirely.

The best numbers I've seen for projecting US cases and deaths honestly seem to be pretty good:

https://covid19.healthdata.org/projections

This projects less than 100k deaths in the US this year. Compare that to heart disease (largely preventable) at 650k a year. That'd also make it only about 5 times worse than a bad flu year. (Edit: thanks for the correction below; if correct, this would be only about 2 times worse than a bad flu year.)

I also like this model but be careful with it. That’s just the first wave, and this assumes we adhere to strict social distancing in all states.

100,000 dead in three months is not “pretty good”. Honestly, I don’t understand the casualness that people seem to have around the number of deaths. “It’s not that bad” is such a callous take.

Are you incapable of understanding relative terms?

Compared to the millions of people dead in the US that many were projecting just a few days and weeks ago, this is indeed good -- in fact, very good, because it seems many fewer people will die.

100,000 - 250,000 dead is not something to celebrate. It is a reflection of the failure by the current administration to take this seriously all the way back in January. That number would be much lower if proper steps were taken back then.

Also, that 100,000 assumes everyone in the country follows proper physical distancing, hand washing, etc. Last I checked, the state of Florida is still allowing for church services during their "lock-down".

Your post reveals that you are viewing things through a political lens.

It's true the administration could have acted sooner. It's also true the opposite party was smearing 'racism' and 'xenophobia' even as shutting flights down was obviously the right move. This is not a scenario where any politician can claim to have done better.

In fact, world-wide we have seen a variety of responses, with no definitive answer on what has been good and what has been bad. It's a horrible situation for any national leader.

As to the number of dead.... it is what it is. Is it good? Certainly not. Could it be worse? Certainly. Does anyone have all the optimal answers. Certainly not.

This is with extreme social distancing measures.

We’re in “virus time” now and there will not be an end until a vaccine is manufactured and distributed.

On again off again quarantines are now ‘normal’.

2017-2018 was a bad flu season at 61k US deaths. So, if this turns out to be 100k, it's not 5 times worse than that.

Experts estimated we'd be at 20k cases roughly by March 31st...we were at like 200-300k... so yeah experts don't know much either on how this will turn out. Some of the states not taking it seriously will drive numbers way up beyond experts best guesses.

Best way to guage the toll is take a glance at deaths in 2019 vs 2020 and the difference is covid-19 related. Even if it's a heart attack who couldn't get into the ER because it was full...etc..

Death rates really don't capture the full picture. What if zero people died from the disease directly, but it still caused painful illness with possible long term complications and overwhelmed health care systems? The economy would still be shut down. Social distancing would still be in place. The economic damage has very little to do with how many people die, and very much to do with how many people are unwilling or unable to participate in the economy.

Do you know anywhere that is reporting stats on how many people are maimed by this?

I haven't seen it but I'm guessing that won't show up until next year. I'd figure that people who survive the virus and can breathe on their own have to wait for follow up since resources are tight.

This is with lockdown in place. No lockdown and you could aim for 600 to 2M death in the US alone. ten to twenty time a bad flue year.

Also some people are out of the ICU (at least in France) and will have to do 3 to 6 month of reeducation for the best cases. For the worst cases (still in ICU at the moment, at least in Colmar), its 20 years shoved off (lung fibrosis), one of them is younger than me. I guarantee you lethality might be what we're talking about now, but next year it will become secondary.

Can't edit anymore (too late) I was wrong, fibrosis did not only appear in ICU patients, but also in patients who were healthy enough to stay home.

This is shittier than i thought.

My coworker's whole family lives in Beijing. Her father died recently. He suddenly was having a hard time breathing, was brought to hospital, and by then his blood oxygen was far below normal. They refused to test him for COVID19. She told me this. Her facial expression was utter shock, and she told me her mom's grief has been multiplied by the fact that the government doesn't want to be honest about his real cause of death.

People who believe the data coming from China is accurate are ignoring the recent history on transparency around this disease from the CCP. I just don't understand it. Sure, the country where police arrested the first doctors to publicly state it was human to human transmissible is being completely honest. Wow.

Two things can be true at the same time: Trump administration has done poorly AND the CCP is culpable, lying, and made the situation much worse.

But in the US political system, there is no tolerance for distraction from hating the opposition party. You can only blame Trump, and saying bad things about China is "just racist and mean. They did such a great job, they say they have contained it. We didn't because the bad orange man didn't do his job."

Yeah, meanwhile, those of us living in reality know that Trump and the CDC/FDA suck, AND the CCP does too. And yeah, maybe, just maybe, if the US news media had dedicated 1/20th the coverage they gave to the impeachment to the virus, the government would have been held accountable to start acting then. I was travelling internationally, and when I got back home in early February, I was shocked at how little CNN and MSNBC were talking about the virus. Basically zero. And Fox only talked about it in the context of the impeachment distracting from it.

When governments fail, we hope that the free press will hold them accountable, and there's no reason they couldn't have done that earlier. No, the red vs. blue team sports are just too good for ratings to talk about things that actually matter.

I don't think you're being fair.

Remember how Trump was roundly criticized as 'racist' and 'xenophobic' for stopping flights? The Democrats have to own that one, their answers were flawed and would have cost lives as well.

But really-- nobody has all the optimal answers. War is hell.

Trump reacted late, and by the time he acted he was slamming the barn door after the horse had left (or more accurately after the horse was inside the barn). The virus came across on flights from Europe just as fast and just as damagingly as it did from China. You can't stop a pandemic like this at your borders. Trying to do so just prevents the flow of critical people and materials and distracts resources from more effective responses.

Testing and social distancing were the steps that were needed on day one. They didn't happen fast enough and aren't happening fast enough.

It is not politicizing things to state the fact that his responses have been slow and poorly informed.

> they'll be hired again by the same companies as soon as the quarantine ends

Hopefully, yes, although this turnaround has some unfortunate bureaucratic costs to both the employees and employers. I hope those small-medium business loans work for keeping a reasonable number of people on payrolls. While the administration of those loans has its own potential pitfalls, in some ways it seems like the better path than leaning on the unemployment insurance system.

>I think many of these workers are laid off so they can get unemployment benefits, and they'll be hired again by the same companies as soon as the quarantine end

That is highly doubtful. Many companies can't survive even 2 months of inactivity and will fold.

>which should take a couple month if we look at what happened in China.

China is undergoing a second wave right now [1] due to unlocking quarantine too early. It's extremely likely that they will be undergoing a second lockdown. Anecdotally, speaking to a lot of my friends in NYC most everyone who is currently WFH (myself included) isn't planning on returning back to the offices until at least the end of the year. Realistically, I think we won't fully get rid of lockdowns until vaccine is available and 80% of the population is vaccinated.

[1] https://www.bloomberg.com/news/articles/2020-04-02/chinese-c...

The FRB is printing $90B per day as part of its open-ended QE program ( $935B in Treasurys and $344B in agency paper since 16 Mar )

While they are not technically buying stocks, every dollar of paper they buy from primary dealer inventory is a dollar that managers will find a home for.

The horrific employment news portends the need for the Fed to make $90B/day look like amateur hour in the near future. Hence, the run up in basically every single asset class today.

Understand that in an era of perpetual debt monetization, silly things like P/E multiples, employment, or earnings growth don't anchor stocks. Infinite liquidity combined with fund managers with a fetish for yield, no matter what the risk, are the only relevant mechanism in town. It's entirely possible to simultaneously have DJIA at 50,000 and half-mile-long lines for soup kitchens in this environment.

The stock market is just a collection of people betting on where they think things are going. The market declined 25-30% because people were predicting a downturn. Now we’re in that downturn.

The reason the market didn’t tank today is because this jobs report was already priced in.

Stock market lost connection to "people" long time ago. It is all big funds and algos, small investors who want to manage their own money are not even visible. Quite a lot action happens in pre and after-hours as well (look at these open gaps over last couple weeks) - "regular" public cannot even get there.

You can take people to mean whatever you want. Behind those algorithms and big funds are people pulling the strings. At the end of the day the market is a reflection of where things will go.

Non expert speculation: we are printing money like no tomorrow. We are giving $4 trillion in free money to large corporations. With how easily they agreed to that there’s reason to expect they’ll do even more. There’s a huge demand for USD outside the US. All this means may be heading for a period of high inflation in the US despite the recession. People need to put money somewhere and assets are the only place to go.

I'd put my bets on a few ideas.

1) A large portion of equity is held by large funds, which may be contractually unable to pull out of the equity market at all.

2) Lots of people are in it for a short term bump based on stimulus expectations

3) Most investments are made with a longer time horizon than the immediate pain of the short term, and thus, have no reason to sell now.

I think this could be an excellent rare economic data point to suggest the efficient market hypothesis does not work anymore (trumped by behavioral economics issues).

The stock market isn't holding up, it's down 26% since this started. The thing to remember is that the stock market is predictive; it fell when investors foresaw the job losses, before they actually happened.

Interesting train of thought. Could this possibly indicate that investors see light at the end of the tunnel? Dow & S&P are up 1% right now.

That would seem to be the case, but keep in mind that doesn't mean they are right (but I hope they are). We are in uncharted waters here, so the models and playbooks of investors may be even less accurate than normal.

In 2008 gdp declined by ~2% and the stock market fell 50%.

The downright dreadful forecasts coming in about 2020 GDP double digit declines seem to me to warrant a larger decline in equities.

I think a lot of folks think this will be a sharp V recovery, but I'm not so sure. I'm already seeing knock-on effects in the real world. People in tech being laid off; (formerly) rich folks cutting way back on planned spending; entire projects canceled, etc.

I wouldn’t be surprised of on again off again quarantines over the next year.

This is our new reality until a vaccine is manufactured and distributed.

https://www.statista.com/statistics/188165/annual-gdp-growth...

GDP growth declined -0.1% in '08 and -2.5% in '09

> People in tech being laid off

This does seem to be accelerating, although recall that this year opened with a fair few headline-grabbing mass layoffs. It's hard to say that more weren't already coming, with the timetable just moved up.

While I don't think the selloff is over, the bull case for American equities (I assume you are talking about U.S. stock market) is still quite strong:

- Emerging markets, Japan, and Euro also being hit by the virus. Where else will capital flow?

- International bond markets selling off as credit risks rise removes bonds as the traditional flight to safety (US Gov Bonds being the notable exception).

- Strong US dollar vs. other world currencies gives international capital extra safety when parked in U.S. stocks.

- Large-cap U.S. equities such as those in the S&P 500 can generally weather short-term liquidity shocks like this, and if anything they will grow by absorbing the market share of failing small businesses.

FWIW: Japan (for sure) and Europe (probably) seem likely to recover from the lockdowns rather faster than the US, which is just now getting started in big chunks of the country.

While I agree in principle that the markets are trying to price in the downturn, I genuinely don't think that the median-dollar-investor abstraction really has a clue how long this is likely to last.

It's anybody's guess at this point. Most people at r/wallstreetbets on Reddit are saying three things: 1) "it was priced in", meaning that somehow investors already expected this to happen, 2) the Fed is propping up the market with unlimited QE (Quantitative Easing), which means they are printing trillions of dollars to buy up a lot of bonds to create liquidity, and 3) today's rally is driven by oil prices surging because of Trump's tweet saying Saudi Arabia and Russia will cut down production to help stabilize the market.

They are also kind of shocked that stocks are not plummeting and saying the market is rigged. Seems like a lot of people have been buying PUT options expecting the market to crash soon.

>Seems like a lot of people have been buying PUT options expecting the market to crash soon.

Reddit's investors haven't been known to be the a) smartest investors, b) most savvy investors, or c) adult humans.

I heard 401k target date funds are rebalancing to maintain the desired ratios. The algos are buying stocks. Not sure if that is actually happening but sound plausible with auto rebalancing.

If we go by textbook definition of stock prices, it is supposed to be the "present value of future cash flows". If we do not expect the society to be fundamentally altered due to COVID-19, then future cash flows should not really be affected from what they were assumed to be in Jan-2020.

So I would like to rephrase your question - what kind of permanent change do you expect in our society due to COVID-19?

Supposed you have some 10k dollars you won't need at the next 2 years. What would you do with them right now? How do you expect the stock market to look like in 2 or 3 years? Do you expect any of the causes of the currently overvaluation you are seeing to be gone?

Buy into a vanguard fund like VTSAX and then put in a little bit every month, so you just average it out over time, rather than obsessing about trying to pick when it hits bottom.

Well, my question was rhetorical. But I imagine you have no trouble understand why the stock market stopped free-falling before it hits 0.

Do you think the virus means companies are not worth owning anymore?

Here's Howard Marks about what's priced in and what isnt:

https://www.oaktreecapital.com/docs/default-source/memos/whi...

TL;DR: markers are pricing in a V shaped recovery in a couple of months

Some stocks/companies will profit, but a hit is already priced in.

Hold my beer.

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