I study macro economics and have friends at the ground level that are more knowledgeable than me. I can tell you this, there is more pain to come in the next few months. This is the first time we have a supply shock and a demand shock. Coronavirus is the trigger but not the venom. Its all related to the Federal Reserve and their easing program over the last decades has brought forth this crash. The economy is not well from the start, there is so much debt that if companies that can't cash flow for a few months start going bankrupt, this is a red flag. Over the years, the state pension funds have been buying company stocks because of low yield environment, they can only find yield by the stock price going up. About 70% of the funds are funded, rest are unfunded. Since 2008, the baby boomers are out of savings and the majority of the buying came from pension funds/401k for the S&P. Since baby boomers are no longer buying the market, millenniums are dealing with student loans, the last source of money come from pension funds(baby boomer's 401k). What the pension funds are buying are high yield corporate bonds(very risky). The BBB rated bonds would be considered junk bonds in the 80s. This includes AT&T, GE, and Ford. The rating agencies have lowered their standards again and rated these junk bonds triple BBBs. Additionally, due to low interest rates, companies have been taking out debt to buyback their own stocks, further pushing the price up. Hell, even foreign governments bought US stocks now, further blowing up this bubble. When you hear Sweden government being the top 10 holder of Apple stock, run. US shale energy companies have over-leveraged themselves this time around. Their break-even is around $40 a barrel. But the amount of investments/debt they owe creating all this infrastructure out weight the pros. They have been pumping so much oil that they now have to think about storing them. There will be many shale bankruptcies incoming. China is plateauing in panic selling, means they are at peak fear right now. Recovery seems to be coming for China, both on a stock market perspective and air pollution data. US has yet to experience peak fear. US is ill prepared for this and the fear should last longer. Here is a podcast from a woman who is in Italy atm: https://youtu.be/CVLS8opmRGo The federal reserve has opened a new monthly repo market, on top of obligations to the over night repo market. For those who don't know what a repo market is, its basically a place where banks go to loan money to other banks. Essentially meaning banks are illiquid. As a result, the fed has injected 1.5 trillion dollars in ONE DAY! They also stated that this is now permanent. To put this in perspective, the repo market was once smaller, about 10 billion of liquidity was passed around. Now with the fed, its over 170+ billion per day. The fed has also allowed the purchases of 30 yr treasuries similar to 2008 crisis. Treasuries are used to fund the government spending. There was a sell off of the T-bills/bonds on Friday. During a crisis, the first phase that occurs is a liquidity crisis. Companies need to find cash to cover their losses, therefore, they sell their positions on anything that was profitability, no matter how good it is. This includes T-Bills/bonds and that is what happened on Friday. This is mainly to help the hedge funds that manage the pension funds. Since a lot of the population has moved into passive investing, you see these large drops per day, straight lines, these are the hedge funds managing the pension funds just unloading buckets of stocks. When you have selling of T bonds, there will be less demand for the government to issue new T-bonds compared to the already existing ones, especially in a liquidity crisis. With the announcement of Trump saying interest payments will be halted temporary, will further cause issues as yields are already low. I do believe this will end up being permanent. Other countries are devaluing their currencies, as a result, gold is now all time highs in respect to their currencies in 100+ countries. Many countries have their debt denominated in US dollars. So demand for dollars is high, this puts pressure on the dollar because in order for the US to pay their debts, they need to devalue via. inflation. Deflation would make debt worth more in value terms, Greenspan, Powell and Ben Bernanke all agree to inflate. Therefore, the country that doesn't have the ability to print dollars will be under tremendous amount of pressure. Oil producing nations will scrabble to sell their oil, since it is required to sell oil in US dollars, further, pushing the oil price down. The problem I am very worried about is when the countries learn from their mistakes and diversity themselves from the US dollars. That can take another decade but all those demand of US dollars will then flood back into the domestic economy. Right now, more than 60% of dollar demand is outside of the US, imagine when this no longer exists. In the 1980s, it was around 15-30%. Dollar crash incoming. Overall, the dependency on cheap money printing is overdosing the economy. Japan has done the same, even going as far as buying the market outright. The one play that was profitable to do was to buy gold. We are on a trend where there would be no point on collecting taxes, paying interest on loans and crony capitalism turns into full on socialism. What is the point of companies even trying to be competitive with one another when everyone gets bailed out no matter what they do. RIP america. Like Mario Draghi, the fed has taken a stance on "Whatever it takes". This will ultimately lead to inflation. Inflation is a tax on the savers, its bad for the average american that do not own assets. But with any crisis, the fed will keep pulling a rabbit out of their hat. Most likely they will use the federal reserve discount window. Think of it as the walk of shame for banks. When you see more activity here, we are fucked. Hope you learned something. #stock #gtfo 4/3/2020 Update: The Fed has opened a new international repo market Thursday, last week. They are again expanding their T-bill buying spree to keep the interest rates low but this time for the entire world. There was a large spike in T-bill interest rates, meaning people were selling. Since no one is buying, the Fed stepped in to buy, allowing the government the ability to issue newer T-bills at the artificial rate. It is obvious, both entities are working together when they are not suppose to be, based on the Constitution. The Fed has been doing swap lines between other international central banks to keep the liquidity flowing. Jobless claims are on pace to break all records, even the great depression, if this continues!
🍿
Okay so this all makes sense for the “corno-virus” but could you tell us about how the coronavirus will affect the market?
Think of the virus as a way to cut off the cash flow on companies for a couple of months. When companies can't pay interest on their debt, they crash. Banks then start failing again and a run to the Fed for safety occurs. Past recessions, there were 50-60% correction on S&P. I believe we have more to go, maybe even a 70% correction this time. If we don't correct to those levels, we will instead see consumer price inflation.
I was just meme-ing you because you typo’d coronavirus. Save it nerd.
I didn't read any of this, but wtf is your TC
The clueless investor will become further clueless after reading this.
All he is trying to say is: “we are fucked” 😀
Think about all the LC mediums op could have solved with the time he wasted typing this rant up
If done my fair share of LC. 300+
You the man!
1. Chinese stock market is not really recovering. It's a phony recovery due to Bank of a China buying up assets through QE. 2. Fed did not inject $1.5T in one day. Injections were $500B each day over three days, totaling $1.5T. This is due to the freeze up in the corporate bond markets where there was no investment grade bond issuance for over a week. Rest is accurate. Especially the fact about pension funds being underfunded. A lot of them will go belly up when the corporate credit market falters. A lot of pension funds bought high yield corporate bonds for their yields. All this will happen before 2025. Glad to see someone who follows the market as much as I do and is aware of the "Fed" put and massive incoming inflation.
1. My data just suggests they are recovering. Factory production has started back up. 2. 500B in 3 month repo. 500B in 1 month repo. 175B daily repo and another 45B in 2 week repo. 60B in T-bills.
Production hasn't started back up at all. The Chinese factory owners are just running machines that make sounds to make it look like the factories are running. So the Chinese govt does not knock on their door as to why they haven't opened shop yet. But inside those factories, there are no workers.
Someone provide TLDR please?
TLDR; The economy is headed towards a massive economic depression.
Thank you.
You need to get laid
OPs post was one of the best posts I have seen lately on blind. There was far more knowledge here than the usual shitpost. You really should feel ashamed spewing out such nonsense, internet troll
Balcksheep needs to get laid. -studies macroeconomics too