Author Topic: The day after tomorrow  (Read 16244 times)

SharperDingaan

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Re: The day after tomorrow
« Reply #20 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
« Last Edit: March 21, 2020, 10:44:07 AM by SharperDingaan »


Cigarbutt

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Re: The day after tomorrow
« Reply #21 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...

roark33

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Re: The day after tomorrow
« Reply #22 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.

TwoCitiesCapital

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Re: The day after tomorrow
« Reply #23 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.

rb

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Re: The day after tomorrow
« Reply #24 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.

samwise

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Re: The day after tomorrow
« Reply #25 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.

Jurgis

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Re: The day after tomorrow
« Reply #26 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.  ::)
« Last Edit: March 21, 2020, 03:59:33 PM by Jurgis »
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Spekulatius

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Re: The day after tomorrow
« Reply #27 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.
« Last Edit: March 21, 2020, 08:13:51 PM by Spekulatius »
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samwise

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Re: The day after tomorrow
« Reply #28 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?

Jurgis

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Re: The day after tomorrow
« Reply #29 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)
"Human civilization? It might be a good idea." - Not Gandhi
"Before you can be rich, you must be poor." - Nef Anyo
"Money is an illusion" - Not Karl Marx
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"American History X", "Milk", "The Insider", "Dirty Money", "LBJ"