Corner of Berkshire & Fairfax Message Board

General Category => Strategies => Topic started by: Spekulatius on March 19, 2020, 03:49:58 PM

Title: The day after tomorrow
Post by: Spekulatius on March 19, 2020, 03:49:58 PM
1) What is the Economy going to look like when the epidemic is over?
2) How long is it going to take until the economy turns
3) Which industries may take irreversible damage, which may benefit?
4) Economic changes? Are tax rates going up or down? For whom?
5) Political changes?
6) Bailouts, what is likely to happen, who is going to pay for it?
7) Will there be lasting changes to the health care system in the US?

I hope we can do some crowdsourcing here and get some new ideas and variant opinions.

Title: Re: The day after tomorrow
Post by: Viking on March 19, 2020, 04:24:53 PM
I would love to hear from people who have first hand knowledge of what is going on in China, South Korea and Taiwan right now. Like how fast the economy is ramping back up (if it is).

Companies with operations in China, like Starbucks, will have an advantage as they will have already established Ďbest practicesí in China that they can now fast adapt to operations in other parts of the world.
Title: Re: The day after tomorrow
Post by: montizzle on March 19, 2020, 04:38:19 PM

Companies with operations in China, like Starbucks, will have an advantage as they will have already established Ďbest practicesí in China that they can now fast adapt to operations in other parts of the world.

I work for a global building materials company in Canada. What I've seen at work is spot on with what you've said. We began getting emails as early as mid january about the coronavirus and how it may effect operations, long before anyone in this part of the world was taking it seriously.

My workplace has been surprisingly more co-ordinated and prepared for all of this than from what I've heard from friends in non-international companies. I think a lot of it is corporate learning from experiences in China a few months ago. Interested to see what material impact (workplace infection rates, maintaining level of productivity, etc.) this preparedness will translate to.
Title: Re: The day after tomorrow
Post by: ValuePadawan on March 19, 2020, 04:42:14 PM
For how long Coronavirus effects last the way I've been thinking about it is the outer bound will be 18-24 months when a vaccine is available and mass manufactured. If developed countries can "pull a China" and lock down their countries for 6 weeks and effectively track back flow cases, cases coming in from other countries, I think domestic business less reliant on global supply chains and commodities can get back to normal whatever normal is at that point.

That will take probably at least 12 weeks from now and will only happen if they perform excellent at contact tracing once the cases begin to decline which is a big if in countries that have had responses that weren't exactly swift to say the least (looking at you Iran, Russia the USA etc).

The airlines are going to be hurting for the next two years at least and if I was the government dust off the Buffett playbook and go for perpetual preferred shares with warrants. Their investment will pay off so taxpayers will be happy and airline shareholders will be grateful for the liquidity. Both sides win.

I think this will make companies reconsider the level to which their supply chains are globalized and along with nationalism having a resurgence the last 5 years more companies will modify their risk by moving production closer to where the products are sold.

This is mostly speculation but it will be interesting how things shape up!
Title: Re: The day after tomorrow
Post by: fareastwarriors on March 19, 2020, 04:55:47 PM
I would love to hear from people who have first hand knowledge of what is going on in China, South Korea and Taiwan right now. Like how fast the economy is ramping back up (if it is).

Companies with operations in China, like Starbucks, will have an advantage as they will have already established Ďbest practicesí in China that they can now fast adapt to operations in other parts of the world.

Owner of a soap, shampoo/conditioner factory in Guangzhou is back to full capacity. They supply lower end SE Asia market. Probably still working through back orders...

His family is back to eating dim sum every day. I guess things are not That bad anymore.
Title: Re: The day after tomorrow
Post by: Jurgis on March 19, 2020, 05:24:15 PM
1) What is the Economy going to look like when the epidemic is over?
2) How long is it going to take until the economy turns
3) Which industries may take irreversible damage, which may benefit?
4) Economic changes? Are tax rates going up or down? For whom?
5) Political changes?
6) Bailouts, what is likely to happen, who is going to pay for it?
7) Will there be lasting changes to the health care system in the US?

I hope we can do some crowdsourcing here and get some new ideas and variant opinions.

Just for fun:

1) Same as it looked pre pandemic
2) Depends on how the pandemic is handled. Best case: 1-2 quarters, worst case: probably a year. Yeah, I know that vaccine is not gonna be ready for a year-18 months. Economy won't stop for 18 months. People won't shelter-in-place for 18 months.
3) Likely none. There will be companies that go BK though.
4) At some point tax rates will likely go up. Quite possibly not soon.
5) This is not politics section
6) Yes. Deficit will go up. Money will be printed.
7) No.
Title: Re: The day after tomorrow
Post by: Spekulatius on March 19, 2020, 05:32:41 PM
For how long Coronavirus effects last the way I've been thinking about it is the outer bound will be 18-24 months when a vaccine is available and mass manufactured. If developed countries can "pull a China" and lock down their countries for 6 weeks and effectively track back flow cases, cases coming in from other countries, I think domestic business less reliant on global supply chains and commodities can get back to normal whatever normal is at that point.

That will take probably at least 12 weeks from now and will only happen if they perform excellent at contact tracing once the cases begin to decline which is a big if in countries that have had responses that weren't exactly swift to say the least (looking at you Iran, Russia the USA etc).


I think the timeframe should be the starting point  to think about how this is playing out. There is still a lot of thinking going around (besides those that still believe in the flu variant) on that this is over in a few weeks. The longer it lasts, the greater the economic damage is going to be.

The 3 month timeframe until things clear up and the normal live more or less can restart sounds about right to me. When we look back at China, this thread got started early in January and now the normalcy returns mid March, so for us starting in March, it seems that June is our best case scenario, assuming a similar timeline. Most likely, it is going to be a longer drawn out affair though.

We do not know if this epidemic is seasonal, but if it is, it might reoccur in Winter. Then we are most likely talking Spring next year. Even if not seasonal, I expect new infection hotspots popping up, but hopefully they will be easier to contain when part of the population is already immune and the government and states know what to do. In any case, itís going to be a 3 month best case, but more likely one year affair.
Title: Re: The day after tomorrow
Post by: Cigarbutt on March 19, 2020, 06:33:21 PM
^Frankly, I don't even know what tomorrow will bring so forget about the day after tomorrow.
Also, from an advice you gave me in September 2018, the aim is to move from understanding to observation, as far as unknowables are concerned.

So, only 7) is discussed here. I'm more optimistic than Jurgis and I think that change will occur from the inside and/or will be imposed from the outside and that may impact many private entities involved in health care. And even if the virus is significant, it's the evolving status of the (economic) host that I worry about. Something along those lines just came out from somebody who is looking for an opportunity:
https://www.newyorker.com/magazine/2020/03/23/why-americans-are-dying-from-despair
Title: Re: The day after tomorrow
Post by: Viking on March 19, 2020, 11:01:48 PM
Here is a summary of where Italy is at. Not out of the woods yet. And lots of unanswered questions about what the future holds.

https://www.thelocal.it/20200318/when-will-the-coronavirus-epidemic-in-italy-peak
Title: Re: The day after tomorrow
Post by: cubsfan on March 20, 2020, 05:42:04 AM
So, only 7) is discussed here. I'm more optimistic than Jurgis and I think that change will occur from the inside and/or will be imposed from the outside and that may impact many private entities involved in health care. And even if the virus is significant, it's the evolving status of the (economic) host that I worry about. Something along those lines just came out from somebody who is looking for an opportunity:
https://www.newyorker.com/magazine/2020/03/23/why-americans-are-dying-from-despair

Cigarbutt - great article on the human side of the disaster.

thank you
Title: Re: The day after tomorrow
Post by: Spekulatius on March 20, 2020, 04:41:42 PM
^Frankly, I don't even know what tomorrow will bring so forget about the day after tomorrow.
Also, from an advice you gave me in September 2018, the aim is to move from understanding to observation, as far as unknowables are concerned.

So, only 7) is discussed here. I'm more optimistic than Jurgis and I think that change will occur from the inside and/or will be imposed from the outside and that may impact many private entities involved in health care. And even if the virus is significant, it's the evolving status of the (economic) host that I worry about. Something along those lines just came out from somebody who is looking for an opportunity:
https://www.newyorker.com/magazine/2020/03/23/why-americans-are-dying-from-despair

Yes, I am looking at this thread as a means to develop a framework. I am not keen on predicting the future, but I do want to have a framework in place, in order to understand what might happen. It is easier to make sense of events as they unfold, if you have a mental model (or several of them ideally) and then test them against the new developments and data coming in.

Simple example - Andrew Youngís UBI. This was fringe idea proposed by a fringe candidate and seems outlandish and quite frankly it is socialist, but look at where we are know? This idea has gone from fringe to mainstream and Trump may sent out checks very soon. Thatís a huge paradigm shift.

I asked in the Coronavorus Thread if a health insurer could go bankrupt. Most seem to think no, which probably is right. But what happens if we get a pandemic and it makes a large insurer like UNH insolvent? Quite frankly, their capital cushion isnít all that impressive and if there is a huge surge in claims, I could see that happen. What would happen then? Nationalization? Bailout? In what Form? And what would happen to the insured? Medicare for all? ItĎs just a possible scenarios and purely speculative, but I guess we will see in the next 12 month things that we never thought to be possible.

At least thatís my thinking. I also like the term New Deal 2.0 because I think that what I think we will be getting. I have no idea what it will look like though.

Itís an interesting time to be alive and hopefully stay that way.
Title: Re: The day after tomorrow
Post by: Cigarbutt on March 20, 2020, 05:12:42 PM
...
Itís an interesting time to be alive and hopefully stay that way.
...I guess we ain't seen nothing yet.
https://www.youtube.com/watch?v=g9S93bE06H0
It's the story of a guy who got a transmissible gift because he didn't think that flattening the curve mattered that much in the heat of the moment.
The best is yet to come and we'll make it, somehow.
Looking forward to your framework(s).
Title: Re: The day after tomorrow
Post by: Castanza on March 20, 2020, 05:37:14 PM
^Frankly, I don't even know what tomorrow will bring so forget about the day after tomorrow.
Also, from an advice you gave me in September 2018, the aim is to move from understanding to observation, as far as unknowables are concerned.

So, only 7) is discussed here. I'm more optimistic than Jurgis and I think that change will occur from the inside and/or will be imposed from the outside and that may impact many private entities involved in health care. And even if the virus is significant, it's the evolving status of the (economic) host that I worry about. Something along those lines just came out from somebody who is looking for an opportunity:
https://www.newyorker.com/magazine/2020/03/23/why-americans-are-dying-from-despair

Yes, I am looking at this thread as a means to develop a framework. I am not keen on predicting the future, but I do want to have a framework in place, in order to understand what might happen. It is easier to make sense of events as they unfold, if you have a mental model (or several of them ideally) and then test them against the new developments and data coming in.

Simple example - Andrew Youngís UBI. This was fringe idea proposed by a fringe candidate and seems outlandish and quite frankly it is socialist, but look at where we are know? This idea has gone from fringe to mainstream and Trump may sent out checks very soon. Thatís a huge paradigm shift.

I asked in the Coronavorus Thread if a health insurer could go bankrupt. Most seem to think no, which probably is right. But what happens if we get a pandemic and it makes a large insurer like UNH insolvent? Quite frankly, their capital cushion isnít all that impressive and if there is a huge surge in claims, I could see that happen. What would happen then? Nationalization? Bailout? In what Form? And what would happen to the insured? Medicare for all? ItĎs just a possible scenarios and purely speculative, but I guess we will see in the next 12 month things that we never thought to be possible.

At least thatís my thinking. I also like the term New Deal 2.0 because I think that what I think we will be getting. I have no idea what it will look like though.

Itís an interesting time to be alive and hopefully stay that way.

My opinion of this bailout is changing very quickly. Seems like there is no hope of it being a loan and therefore no personal responsibility attached. I plan on mailing mine back if this is nothing but a handout.
Title: Re: The day after tomorrow
Post by: RadMan24 on March 20, 2020, 06:28:30 PM
The focus is always on the vaccine which is so far away, but I think there's positive outcomes in anti viral or other treatments in reducing inflammation in severe cases that's causing most of the deaths. If a treatment is approved here in the next week or two that greatly reduces deaths, the quarantine we're all in should reduce cases in a month or so that business can start to rebound, and the load on the health care system won't be too bad. This is all unknown, but at today's prices for quality companies with solid balance sheets in beaten down sectors, it's about as good as it gets.

Also, there's no way the vaccine takes longer than 12 months. Even Regeneron is prepping doses just in case its effective along side clinical trials.There are 19 other developments as well, but a Vaccine could hit the market as soon as Summer if stars align.

And, to be frank, it needs to happen or people won't trust the industry any more nor believe the efforts in R&D are worth the sky high drug prices, high health care costs, etc. and this industry will be hit hard going forward, imo in such a case..

Title: Re: The day after tomorrow
Post by: bergman104 on March 20, 2020, 09:16:32 PM
I'm sure there are other health professionals on this, but I'm a surgical resident at a large academic center in the midwest. The reports we are hearing from people across the world are pretty startling. In the US were are in the early early innings of this. I very much hope I am wrong and the economy bounces back in 4 weeks, but I'd be pretty shocked. This is going to get bad folks.

My reasoning is simple. The vaccines and drugs are not going to help simply because there won't be enough time to test them. The anti-inflammatory drugs like chloroquine have only shown to be beneficial in a petri dish, not in large groups of people. No physician I know would actually prescribe chloroquine to their patient unless it was a hail mary. By then it will likely be too late. We simply have no way to fight this other than physically distancing ourselves. The problem with that economically is it drags out the process. My best would be late June or July.

We are 1 week in. I'm waiting 5-6 weeks and hoping like hell I'm wrong and miss the rebound.

Title: Re: The day after tomorrow
Post by: ERICOPOLY on March 20, 2020, 09:47:16 PM
The anti-inflammatory drugs like chloroquine have only shown to be beneficial in a petri dish, not in large groups of people. No physician I know would actually prescribe chloroquine to their patient unless it was a hail mary.

Montefiore Medical Center in New York has already started seeing the surge of Covid-19 patients that public health experts have been warning about. The hospital is participating in the remdesivir trial and is giving Covid-19 patients chloroquine. ďAll of our patients get put on chloroquine, as well as on antiretrovirals. Weíre using Kaletra. Different places are using different antiretrovirals,Ē says Liise-anne Pirofski, chief of infectious diseases at Albert Einstein College of Medicine and Montefiore. ďEverybody gets that, unless they have some contraindication.Ē

https://www.wired.com/story/an-old-malaria-drug-may-fight-covid-19-and-silicon-valleys-into-it/
Title: Re: The day after tomorrow
Post by: Packer16 on March 21, 2020, 05:53:00 AM
IMO the key is an effective treatment not a vaccine.  Treatment will prevent deaths.  There a tension between closing stuff down (which has a huge economic impact on everyone) and public health.  I think if this goes the way of China which IMO should be the mid case (as we are learning from others & should have a better treatment available within weeks) is 2 months (January to March).  Maybe folks are in panic mode to such an extent when someone uses China as an example, they cannot even count the months correctly.  My concern is an over ambitious politician that will keep the close business order on too long.  We still have essential services operating so most of our economy is running fine.

I think this crisis has shown how fragile some portions of our economy is & how levered certain portions of our system.  We are seeing margin calls which are causing contagion in other unrelated sectors (especially real estate and banks).  The unknown here is contagion or fear of contagion reflected in some security prices.

Packer 
Title: Re: The day after tomorrow
Post by: Uccmal on March 21, 2020, 06:15:08 AM
I'm sure there are other health professionals on this, but I'm a surgical resident at a large academic center in the midwest. The reports we are hearing from people across the world are pretty startling. In the US were are in the early early innings of this. I very much hope I am wrong and the economy bounces back in 4 weeks, but I'd be pretty shocked. This is going to get bad folks.

My reasoning is simple. The vaccines and drugs are not going to help simply because there won't be enough time to test them. The anti-inflammatory drugs like chloroquine have only shown to be beneficial in a petri dish, not in large groups of people. No physician I know would actually prescribe chloroquine to their patient unless it was a hail mary. By then it will likely be too late. We simply have no way to fight this other than physically distancing ourselves. The problem with that economically is it drags out the process. My best would be late June or July.

We are 1 week in. I'm waiting 5-6 weeks and hoping like hell I'm wrong and miss the rebound.

I would agree with your synopsis, and I am not a surgical resident :-). 

There are far more questions than answers.  The West, particularly the US is going to get hit way worse than China.  China has high level leadership. 

Its many times more complex than working out a chess game 20 moves downstream for a human being. 
Title: Re: The day after tomorrow
Post by: rb on March 21, 2020, 06:22:19 AM
1) What is the Economy going to look like when the epidemic is over?
2) How long is it going to take until the economy turns
3) Which industries may take irreversible damage, which may benefit?
4) Economic changes? Are tax rates going up or down? For whom?
5) Political changes?
6) Bailouts, what is likely to happen, who is going to pay for it?
7) Will there be lasting changes to the health care system in the US?

I hope we can do some crowdsourcing here and get some new ideas and variant opinions.
For the economic side the answer really depends on what was the real shape of the economy before covid hit. If the economy was in decent shape like the headline numbers would suggest then the economy is gonna snap back. If the economy was more sluggish the the recovery is going to be slower.  This can very well be the case because other indicators were softer than the headline numbers would suggest. Inflation was weak in 2019, you had a rate cut, and the 10 year yield was coming down way before every finance guy started looking up the word "epidemiology".

I'm actually quite optimistic about this despite being in the economy was more sluggish bucket.

This basically started with a supply shock (china) but then got hit with a massive demand shock. The way to think about it is that it's equivalent to the Fed doing a massive rate hike, sucker punching demand, and causing a recession. This is basically every recession pre 2000. In those cases as soon as the Fed took its foot of the break the economy came back because the demand was there. Furthermore, this time around there will be substantially less feedback loops normally happen in a recession. Because the banks won't foreclose on you, you'll be able to delay payments, fiscal help, etc.

As for time frame I think we're looking at about 3 months. China is a good example. As soon as the locked down you see them getting this thing under control in about a month. Right now pretty much everyone is pulling a China, not with the military and police but because people have scared themselves senseless. In America because they're pussies and have twitter. In Europe because of Italy and whoever wasn't scared before looked at Italy and is good and scared now. So basically you're looking at 1 month to get it under control then 2 months to clear out the cases.

The other side of this is that they have to solve it in 3 months otherwise we're screwed. I don't think that we can keep at this level more than 3 months before things start to fall apart. I think the longer it goes the more talk you're gonna hear about how we need to get back to normal and the old folks need to take one for the team this time around. So 3 months, assuming the economy wasn't in the crapper going in, with decent monetary and fiscal stimulus behind it. I think the economy recover well.

I don't think there are tax hikes on anyone for a while. While would you tighten fiscally when you need to stimulate. Plus it's an election year.

Regarding industries permanently affected. I don't know that they'll be one. People are pretty good at forgetting bad things and are quite hedonistic. So I think that they go back to their pleasures. There may be a while until someone books a cruise though.

Politically I think changes have already occurred. The Republican party has been completely transformed from what it was. I'm referring to the base as well as the politicians. We knew for a while now that they don't care about deficits. But what we've seen with this crisis is that they're perfectly ok with outright spending as well. So going forward i think that there will be more of a fiscal response to shocks than in the past. This is a good thing, but we'll see.  Republicans have been pretty good at changing their economic policies depending on who's in office.

I don't think there will be changes to the health care system. Americans are really good at keeping it permanently screwed up.
Title: Re: The day after tomorrow
Post by: Castanza on March 21, 2020, 06:23:07 AM
SARS was primarily treated with antibiotics. A vaccine didnít arrive until the end of the outbreak.

For those in the medical community wouldnít antibiotics generally have a quicker response? Vaccines typical take a week or so to build immunity and still might not be effective.
Title: Re: The day after tomorrow
Post by: SharperDingaan on March 21, 2020, 06:35:24 AM
No one has any idea what the economy will look like once this is done. Relax social distancing and the restaurants, bars, etc. can start back up (benefiting the owners and staff who really need it). But it is going to be a while before anyone starts taking trips, or buying anything major again. Best guess is 4-6 months to 60% of prior activity, and in 2-3 progressive stages.

Most industries are going to substantially change. Supply chains that are more local, and robust. Industry consolidation into oligarchs. QE bailouts via debt to equity swap, FDR type mega-projects, injecting thousands of predictable well-paying jobs, to get the economy going again.

Reregulation. For the most part, airline travel was a far better experience when there were just 1-2 national airlines per nation. Similar thing with cruise ships, hotels, supply chains, etc. Price is important, but no longer king.

Same old. People still need to do things, and most cannot afford much. The sports, concerts, etc. will still go on. Just fewer and smaller until the population becomes comfortable with mass crowds again.

Accelerated social change. Strident calls, but directionless in the early stages; too early to tell where it goes yet.
Unlikely Trump gets a second term, as we Ďthe peopleí will demand someone to blame.

Trump. Different views, but most would agree that Trump and his enablers, have been toxic to the process.
Change the channel, and the recovery can accelerate. 

Obviously, lots to chew on

SD
Title: Re: The day after tomorrow
Post by: Cigarbutt on March 21, 2020, 07:28:23 AM
SARS was primarily treated with antibiotics. A vaccine didnít arrive until the end of the outbreak.

For those in the medical community wouldnít antibiotics generally have a quicker response? Vaccines typical take a week or so to build immunity and still might not be effective.
Disclosure: this post is based on incomplete knowledge supplemented by a 5 minute search, so...
There are several efforts and trials now based on the SARS experience and human ingenuity should not be underestimated but, AFAIK, the coronavirus that caused SARS has no real effective treatment. When people come in the hospital with symptoms and respiratory distress, they are typically put on a large-spectrum antibiotics (because that treatment works for bacterial and other pneumonias) but these medications have no effect on the CV itself, if that's the cause. There are potentially anti-viral agents but the evidence appears weak, in terms of a widespread and convincing benefit and side effects are significant. With respiratory failure, steroids are used (evidence very weak) and, typically, only general and supportive measures (including respiratory support) can be used until the natural immunity kicks in.
When "infection control" is mentioned at this point, it is meant at the community level, in terms of the spread.
Hoping for progress here...
Title: Re: The day after tomorrow
Post by: roark33 on March 21, 2020, 10:36:32 AM
I would love to hear from people who have first hand knowledge of what is going on in China, South Korea and Taiwan right now. Like how fast the economy is ramping back up (if it is).

Companies with operations in China, like Starbucks, will have an advantage as they will have already established Ďbest practicesí in China that they can now fast adapt to operations in other parts of the world.

The main problem with looking at China and SK is missing the comparison that we have let the horse out of the barn, so to speak. The virus has already spread throughout the US and therefore it will only spot once we develop herd immunity, which is around 15-20% of the population.  Until then, the only real goal for the US is to slow the spread to help defer the impact on the medical capacity.  So, if you look at China and say, well, Starbucks is back up and running, that's not going to happen in the US.
Title: Re: The day after tomorrow
Post by: TwoCitiesCapital on March 21, 2020, 12:12:44 PM
I would love to hear from people who have first hand knowledge of what is going on in China, South Korea and Taiwan right now. Like how fast the economy is ramping back up (if it is).

Companies with operations in China, like Starbucks, will have an advantage as they will have already established Ďbest practicesí in China that they can now fast adapt to operations in other parts of the world.

The main problem with looking at China and SK is missing the comparison that we have let the horse out of the barn, so to speak. The virus has already spread throughout the US and therefore it will only spot once we develop herd immunity, which is around 15-20% of the population.  Until then, the only real goal for the US is to slow the spread to help defer the impact on the medical capacity.  So, if you look at China and say, well, Starbucks is back up and running, that's not going to happen in the US.

Agreed on this. Also, like any data out of China, you need to take it with a very LARGE grain of salt. No idea how much bigger it is than they're saying, but guarantee its bigger than what they've said.
Title: Re: The day after tomorrow
Post by: rb on March 21, 2020, 12:47:19 PM
I would love to hear from people who have first hand knowledge of what is going on in China, South Korea and Taiwan right now. Like how fast the economy is ramping back up (if it is).

Companies with operations in China, like Starbucks, will have an advantage as they will have already established Ďbest practicesí in China that they can now fast adapt to operations in other parts of the world.

The main problem with looking at China and SK is missing the comparison that we have let the horse out of the barn, so to speak. The virus has already spread throughout the US and therefore it will only spot once we develop herd immunity, which is around 15-20% of the population.  Until then, the only real goal for the US is to slow the spread to help defer the impact on the medical capacity.  So, if you look at China and say, well, Starbucks is back up and running, that's not going to happen in the US.

Agreed on this. Also, like any data out of China, you need to take it with a very LARGE grain of salt. No idea how much bigger it is than they're saying, but guarantee its bigger than what they've said.
I think the data coming out of china is ok. Let me explain.

The numbers don't matter that much. There's too much noise is the data anyway. Korea tested too much, US and Italy not enough. It doesn't really matter what the numbers are. Whether 3,000 or 10,000 died in china is not that important. What's important is that at some point it started, at some point it went exponential, and at some point it ended. Those are the important data points. I don't think China is lieing about that. So the data is ok.
Title: Re: The day after tomorrow
Post by: samwise on March 21, 2020, 01:38:49 PM
How are people investing now? Iíll lay out my thoughts. Happy to heard thoughts, or anything I missed.

I think no business models get impaired, expect a low probability chance in healthcare. So the day after tomorrow looks like the day before yesterday. So one can quantify the upside based on previous earnings.

Whatís not clear is which equity survives a 3 month shutdown. This is the big risk priced in the market now. Huge unknowns as I donít know what the effects of shutdown are.

The trade off is upside versus survival. On one side Japanese companies which hoard cash to survive anything, but are terrible at generating returns for shareholders. On the other side leveraged companies with thin margins and fixed costs which might not survive a blip in sales.

A full lockdown is worse than a depression.
Retailers have no sales, cannot pay payroll or rent or debt. Without rent landlords cannot service the mortgage. Banks canít get any payments, so how do they make payroll?
Individuals donít get paid, canít pay rent, mortgage or credit cards.

This looks unsustainable and canít last too long. Itís also government enforced, so hard to say that the bankers took too much risk and deserved the losses. Makes me think society will cut this short and take the loss in lives stoically.
Title: Re: The day after tomorrow
Post by: Jurgis on March 21, 2020, 03:50:55 PM
A full lockdown is worse than a depression.

I think a lot of people have incorrect concept of "full lockdown".

I had questions about how the heck things work in a full lockdown in California. So I searched.
The list of "essential" businesses that are open is quite longer than you'd think.
In case you wonder if you can get strawberries: agriculture is not shut down.
In case you wonder if you can get anything from China: port of Long Beach is not shut down and railroads are likely not shut down either.
In case you wonder if you can get a loan, cash a check, or do a refi: banks are not shut down (though some might have limited staff in branch and/or shorter hours).
In case you wonder if you can get your appliances repaired or purchased: appliance repairs is essential business and not shut down; purchases might be more mixed bag. I just bought an appliance (but we are not in full lockdown as California is).

I'm not saying that "lockdown" is "just like a flu"  ;D. It is bad. But it's not 100% stoppage of economy either.

BTW, I find it really funny that with "lockdown" in effect, I can easily buy non-essential products like window blinds from China, but I cannot buy such essential product as US made toilet paper.  ::)
Title: Re: The day after tomorrow
Post by: Spekulatius on March 21, 2020, 05:08:14 PM
A full lockdown is worse than a depression.

I think a lot of people have incorrect concept of "full lockdown".

I had questions about how the heck things work in a full lockdown in California. So I searched.
The list of "essential" businesses that are open is quite longer than you'd think.
In case you wonder if you can get strawberries: agriculture is not shut down.
In case you wonder if you can get anything from China: port of Long Beach is not shut down and railroads are likely not shut down either.
In case you wonder if you can get a loan, cash a check, or do a refi: banks are not shut down (though some might have limited staff in branch and/or shorter hours).
In case you wonder if you can get your appliances repaired or purchased: appliance repairs is essential business and not shut down; purchases might be more mixed bag. I just bought an appliance (but we are not in full lockdown as California is).

I'm not saying that "lockdown" is "just like a flu"  ;D. It is bad. But it's not 100% stoppage of economy either.

BTW, I find it really funny that with "lockdown" in effect, I can easily buy non-essential products like window blinds from China, but I cannot buy such essential product as US made toilet paper.  ::)

A lot of business are considered essential, including the one I work for, since it supplies defense as well as some medical equipment companies. A lot of companies continue to operate, utilities operate, public services operate and lots of folks work from home. Even in a lockdown, most people are working every day and get a paycheck.
Title: Re: The day after tomorrow
Post by: samwise on March 21, 2020, 08:03:17 PM
A full lockdown is worse than a depression.

I think a lot of people have incorrect concept of "full lockdown".

I had questions about how the heck things work in a full lockdown in California. So I searched.
The list of "essential" businesses that are open is quite longer than you'd think.
In case you wonder if you can get strawberries: agriculture is not shut down.
In case you wonder if you can get anything from China: port of Long Beach is not shut down and railroads are likely not shut down either.
In case you wonder if you can get a loan, cash a check, or do a refi: banks are not shut down (though some might have limited staff in branch and/or shorter hours).
In case you wonder if you can get your appliances repaired or purchased: appliance repairs is essential business and not shut down; purchases might be more mixed bag. I just bought an appliance (but we are not in full lockdown as California is).

I'm not saying that "lockdown" is "just like a flu"  ;D. It is bad. But it's not 100% stoppage of economy either.

BTW, I find it really funny that with "lockdown" in effect, I can easily buy non-essential products like window blinds from China, but I cannot buy such essential product as US made toilet paper.  ::)

A lotmof business are considered essential, including the one I work for, since it supplies defense as well as some medical equipment companies. A lot of companies continue to operate, utilities operate, public services operate and lots of folks work from home. Even in a lockdown, most people are working every day and get a paycheck.

Thatís heartening to hear. But at 20% unemployment most people are still working, and itís twice as bad as 2008/9. Markets are worried about which companies can survive, and there is no idea how deep the recession will be. Perhaps since this is a self imposed pain, there is a limit on how much pain can be taken.

For reference the depression had 25% and GFC had 10% unemployment. One can hope whatever unemployment we get is temporary. But how deep will it be?  That will predict loan losses in banks consumer books and credit cards. If itís not too bad then I donít understand the pessimism in all lending stocks: banks, credit cards, KMX.

How about retail sales? Eyeballing the data series shows about 11% fall between December 2008 and 2009. Lots of unknown macro variables here in a novel situation.

Jurgis, thanks for explaining the lockdown. I had no idea how similar or not it was to Wuhan and Italy. How much of a hit to employment or sales would you estimate this causes?
Title: Re: The day after tomorrow
Post by: Jurgis on March 21, 2020, 09:46:25 PM
Thatís heartening to hear. But at 20% unemployment most people are still working, and itís twice as bad as 2008/9. Markets are worried about which companies can survive, and there is no idea how deep the recession will be. Perhaps since this is a self imposed pain, there is a limit on how much pain can be taken.

For reference the depression had 25% and GFC had 10% unemployment. One can hope whatever unemployment we get is temporary. But how deep will it be?  That will predict loan losses in banks consumer books and credit cards. If itís not too bad then I donít understand the pessimism in all lending stocks: banks, credit cards, KMX.

How about retail sales? Eyeballing the data series shows about 11% fall between December 2008 and 2009. Lots of unknown macro variables here in a novel situation.

Jurgis, thanks for explaining the lockdown. I had no idea how similar or not it was to Wuhan and Italy. How much of a hit to employment or sales would you estimate this causes?

I'm not a professional economist.  8)

Back of the napkin:
Retail https://www.bls.gov/iag/tgs/iag44-45.htm
15M labor force, let's say 7M unemployed.
Leisure and hospitality https://www.bls.gov/iag/tgs/iag70.htm
17M labor force, let's say 10M unemployed
That's about 17M unemployed.
Total US labor force is about 160M. So a bit above 10% unemployment.
I don't know if these assumptions are too draconian.
In other sectors it's likely people won't get fired even if company curtails operations. In retail a lot of people are hourly, so they are not really "fired" if they don't work.

Retail sales are likely to suffer higher drop than 11%. 20%+?

I might be totally off though.  ::) Don't rely on these estimates to make any decisions.  8)
Title: Re: The day after tomorrow
Post by: samwise on March 21, 2020, 10:03:09 PM
Thanks Jurgis. I wonít rely on those numbers. 🙂 they are quite bad, but hopefully temporary.

Here is another approach. This isnít an economic phenomenon which has to run its course, itís completely man made. So maybe we just need to measure the willingness to take this pain.

How much pain can the average American take? At what unemployment number over two months do Americans say enough, letís end this.
Title: Re: The day after tomorrow
Post by: Spekulatius on March 22, 2020, 03:51:12 AM
Thanks Jurgis. I wonít rely on those numbers. 🙂 they are quite bad, but hopefully temporary.

Here is another approach. This isnít an economic phenomenon which has to run its course, itís completely man made. So maybe we just need to measure the willingness to take this pain.

How much pain can the average American take? At what unemployment number over two months do Americans say enough, letís end this.

Economic problems are man made too. What allís these estimates donít take into account is cascading effects or reflexivity. If I had to  make a guess, the 20% lay-off number is closer to the truth than 10%. Who is going to buy a house, car, fund a startup or invest in new business opportunity in this pandemonium? Sure some will remain, but those somewhat decretionary things will be severely cut. The indirect cascading effects will at least as high than the direct effects. Thatís why it important to soften the blow to the economy.
Title: Re: The day after tomorrow
Post by: Cigarbutt on March 22, 2020, 05:50:35 AM
Thanks Jurgis. I wonít rely on those numbers. 🙂 they are quite bad, but hopefully temporary.

Here is another approach. This isnít an economic phenomenon which has to run its course, itís completely man made. So maybe we just need to measure the willingness to take this pain.

How much pain can the average American take? At what unemployment number over two months do Americans say enough, letís end this.

Economic problems are man made too. What allís these estimates donít take into account is cascading effects or reflexivity. If I had to  make a guess, the 20% lay-off number is closer to the truth than 10%. Who is going to buy a house, car, fund a startup or invest in new business opportunity in this pandemonium? Sure some will remain, but those somewhat decretionary things will be severely cut. The indirect cascading effects will at least as high than the direct effects. Thatís why it important to soften the blow to the economy.
Maybe this is irrelevant but I get this feeling that a lot of what the government has done in the last 20 years or so has been to soften the blow.
https://www.cbo.gov/system/files/2020-03/56165-CBO-debt-primer.pdf
I realize CBO documents are not exactly like a Netflix series but looking at page 6, graph S-1 requires about 5 seconds.
A word about the CBO:
-They are typically wrong in their forecasts (sometimes wildly so) and they typically underestimate shortfalls.
-Their outlook does not usually factor in recessions
-Their recent outlook report (March 2020) does not take into account recent health-related issues
Title: Re: The day after tomorrow
Post by: SharperDingaan on March 22, 2020, 07:42:10 AM
Most people are simply in denial. The unemployment numbers from this are so large, that folks just cannot imagine it.
There HAS to be a pill, or a vaccine that I can take - to escape this nightmare!

There are 45 auto-plants in the US. They, and their domestic supply chains, are now shut down. Every auto-plant supports roughly 7 other jobs in the economy. Of the 45 auto-plants, roughly half are owned by the Big-3, and employ about 150K employees. Hence, with this announcement - roughly 2.1 MILLION jobs, just hit the street (2x150Kx7=2.1M). Similar cascades around aircraft makers/airlines, oil/gas, travel, hospitality, and hotels - AND ALL IN THE SAME MONTH.

Manufacturers are converting to mask and ventilator production, because they desperately need the work.
https://www.cbc.ca/news/canada/windsor/ford-gm-covid19-close-factories-1.5501927
https://en.wikipedia.org/wiki/List_of_automotive_assembly_plants_in_the_United_States

That denial, is feeding US intolerance of social distancing for any length of time.
Public shaming, and police/military enforcement in a pressure cooker, is not going to go down well. Millions of angry people, with easy access to social media and internet, is not a happy combination - and they are going to blame somebody.

SD


 
Title: Re: The day after tomorrow
Post by: Jurgis on March 22, 2020, 09:07:21 AM
Most people are simply in denial. The unemployment numbers from this are so large, that folks just cannot imagine it.
There HAS to be a pill, or a vaccine that I can take - to escape this nightmare!

There are 45 auto-plants in the US. They, and their domestic supply chains, are now shut down. Every auto-plant supports roughly 7 other jobs in the economy. Of the 45 auto-plants, roughly half are owned by the Big-3, and employ about 150K employees. Hence, with this announcement - roughly 2.1 MILLION jobs, just hit the street (2x150Kx7=2.1M). Similar cascades around aircraft makers/airlines, oil/gas, travel, hospitality, and hotels - AND ALL IN THE SAME MONTH.

Manufacturers are converting to mask and ventilator production, because they desperately need the work.
https://www.cbc.ca/news/canada/windsor/ford-gm-covid19-close-factories-1.5501927
https://en.wikipedia.org/wiki/List_of_automotive_assembly_plants_in_the_United_States

That denial, is feeding US intolerance of social distancing for any length of time.
Public shaming, and police/military enforcement in a pressure cooker, is not going to go down well. Millions of angry people, with easy access to social media and internet, is not a happy combination - and they are going to blame somebody.

SD

SD,

I could not find info for all factories, but it seems that employees are being compensated during closure:
https://www.dallasnews.com/business/autos/2020/03/19/arlington-general-motors-plant-will-close-for-deep-cleaning-until-march-30-halting-production/
So, although it's a big economic impact to companies, it is not yet a big impact on jobs.
Clearly companies won't be able to keep paying employees if the factories are closed for extended period though.
It is also not clear if other companies in the supply chain pay their workers during closures too.
Title: Re: The day after tomorrow
Post by: SharperDingaan on March 22, 2020, 10:21:22 AM
Most people are simply in denial. The unemployment numbers from this are so large, that folks just cannot imagine it.
There HAS to be a pill, or a vaccine that I can take - to escape this nightmare!

There are 45 auto-plants in the US. They, and their domestic supply chains, are now shut down. Every auto-plant supports roughly 7 other jobs in the economy. Of the 45 auto-plants, roughly half are owned by the Big-3, and employ about 150K employees. Hence, with this announcement - roughly 2.1 MILLION jobs, just hit the street (2x150Kx7=2.1M). Similar cascades around aircraft makers/airlines, oil/gas, travel, hospitality, and hotels - AND ALL IN THE SAME MONTH.

Manufacturers are converting to mask and ventilator production, because they desperately need the work.
https://www.cbc.ca/news/canada/windsor/ford-gm-covid19-close-factories-1.5501927
https://en.wikipedia.org/wiki/List_of_automotive_assembly_plants_in_the_United_States

That denial, is feeding US intolerance of social distancing for any length of time.
Public shaming, and police/military enforcement in a pressure cooker, is not going to go down well. Millions of angry people, with easy access to social media and internet, is not a happy combination - and they are going to blame somebody.

SD

SD,

I could not find info for all factories, but it seems that employees are being compensated during closure:
https://www.dallasnews.com/business/autos/2020/03/19/arlington-general-motors-plant-will-close-for-deep-cleaning-until-march-30-halting-production/
So, although it's a big economic impact to companies, it is not yet a big impact on jobs.
Clearly companies won't be able to keep paying employees if the factories are closed for extended period though.
It is also not clear if other companies in the supply chain pay their workers during closures too.

Employees in the auto-plants and supply chains, are being compensated for WEEKS, not months. Vacation pay at 100%, 2-3 weeks at 50% of pay or less, then unemployment insurance. For most, maybe 4-8 weeks until unemployment insurance. If it takes longer ......

Wait staff typically earn 1/2 their pay from the employer, and 1/2 from tips. Most canadian unemployment insurance will replace 50% of employment income, but for wait staff that is a 75% cut in pay, effective immediately. The hundreds of thousands of servers no longer serving you - and leaving the major cities to return home to mom/dad, because they can no longer afford to live there.

SD

 
Title: Re: The day after tomorrow
Post by: Viking on March 22, 2020, 10:27:48 AM
Most people are simply in denial. The unemployment numbers from this are so large, that folks just cannot imagine it.
There HAS to be a pill, or a vaccine that I can take - to escape this nightmare!

There are 45 auto-plants in the US. They, and their domestic supply chains, are now shut down. Every auto-plant supports roughly 7 other jobs in the economy. Of the 45 auto-plants, roughly half are owned by the Big-3, and employ about 150K employees. Hence, with this announcement - roughly 2.1 MILLION jobs, just hit the street (2x150Kx7=2.1M). Similar cascades around aircraft makers/airlines, oil/gas, travel, hospitality, and hotels - AND ALL IN THE SAME MONTH.

Manufacturers are converting to mask and ventilator production, because they desperately need the work.
https://www.cbc.ca/news/canada/windsor/ford-gm-covid19-close-factories-1.5501927
https://en.wikipedia.org/wiki/List_of_automotive_assembly_plants_in_the_United_States

That denial, is feeding US intolerance of social distancing for any length of time.
Public shaming, and police/military enforcement in a pressure cooker, is not going to go down well. Millions of angry people, with easy access to social media and internet, is not a happy combination - and they are going to blame somebody.

SD

Agreed. How do you model something you have never experienced before? That is happening on a scale that has never happened before? Where you are completely unprepared? With no global coordination? Where you have incomplete or no information? Where 1/3 of the population thinks concerns over the virus are being overblown?

Letís hope someone comes up with a treatment quickly. This virus thing is about to get real in the rest of Europe and North America in about another week.
Title: Re: The day after tomorrow
Post by: no_free_lunch on March 22, 2020, 10:28:14 AM

The hundreds of thousands of servers no longer serving you - and leaving the major cities to return home to mom/dad, because they can no longer afford to live there.

SD

 

This is a good post.  It is not a theoretical, I have already seen it happen this past week.  Much of the population has no buffer at all, and the government's plans are completely inadequate for this situation.  Not a good time to be a landlord unless you can pass the pain on to the bank.
Title: Re: The day after tomorrow
Post by: samwise on March 22, 2020, 11:25:25 AM
FT posted some real time data points.

opentable shows restaurants bookings down 100% in uk, USA, Canada, Germany, Mexico, Ireland, but only down 50% in Australia.

Springboard (never heard of them before) shows retail footfalls have fallen 70% in USA and Italy on Mach 18, and 20% in uk, Sweden.

Cinema bookings shrank 2/3 in the March 15 weekend Y/Y. In most of  50 countries they track. Italy and China didnít report any data. Presumably because there was no data to report.

Us cinemas weekly take was less than half the take from a year ago.

Flightradar24 shows global flights down 20% in the week till March 21.

Tom Tom shows global rush hour traffic is down. London isnít down as much. Wuhan rush hour traffic hasnít recovered yet.

North Italy electricity consumption is down 15% March vs February, same day of the week. Maybe seasonal effects too.

Ft didnít say anything about unemployment. Google trends search on unemployment is back to 2009 levels, but previous research shows limited prediction power in this data. https://ideas.repec.org/p/rif/wpaper/35.html

Btw Italyís lockdown is quite severe. They just banned outside excercise (running,cycling). Staying inside is the healthier option. https://www.usnews.com/news/world/articles/2020-03-20/jogging-park-walks-banned-as-alarmed-italian-regions-impose-more-coronavirus-restrictions



Title: Re: The day after tomorrow
Post by: bergman104 on March 22, 2020, 11:28:06 AM
The anti-inflammatory drugs like chloroquine have only shown to be beneficial in a petri dish, not in large groups of people. No physician I know would actually prescribe chloroquine to their patient unless it was a hail mary.

Montefiore Medical Center in New York has already started seeing the surge of Covid-19 patients that public health experts have been warning about. The hospital is participating in the remdesivir trial and is giving Covid-19 patients chloroquine. ďAll of our patients get put on chloroquine, as well as on antiretrovirals. Weíre using Kaletra. Different places are using different antiretrovirals,Ē says Liise-anne Pirofski, chief of infectious diseases at Albert Einstein College of Medicine and Montefiore. ďEverybody gets that, unless they have some contraindication.Ē

I stand corrected. Apparently it is being prescribed everywhere now. I hope it makes a significant difference.

https://www.wired.com/story/an-old-malaria-drug-may-fight-covid-19-and-silicon-valleys-into-it/
Title: Re: The day after tomorrow
Post by: samwise on March 22, 2020, 11:59:01 AM
This isnít an economic phenomenon which has to run its course, itís completely man made. So maybe we just need to measure the willingness to take this pain.

How much pain can the average American take? At what unemployment number over two months do Americans say enough, letís end this.

Economic problems are man made too.

Agreed all human activity is man made. I should have been more exact. The last two recessions involved malinvestment which the economy had to work off. People and companies that did the malinvestment had to suffer losses.

I donít see any such cause now. If society decided to ďstay calm and carry onĒ as they did in wartime Britain in 1918, the economic losses would be much smaller, sharper, and more focused on travel and entertainment. The human losses would be large.

So the current pain is a choice. Thatís what I called man made, but of course there should be a better word.

Since itís a choice, there is a limit to how much people will tolerate.
Title: Re: The day after tomorrow
Post by: Schwab711 on March 22, 2020, 12:05:26 PM
There was a massive curtailment of economic activity everywhere the Spanish Flu went in 1918-1919. The only reason many businesses stayed open (generally with reduced split shifts to reduce the spread) was there was a simultaneous world war. We are doing almost all of the same things society did then.
Title: Re: The day after tomorrow
Post by: samwise on March 22, 2020, 05:00:29 PM
Schwab, I am not an expert on the events of 1918, but I based my opinion on these pieces.

1. The British decided to focus on keeping factories open to help with the war. With so many war deaths, they did not think a few more flu deaths mattered. https://www.telegraph.co.uk/health-fitness/body/coronavirus-spanish-flu-dark-history-keep-calm-carry-advice/

2. The St. Louis fed report does mention quarantines, and short term effects similar to today in some cities in the USA. In Little Rock, sales were estimated down 40%-70%. Grocery sales were down 33%. Memphis street railway had 124 employees sick out of 400 and had to curtail service. Tennessee mines were at 50% production and almost shut down because of the epidemic in mining camps. However the report says all the effects were short term and society recovered. https://www.stlouisfed.org/~/media/files/pdfs/community-development/research-reports/pandemic_flu_report.pdf

We can expect society to recover in either scenario, but that doesnít mean every business survives.

I already see citizens debating the economic costs, their sustainability and desirability. This debate has already started, replacing the earlier debate about ďitís just the fluĒ.


Title: Re: The day after tomorrow
Post by: Spekulatius on March 22, 2020, 05:59:11 PM
Schwab, I am not an expert on the events of 1918, but I based my opinion on these pieces.

1. The British decided to focus on keeping factories open to help with the war. With so many war deaths, they did not think a few more flu deaths mattered. https://www.telegraph.co.uk/health-fitness/body/coronavirus-spanish-flu-dark-history-keep-calm-carry-advice/

2. The St. Louis fed report does mention quarantines, and short term effects similar to today in some cities in the USA. In Little Rock, sales were estimated down 40%-70%. Grocery sales were down 33%. Memphis street railway had 124 employees sick out of 400 and had to curtail service. Tennessee mines were at 50% production and almost shut down because of the epidemic in mining camps. However the report says all the effects were short term and society recovered. https://www.stlouisfed.org/~/media/files/pdfs/community-development/research-reports/pandemic_flu_report.pdf

We can expect society to recover in either scenario, but that doesn’t mean every business survives.

I already see citizens debating the economic costs, their sustainability and desirability. This debate has already started, replacing the earlier debate about “it’s just the flu”.

I think the big difference to 1918 was that
A) WW1 was raging which was already an existential threat for combatants in Europe. As Bad as the Spanish flue was, it wasn’t an existential threat.
B) Equity Valuations were much lower. The economy in the US was booming at this time due to all the Production needs for war.

If we had a PE of let’s say 8x now, I would be a whole less worried about the stock market correction (even if it’s a pre crisis PE).
Title: Re: The day after tomorrow
Post by: samwise on March 22, 2020, 07:09:12 PM
Spek,

There are three effects here, and we seem to be talking about different ones.

1. Health effects of the virus on the population
2. Economic effects of the virus directly by sickness, death or precautions; indirectly by government quarantine etc.
3. Market reactions

I was talking about 2. If I can find which business will survive, I can try to buy those cheap. Of course they might get much cheaper for a few months or even years, because I donít have much hope about timing the market(3). As a whole I agree that the market is still not crazy cheap. Lots of companies are still at high PE.

1918 is not the best comparison as you pointed out, but itís the only somewhat similar case. If we accept that we canít figure out a worst case scenario for (2), then shouldnít we be buying just companies which could survive anything, like Japanese cash hoarders. That was my original question, how does one invest in a market like this?
Title: Re: The day after tomorrow
Post by: Cigarbutt on March 23, 2020, 04:56:36 AM
^The above exchanges are useful.
Samwise's perspective is also interesting.

As a relative neophyte, it seems that pandemics such as the CV situation should, in itself, be correlated with a V-shaped recovery, even if the inverted point of the "V" hurts.
Trying to make some sense out of this and using thinking along multiple angles, it's interesting to note that the effect the virus has on people is multi-factorial (anything can happen) but the critical variables associated with the severity of the disease are not related to the virus, they are related to the host. In compromised hosts, the virus, in a cascading effect, can cause damage and require supportive and resuscitation efforts and can even trigger the use of unproven (and potentially dangerous) therapies. I'm trying to see the implications for advanced economies and wonder if countries like China can survive, in its current form, in a new economic environment.

I've come across this recent study (from Italy). It describes the host profile risk factors.
https://www.epicentro.iss.it/coronavirus/bollettino/Report-COVID-2019_17_marzo-v2.pdf

I come to the conclusion, at this point, that the sentiment reaction to the virus is excessive but the appreciation of the hosts's weakness still hasn't been priced in. So what to do? In my case, uncharacteristically, the plan is to take a more measured approach to reinvestment.
Title: Re: The day after tomorrow
Post by: Spekulatius on March 23, 2020, 04:46:01 PM
Spek,

There are three effects here, and we seem to be talking about different ones.

1. Health effects of the virus on the population
2. Economic effects of the virus directly by sickness, death or precautions; indirectly by government quarantine etc.
3. Market reactions

I was talking about 2. If I can find which business will survive, I can try to buy those cheap. Of course they might get much cheaper for a few months or even years, because I donít have much hope about timing the market(3). As a whole I agree that the market is still not crazy cheap. Lots of companies are still at high PE.

1918 is not the best comparison as you pointed out, but itís the only somewhat similar case. If we accept that we canít figure out a worst case scenario for (2), then shouldnít we be buying just companies which could survive anything, like Japanese cash hoarders. That was my original question, how does one invest in a market like this?

Yes, this thread should be about the longer term economic effects of the epidemic. We have already enough discussions about the near term outlook in term of epidemiology in the Coronavirus thread.

Cigarbutt coined the term New deal 2.0 and I really like it. First of all it is consistent with the tremendous interventions from the government around the world that we are seeing and second it describes a fundamental paradigm shift that I believe we will have as a consequence of all this.

When this epidemic first got started, I regarded it as similar to the 9/11 recession because I thought it will be mostly related to travel and airline. This is clearly not the case any more, the consequences are not confined and most likely will affect every sector. So, the GFC Is a better comparisons at this point. I have no idea how, but I think we will see more government involvement and regulation and less free market. I could be wrong of course, but I see that as the likely course we are taking.
Title: Re: The day after tomorrow
Post by: samwise on March 23, 2020, 08:29:49 PM
Fed president Bullard talked about 30% unemployment today. And a 50% drop in GDP, next Q. We are not talking GFC here. This hasnít happened in WEBís career.

But I also think people are pulling numbers from hats. No one knows.no has seen this before or modelled it. The fed and government have no playbook.

He also proposed a 3 month holiday with the government paying you to stay home. If they force you to stay home, they should pay. Makes sense to me. ďThe US shouldnít lose companies or industries because of lack of support.Ē https://www.bloomberg.com/news/articles/2020-03-22/fed-s-bullard-says-u-s-jobless-rate-may-soar-to-30-in-2q


The fed is buying corporate debt and commercial paper. Should help all funding issues for larger companies and even municipalities.

Edit: you can call this new deal 2 or socialization of losses. But there isnít an ďinvisible hand of the marketĒ which will save us here. This needs coordinated social action. It is social. If you offered a lot of people free choice between a 0.01% chance of dying, and a 90% chance of bankruptcy, are you sure their choice would be the best for society as a whole? Might as well pay them to stay home, suspend the economy, make sure everyone survives economically. Maybe print a lot of money and have a one time inflation spike. Or some other solutions which I am sure smart people can think of.

If there is one hopeful thing in this whole affair it is this: the disease was identified in late December. It has not even been 90 days! And so many studies have been done on it from genetics, clinical treatments, vaccines, etc. The world as a whole (8 billion people) havenít learnt about anything this fast ever. Economists are late to the party, but maybe they can figure out some new things fast as well. Letís hope so.

Title: Re: The day after tomorrow
Post by: Spekulatius on March 24, 2020, 11:52:26 AM
(https://i.imgur.com/k494xWh.jpg)

I kind of wonder a bit of people are going to consider if they want to live in urban vs suburban environments in the future. Above is how my “ backyard” looks this morning. Looks pretty good to me, considering we have basically pandemonium going on outside. And I still live close enough to civilization to have a decently paid job (so far).
Title: Re: The day after tomorrow
Post by: Spekulatius on March 24, 2020, 11:53:24 AM
Fed president Bullard talked about 30% unemployment today. And a 50% drop in GDP, next Q. We are not talking GFC here. This hasnít happened in WEBís career.

But I also think people are pulling numbers from hats. No one knows.no has seen this before or modelled it. The fed and government have no playbook.

He also proposed a 3 month holiday with the government paying you to stay home. If they force you to stay home, they should pay. Makes sense to me. ďThe US shouldnít lose companies or industries because of lack of support.Ē https://www.bloomberg.com/news/articles/2020-03-22/fed-s-bullard-says-u-s-jobless-rate-may-soar-to-30-in-2q


The fed is buying corporate debt and commercial paper. Should help all funding issues for larger companies and even municipalities.

Edit: you can call this new deal 2 or socialization of losses. But there isnít an ďinvisible hand of the marketĒ which will save us here. This needs coordinated social action. It is social. If you offered a lot of people free choice between a 0.01% chance of dying, and a 90% chance of bankruptcy, are you sure their choice would be the best for society as a whole? Might as well pay them to stay home, suspend the economy, make sure everyone survives economically. Maybe print a lot of money and have a one time inflation spike. Or some other solutions which I am sure smart people can think of.

If there is one hopeful thing in this whole affair it is this: the disease was identified in late December. It has not even been 90 days! And so many studies have been done on it from genetics, clinical treatments, vaccines, etc. The world as a whole (8 billion people) havenít learnt about anything this fast ever. Economists are late to the party, but maybe they can figure out some new things fast as well. Letís hope so.

What you are describing is essentially the danish plan - a 3 month paid timeout for the economy.
Title: Re: The day after tomorrow
Post by: vinod1 on March 24, 2020, 12:23:02 PM
Spek,

There are three effects here, and we seem to be talking about different ones.

1. Health effects of the virus on the population
2. Economic effects of the virus directly by sickness, death or precautions; indirectly by government quarantine etc.
3. Market reactions

I was talking about 2. If I can find which business will survive, I can try to buy those cheap. Of course they might get much cheaper for a few months or even years, because I donít have much hope about timing the market(3). As a whole I agree that the market is still not crazy cheap. Lots of companies are still at high PE.

1918 is not the best comparison as you pointed out, but itís the only somewhat similar case. If we accept that we canít figure out a worst case scenario for (2), then shouldnít we be buying just companies which could survive anything, like Japanese cash hoarders. That was my original question, how does one invest in a market like this?

Yes, this thread should be about the longer term economic effects of the epidemic. We have already enough discussions about the near term outlook in term of epidemiology in the Coronavirus thread.

Cigarbutt coined the term New deal 2.0 and I really like it. First of all it is consistent with the tremendous interventions from the government around the world that we are seeing and second it describes a fundamental paradigm shift that I believe we will have as a consequence of all this.

When this epidemic first got started, I regarded it as similar to the 9/11 recession because I thought it will be mostly related to travel and airline. This is clearly not the case any more, the consequences are not confined and most likely will affect every sector. So, the GFC Is a better comparisons at this point. I have no idea how, but I think we will see more government involvement and regulation and less free market. I could be wrong of course, but I see that as the likely course we are taking.

Good points!

Although we had regulations and it kind of hindered bank profitability a little, it did not really change the competitive dynamics long term. Banks had severe restrictions and it reduced profitability but it reduced risk too, deserving a slightly higher multiples. So it might be on the whole a wash.

Did the New Deal really change or hinder company profitability in any way? I am not arguing, just asking. What do you see as likely impact on travel, recreation or health care?

Vinod
Title: Re: The day after tomorrow
Post by: John Hjorth on March 24, 2020, 01:43:11 PM
[picture omitted for avoiding dense quoting, John]

I kind of wonder a bit of people are going to consider if they want to live in urban vs suburban environments in the future. Above is how my ď backyardĒ looks this morning. Looks pretty good to me, considering we have basically pandemonium going on outside. And I still live close enough to civilization to have a decently paid job (so far).

That really looks wonderful, Spekulatius,

I hope you grant yourself at least some time every day to enjoy moments like that caught on the photo. Here in Denmark, it's now real spring, and I spend time in the garden every day, when weather permits. It's good for mental health in these times.
Title: Re: The day after tomorrow
Post by: Cigarbutt on March 25, 2020, 05:47:40 AM
Spek,
There are three effects here, and we seem to be talking about different ones.
1. Health effects of the virus on the population
2. Economic effects of the virus directly by sickness, death or precautions; indirectly by government quarantine etc.
3. Market reactions
I was talking about 2. If I can find which business will survive, I can try to buy those cheap. Of course they might get much cheaper for a few months or even years, because I donít have much hope about timing the market(3). As a whole I agree that the market is still not crazy cheap. Lots of companies are still at high PE.
1918 is not the best comparison as you pointed out, but itís the only somewhat similar case. If we accept that we canít figure out a worst case scenario for (2), then shouldnít we be buying just companies which could survive anything, like Japanese cash hoarders. That was my original question, how does one invest in a market like this?
Yes, this thread should be about the longer term economic effects of the epidemic. We have already enough discussions about the near term outlook in term of epidemiology in the Coronavirus thread.

...New deal 2.0 and I really like it. First of all it is consistent with the tremendous interventions from the government around the world that we are seeing and second it describes a fundamental paradigm shift that I believe we will have as a consequence of all this.
When this epidemic first got started, I regarded it as similar to the 9/11 recession because I thought it will be mostly related to travel and airline. This is clearly not the case any more, the consequences are not confined and most likely will affect every sector. So, the GFC Is a better comparisons at this point. I have no idea how, but I think we will see more government involvement and regulation and less free market. I could be wrong of course, but I see that as the likely course we are taking.
Good points!
Although we had regulations and it kind of hindered bank profitability a little, it did not really change the competitive dynamics long term. Banks had severe restrictions and it reduced profitability but it reduced risk too, deserving a slightly higher multiples. So it might be on the whole a wash.
Did the New Deal really change or hinder company profitability in any way? I am not arguing, just asking. What do you see as likely impact on travel, recreation or health care?
Vinod
I'm now enjoying my coffee with a beautiful view. Can I give it a shot?
It's possible that this was an accident waiting to happen and people may overestimate the short term impact as well as underestimate the mid to long term consequences. Many things can be true at once.
https://www.collaborativefund.com/blog/true-at-once/

As for the trigger (virus), scores (APACHE, SOFA) {as coincident indicators} have been used to 'predict' the outcome in ICU CV patients and people tend to forget, especially in the acute phase, that it's the leading indicators that led to the respirator. It's funny though because it's been shown (MIT etc) that, despite major clinical advances and sophistication as well as the introduction of AI adjuncts, it often comes down to gut instincts. The following is by one of the authors of This Time is Different and the thought process is coming from a certain angle but she depicts an interesting perspective of the trigger and suggests that we ain't seen nothing yet in terms of Fed and other whatever-it-takes contamination:
https://www.project-syndicate.org/commentary/covid19-crisis-has-no-economic-precedent-by-carmen-reinhart-2020-03

FWIW, I have a deep interest in history and will give the following opinion about the New Deal's impact on profitability. The New Deal was a series of mostly improvised, inconsistent and failed experiments that distracted the populace for the time it took to correct the excesses of the past. It's a period of time during which businesses were thought to be worth more dead than alive and when Mr. Benjamin Grossbaum Graham made court appearances to argue that stocks were undervalued. And the economy really took off only with WWII. And then we had thirty glorious years.

It just feels like hydroxychloroquine won't do the trick this time.
Just like a few years back, I've started to listen to a song that starts with the unspoken sound for whom the bell tolls and I intend to get through this and end up back in black.
Title: Re: The day after tomorrow
Post by: John Hjorth on March 25, 2020, 07:57:13 PM
...It just feels like hydroxychloroquine won't do the trick this time.
Just like a few years back, I've started to listen to a song that starts with the unspoken sound for whom the bell tolls and I intend to get through this and end up back in black.

I hear you, Cigarbutt,

Two days now with up market prices on stocks, for absolutely no reason. Helicopter money handed out in enormous amounts many places around the world. Here, around DKK 286 B [Denmarks 2019 GDP is around DKK 2,319 B]. I've never in my life seen anything like this. Respirator treatment [oxygen] to several kinds of businesses, most of them straight out dead by now, if not treated. Business owners on public welfare [subsidies to salaries & wages, if you don't layoff employeťs, subsidies to cover fixed costs for certain sectors & industries, if you have lost your turnover [!]] My inner picture of how my country is structured has collapsed like a house of cards. This is not QE X, - it's QEX.
Title: Re: The day after tomorrow
Post by: vinod1 on March 26, 2020, 11:37:38 AM
Spek,
There are three effects here, and we seem to be talking about different ones.
1. Health effects of the virus on the population
2. Economic effects of the virus directly by sickness, death or precautions; indirectly by government quarantine etc.
3. Market reactions
I was talking about 2. If I can find which business will survive, I can try to buy those cheap. Of course they might get much cheaper for a few months or even years, because I donít have much hope about timing the market(3). As a whole I agree that the market is still not crazy cheap. Lots of companies are still at high PE.
1918 is not the best comparison as you pointed out, but itís the only somewhat similar case. If we accept that we canít figure out a worst case scenario for (2), then shouldnít we be buying just companies which could survive anything, like Japanese cash hoarders. That was my original question, how does one invest in a market like this?
Yes, this thread should be about the longer term economic effects of the epidemic. We have already enough discussions about the near term outlook in term of epidemiology in the Coronavirus thread.

...New deal 2.0 and I really like it. First of all it is consistent with the tremendous interventions from the government around the world that we are seeing and second it describes a fundamental paradigm shift that I believe we will have as a consequence of all this.
When this epidemic first got started, I regarded it as similar to the 9/11 recession because I thought it will be mostly related to travel and airline. This is clearly not the case any more, the consequences are not confined and most likely will affect every sector. So, the GFC Is a better comparisons at this point. I have no idea how, but I think we will see more government involvement and regulation and less free market. I could be wrong of course, but I see that as the likely course we are taking.
Good points!
Although we had regulations and it kind of hindered bank profitability a little, it did not really change the competitive dynamics long term. Banks had severe restrictions and it reduced profitability but it reduced risk too, deserving a slightly higher multiples. So it might be on the whole a wash.
Did the New Deal really change or hinder company profitability in any way? I am not arguing, just asking. What do you see as likely impact on travel, recreation or health care?
Vinod
I'm now enjoying my coffee with a beautiful view. Can I give it a shot?
It's possible that this was an accident waiting to happen and people may overestimate the short term impact as well as underestimate the mid to long term consequences. Many things can be true at once.
https://www.collaborativefund.com/blog/true-at-once/

As for the trigger (virus), scores (APACHE, SOFA) {as coincident indicators} have been used to 'predict' the outcome in ICU CV patients and people tend to forget, especially in the acute phase, that it's the leading indicators that led to the respirator. It's funny though because it's been shown (MIT etc) that, despite major clinical advances and sophistication as well as the introduction of AI adjuncts, it often comes down to gut instincts. The following is by one of the authors of This Time is Different and the thought process is coming from a certain angle but she depicts an interesting perspective of the trigger and suggests that we ain't seen nothing yet in terms of Fed and other whatever-it-takes contamination:
https://www.project-syndicate.org/commentary/covid19-crisis-has-no-economic-precedent-by-carmen-reinhart-2020-03

FWIW, I have a deep interest in history and will give the following opinion about the New Deal's impact on profitability. The New Deal was a series of mostly improvised, inconsistent and failed experiments that distracted the populace for the time it took to correct the excesses of the past. It's a period of time during which businesses were thought to be worth more dead than alive and when Mr. Benjamin Grossbaum Graham made court appearances to argue that stocks were undervalued. And the economy really took off only with WWII. And then we had thirty glorious years.

It just feels like hydroxychloroquine won't do the trick this time.
Just like a few years back, I've started to listen to a song that starts with the unspoken sound for whom the bell tolls and I intend to get through this and end up back in black.

Thank you!
Title: Re: The day after tomorrow
Post by: Spekulatius on March 26, 2020, 02:06:37 PM

I'm now enjoying my coffee with a beautiful view. Can I give it a shot?
It's possible that this was an accident waiting to happen and people may overestimate the short term impact as well as underestimate the mid to long term consequences. Many things can be true at once.
https://www.collaborativefund.com/blog/true-at-once/

As for the trigger (virus), scores (APACHE, SOFA) {as coincident indicators} have been used to 'predict' the outcome in ICU CV patients and people tend to forget, especially in the acute phase, that it's the leading indicators that led to the respirator. It's funny though because it's been shown (MIT etc) that, despite major clinical advances and sophistication as well as the introduction of AI adjuncts, it often comes down to gut instincts. The following is by one of the authors of This Time is Different and the thought process is coming from a certain angle but she depicts an interesting perspective of the trigger and suggests that we ain't seen nothing yet in terms of Fed and other whatever-it-takes contamination:
https://www.project-syndicate.org/commentary/covid19-crisis-has-no-economic-precedent-by-carmen-reinhart-2020-03

FWIW, I have a deep interest in history and will give the following opinion about the New Deal's impact on profitability. The New Deal was a series of mostly improvised, inconsistent and failed experiments that distracted the populace for the time it took to correct the excesses of the past. It's a period of time during which businesses were thought to be worth more dead than alive and when Mr. Benjamin Grossbaum Graham made court appearances to argue that stocks were undervalued. And the economy really took off only with WWII. And then we had thirty glorious years.

It just feels like hydroxychloroquine won't do the trick this time.
Just like a few years back, I've started to listen to a song that starts with the unspoken sound for whom the bell tolls and I intend to get through this and end up back in black.

I have a hunch that Value investing in the truest Graham sense may make a comeback. The only place where you can do this now is Japanís, where you find companies trading for cash and often less than that. Perhaps there will be more markets where this is possible.

I know little about the new deal, probably should read up on this. One thing I know is that it lead to more regulation, laid the foundation for social security, but also lead to much higher taxes. It seems to me that over the long run, the higher taxes are a near certainty.

The experimental approach is interesting. Try things out on a limited scale, to see if they work, if they do go ahead, if not abandon. Seems to make sense to me, except whoever runs the administration looks stupid most of the time. But it seems to be better to cut losses than to keep doubling up, which tends to be what most governments have been doing the last few decades.

Title: Re: The day after tomorrow
Post by: Castanza on March 26, 2020, 02:27:16 PM

I'm now enjoying my coffee with a beautiful view. Can I give it a shot?
It's possible that this was an accident waiting to happen and people may overestimate the short term impact as well as underestimate the mid to long term consequences. Many things can be true at once.
https://www.collaborativefund.com/blog/true-at-once/

As for the trigger (virus), scores (APACHE, SOFA) {as coincident indicators} have been used to 'predict' the outcome in ICU CV patients and people tend to forget, especially in the acute phase, that it's the leading indicators that led to the respirator. It's funny though because it's been shown (MIT etc) that, despite major clinical advances and sophistication as well as the introduction of AI adjuncts, it often comes down to gut instincts. The following is by one of the authors of This Time is Different and the thought process is coming from a certain angle but she depicts an interesting perspective of the trigger and suggests that we ain't seen nothing yet in terms of Fed and other whatever-it-takes contamination:
https://www.project-syndicate.org/commentary/covid19-crisis-has-no-economic-precedent-by-carmen-reinhart-2020-03

FWIW, I have a deep interest in history and will give the following opinion about the New Deal's impact on profitability. The New Deal was a series of mostly improvised, inconsistent and failed experiments that distracted the populace for the time it took to correct the excesses of the past. It's a period of time during which businesses were thought to be worth more dead than alive and when Mr. Benjamin Grossbaum Graham made court appearances to argue that stocks were undervalued. And the economy really took off only with WWII. And then we had thirty glorious years.

It just feels like hydroxychloroquine won't do the trick this time.
Just like a few years back, I've started to listen to a song that starts with the unspoken sound for whom the bell tolls and I intend to get through this and end up back in black.

I have a hunch that Value investing in the truest Graham sense may make a comeback. The only place where you can do this now is Japan’s, where you find companies trading for cash and often less than that. Perhaps there will be more markets where this is possible.

I know little about the new deal, probably should read up on this. One thing I know is that it lead to more regulation, laid the foundation for social security, but also lead to much higher taxes. It seems to me that over the long run, the higher taxes are a near certainty.

The experimental approach is interesting. Try things out on a limited scale, to see if they work, if they do go ahead, if not abandon. Seems to make sense to me, except whoever runs the administration looks stupid most of the time. But it seems to be better to cut losses than to keep doubling up, which tends to be what most governments have been doing the last few decades.

Probably the best President we never had.

“Much of the social history of the Western world, over the past three decades, has been a history of replacing what worked with what sounded good.“
Thomas Sowell

“The welfare state is not really about the welfare of the masses. It is about the egos of the elites.”
Thomas Sowell

“The welfare state has always been judged by its good intentions, rather than its bad results.”
Thomas Sowell
Title: Re: The day after tomorrow
Post by: james22 on March 27, 2020, 08:03:58 AM
Longer-run economic consequences of pandemics

How do major pandemics affect economic activity in the medium to longer term? Is it consistent with what economic theory prescribes?

Since these are rare events, historical evidence over many centuries is required. We study rates of return on assets using a dataset stretching back to the 14th century, focusing on 12 major pandemics where more than 100,000 people died. In addition, we include major armed conflicts resulting in a similarly large death toll.

Significant macroeconomic after-effects of the pandemics persist for about 40 years, with real rates of return substantially depressed. In contrast, we find that wars have no such effect, indeed the opposite. This is consistent with the destruction of capital that happens in wars, but not in pandemics.

Using more sparse data, we find real wages somewhat elevated following pandemics. The findings are consistent with pandemics inducing labor scarcity and/or a shift to greater precautionary savings.


http://ssingh.ucdavis.edu/uploads/1/2/3/2/123250431/pandemics_jst_mar2020_.pdf
Title: Re: The day after tomorrow
Post by: LC on March 27, 2020, 08:14:23 AM
I have problems with that study and its conclusion.

Data sources for interest rates in the 1300s aside, they have 12 data points for a pandemic over a 700 year history. We have difficulty modelling losses with 20+ data points over a 100 year period.

Additionally, coronavirus deaths are at 25,000 - it wouldn't even classify as a pandemic per this author's threshold.

Finally, they claim that real interest rates are artificially depressed for 35-40 years post-pandemic? Well, take the HK or Asian flu, occuring in the late 50s/60s. Were rates artificially depressed in the 1980s as a result? I would argue no they were not.

Perhaps there is some effect of pandemics on short term rates; but to make claims about 30+ years in the future is pretty outlandish to me.
Title: Re: The day after tomorrow
Post by: james22 on March 27, 2020, 08:24:08 AM
Yeah, lots to quibble with.

Shouldn't expect labor scarcity since the demographic at risk is largely out of the workforce.

And a shift to greater precautionary savings? Many more examples of the market having a short memory.
Title: Re: The day after tomorrow
Post by: Spekulatius on March 28, 2020, 01:55:19 PM
Yeah, lots to quibble with.

Shouldn't expect labor scarcity since the demographic at risk is largely out of the workforce.

And a shift to greater precautionary savings? Many more examples of the market having a short memory.

Some mostly unrelated thought what might happen:

1) There will be an onslaught of lawsuits. Covid-19 infection at work - lawsuit. Restaurant (preferably a deep pocketed chain) has a Covid-19 infected worker who may infect people - lawsuit. US sues China?

2) Cheesecake Factory told landlords they that donít pay rent in April. Itís not that they canít pay, they just decided not too. Evict us, if you donít like it. unlikely that they will remain the only one. Just not paying your bill might become a national sport? Calvinball time?

3) Bankruptcy courts may get clogged up for a long time from the volume of cases. What happens if you declare bankruptcy and canít get  court date? Ií have no idea.

4) UKís credit rating just got downgraded from AA to AA-. What about hard hit countries like Italy or Spain? This is probably causing another debt crisis in Europe and elsewhere.
Is the US safe?

5) Even with the aid packet, I donít think the airlines will last a long time - they will run out of cash in a couple of month, due to operating leverage. how can they restart national flights with hotspots all over the place. NY and NJ quarantined? other hotspots will flare up? International flights are even worse.

6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector

7) President talk a out quarantining NY and NJ, what are the consequence of this. Are other states going to be closing borders too? I donít think this was ever done before - US becoming more like the EU?
Title: Re: The day after tomorrow
Post by: Castanza on March 28, 2020, 02:18:50 PM
Yeah, lots to quibble with.

Shouldn't expect labor scarcity since the demographic at risk is largely out of the workforce.

And a shift to greater precautionary savings? Many more examples of the market having a short memory.

Some mostly unrelated thought what might happen:

1) There will be an onslaught of lawsuits. Covid-19 infection at work - lawsuit. Restaurant (preferably a deep pocketed chain) has a Covid-19 infected worker who may infect people - lawsuit. US sues China?

2) Cheesecake Factory told landlords they that donít pay rent in April. Itís not that they canít pay, they just decided not too. Evict us, if you donít like it. unlikely that they will remain the only one. Just not paying your bill might become a national sport? Calvinball time?

3) Bankruptcy courts may get clogged up for a long time from the volume of cases. What happens if you declare bankruptcy and canít get  court date? Ií have no idea.

4) UKís credit rating just got downgraded from AA to AA-. What about hard hit countries like Italy or Spain? This is probably causing another debt crisis in Europe and elsewhere.
Is the US safe?

5) Even with the aid packet, I donít think the airlines will last a long time - they will run out of cash in a couple of month, due to operating leverage. how can they restart national flights with hotspots all over the place. NY and NJ quarantined? other hotspots will flare up? International flights are even worse.

6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector

7) President talk a out quarantining NY and NJ, what are the consequence of this. Are other states going to be closing borders too? I donít think this was ever done before - US becoming more like the EU?

Less than an hour after the stimulus bill was signed UAL said they wonít be able to pay workers past September....Simply amazing. This type of talk is coming from anyone and everyone big and small business. Just last night there was a lady who called in to the Joe Biden townhall and said she and her husband owned 3 bars and a spa in NYC. They needed cash to stay afloat. The kicker is she threw out the sympathy card that she was pregnant and quickly followed up with ďwe donít believe in loans, we believe in grants.Ē Most other callers said the same thing.

Point being, this could be interesting moving forward in terms of which group will be receiving more money and in which form.
Title: Re: The day after tomorrow
Post by: Viking on March 28, 2020, 02:26:25 PM
Yeah, lots to quibble with.

Shouldn't expect labor scarcity since the demographic at risk is largely out of the workforce.

And a shift to greater precautionary savings? Many more examples of the market having a short memory.

Some mostly unrelated thought what might happen:

1) There will be an onslaught of lawsuits. Covid-19 infection at work - lawsuit. Restaurant (preferably a deep pocketed chain) has a Covid-19 infected worker who may infect people - lawsuit. US sues China?

2) Cheesecake Factory told landlords they that donít pay rent in April. Itís not that they canít pay, they just decided not too. Evict us, if you donít like it. unlikely that they will remain the only one. Just not paying your bill might become a national sport? Calvinball time?

3) Bankruptcy courts may get clogged up for a long time from the volume of cases. What happens if you declare bankruptcy and canít get  court date? Ií have no idea.

4) UKís credit rating just got downgraded from AA to AA-. What about hard hit countries like Italy or Spain? This is probably causing another debt crisis in Europe and elsewhere.
Is the US safe?

5) Even with the aid packet, I donít think the airlines will last a long time - they will run out of cash in a couple of month, due to operating leverage. how can they restart national flights with hotspots all over the place. NY and NJ quarantined? other hotspots will flare up? International flights are even worse.

6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector

7) President talk a out quarantining NY and NJ, what are the consequence of this. Are other states going to be closing borders too? I donít think this was ever done before - US becoming more like the EU?

Less than an hour after the stimulus bill was signed UAL said they wonít be able to pay workers past September....Simply amazing. This type of talk is coming from anyone and everyone big and small business. Just last night there was a lady who called in to the Joe Biden townhall and said she and her husband owned 3 bars and a spa in NYC. They needed cash to stay afloat. The kicker is she threw out the sympathy card that she was pregnant and quickly followed up with ďwe donít believe in loans, we believe in grants.Ē Most other callers said the same thing.

Point being, this could be interesting moving forward in terms of which group will be receiving more money and in which form.

I start to get a few flickers of optimism and then i read this :-) We really are in uncharted waters. The next couple of months could make for some great reality TV.
Title: Re: The day after tomorrow
Post by: Spekulatius on March 28, 2020, 03:32:08 PM
Yeah, it seems that defaults become a sport or go viral so to speak. I am not sure what rabbit holes this leads us to, but it is certainly not bullish for banks.

The above are just things that I started to notice. Maybe itís something, maybe itís nothing. Most will play out over the long run. Near term, the Potus talk about quarantining NY makes it almost inevitable to do it, unless he walks this back immediately. That would be interesting.
Title: Re: The day after tomorrow
Post by: SharperDingaan on March 28, 2020, 03:58:04 PM
" 6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector"

It's not just the customers, it's also finding the additional service staff, and the re-start losses that those businesses will incur.
Everyone re-starting at once means pay up, or go without. Business is great for 2-weeks, and dies back 50% after the party.
Then ... another Covid-19 contraction shows up.

SD
Title: Re: The day after tomorrow
Post by: Castanza on March 28, 2020, 04:05:14 PM
" 6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector"

It's not just the customers, it's also finding the additional service staff, and the re-start losses that those businesses will incur.
Everyone re-starting at once means pay up, or go without. Business is great for 2-weeks, and dies back 50% after the party.
Then ... another Covid-19 contraction shows up.

SD

Could be supplier issues on the backend as well. Just because a restaurant is ready to open doesnít mean their special flour supplier will be up and running. Breweries could have issues with hops and other perishable supplies or possibly oversupply of beer and no bottle to put it in. Just a guess, but there will probably be 2nd and 3rd order supply chain issues at least for some amount of time.
Title: Re: The day after tomorrow
Post by: Spekulatius on March 28, 2020, 05:54:22 PM
Pretty good recording from Focused compound about economic expectations and impairments. In short, he beleived a 30% haircut for banks is justified for example. This one can also listened to as a podcast.
https://youtu.be/vytay56stf0 (https://youtu.be/vytay56stf0)
Title: Re: The day after tomorrow
Post by: Kaegi2011 on March 29, 2020, 07:14:39 PM
" 6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector"

It's not just the customers, it's also finding the additional service staff, and the re-start losses that those businesses will incur.
Everyone re-starting at once means pay up, or go without. Business is great for 2-weeks, and dies back 50% after the party.
Then ... another Covid-19 contraction shows up.

SD

I think this is exactly right.  Outside of a very assured restart in terms of the virus having no more impact, small business owners will be reluctant to restart / hire and go back to 100% prior to crisis.  I know most of people I know would not risk it if they think the risk is diminished but not gone as a consumer.  Also, while the past 2-3 weeks most restaurants were open for delivery / take out, a lot of them are starting to shut down due to risk to their workers / themselves. 
Title: Re: The day after tomorrow
Post by: Gamecock-YT on March 29, 2020, 07:52:00 PM
" 6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector"

It's not just the customers, it's also finding the additional service staff, and the re-start losses that those businesses will incur.
Everyone re-starting at once means pay up, or go without. Business is great for 2-weeks, and dies back 50% after the party.
Then ... another Covid-19 contraction shows up.

SD

I think this is exactly right.  Outside of a very assured restart in terms of the virus having no more impact, small business owners will be reluctant to restart / hire and go back to 100% prior to crisis.  I know most of people I know would not risk it if they think the risk is diminished but not gone as a consumer.  Also, while the past 2-3 weeks most restaurants were open for delivery / take out, a lot of them are starting to shut down due to risk to their workers / themselves.

Not to mention, they'll probably be regulated to 25 or 50% normal capacity to start. China has had issues getting people to come back to restaurants.

https://www.eater.com/2020/3/24/21191278/china-beijing-coronavirus-future-of-restaurants
Title: Re: The day after tomorrow
Post by: james22 on March 30, 2020, 12:44:46 AM
US sues China?

A bipartisan effort is underway outside of Congress to hold China accountable for what could be trillions of dollars worth of damage caused by their mishandling of the global coronavirus pandemic.

The Berman Law Group, a Miami-based law firm advised by the younger brother of former Vice President Joe Biden, filed a class-action lawsuit against the government of China on March 13.

On Monday, Berman partnered with a lobbying and public affairs firm that has deep connections to President Donald Trump in a move to forge a unified response against Chinaís government.

ďWe believe that this is not a Democratic issue or a Republican issue. This is an American issue,Ē Berman senior litigation strategist Jeremy Alters told the Daily Caller News Foundation.


https://dailycaller.com/2020/03/24/china-coronavirus-class-action-lawsuit/
Title: Re: The day after tomorrow
Post by: SharperDingaan on March 30, 2020, 05:59:36 AM
" 6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector"

It's not just the customers, it's also finding the additional service staff, and the re-start losses that those businesses will incur.
Everyone re-starting at once means pay up, or go without. Business is great for 2-weeks, and dies back 50% after the party.
Then ... another Covid-19 contraction shows up.

SD

Could be supplier issues on the backend as well. Just because a restaurant is ready to open doesnít mean their special flour supplier will be up and running. Breweries could have issues with hops and other perishable supplies or possibly oversupply of beer and no bottle to put it in. Just a guess, but there will probably be 2nd and 3rd order supply chain issues at least for some amount of time.

For the most part, brewers have been gassing (nitrogen), bagging, or converting their hops into iso-hops to preserve freshness. Bottle inventories were preserved by kegging remaining inventory versus bottling. The main issues on 're-start' will be lead-time and access to enough trucking to move the product - both heavily labour dependent.

A lot of small brewers are now making hand sanitizer (60% alcohol), operating at around 25-40% staff, and rotating staff through the hand packing and boxing lines. Net of subsidies, hourly pay remains at around 100%, but everyone shares fewer hours - including the salaried. Considered a 'good' solution in the current times.

Packaging suppliers/manufacturers are considered an essential service, and the creatives have been at work. At some breweries, every 1,000 th bottle of hand sanitizer comes in a commemorative 'limited edition' container. Every 100,000 th in a different pack again. Future collectors items!

SD

Title: Re: The day after tomorrow
Post by: Spekulatius on March 30, 2020, 04:59:33 PM
Mc Kinsey presentation , comprehensive, economic viewpoint:
https://www.mckinsey.com/~/media/mckinsey/business%20functions/risk/our%20insights/covid%2019%20implications%20for%20business/covid%2019%20march%2025/covid-19-facts-and-insights-march-25-v3.ashx (https://www.mckinsey.com/~/media/mckinsey/business%20functions/risk/our%20insights/covid%2019%20implications%20for%20business/covid%2019%20march%2025/covid-19-facts-and-insights-march-25-v3.ashx)