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Invisibledeadwk
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26563371 - 03/28/20 02:29 PM (3 years, 9 months ago)

@Ahab:

Thanks for the response, that seems like a pretty good analysis about the current state of things :thumbup: Really hope there's some change though, otherwise it seems like we'll be having a lot more of these cycles from 2008/2009 -> 2020 in terms of financial crises, periods of prosperity afterwards, followed by more crashes. I really don't see how economies can continue down this path without spelling doom for civilisation as we know it.


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: deadwk] * 2
    #26563518 - 03/28/20 03:33 PM (3 years, 9 months ago)

I recently got turned on to this guy nassim nicholas taleb. He was an option and future trader in the 1987 crash and he's a bit of philosphical type and has written several books. He has a lot of good points about how markets and government are inherently fragile and banks have been consistently bailed out since the early 1980s. So there isn't really any good reason for them not to take excess risk, because any systemically important institution will be bailed out to preserve the fragility of the system.

He argues that the only sensible thing would be to do is to nationalize institutions that are systemically important, or let businesses fail. Otherwise you end up in this continual moral hazard where there is no escape.



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InvisibleAsante
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26563777 - 03/28/20 05:28 PM (3 years, 9 months ago)

Quote:

Ahab McBathsalts said:
the only sensible thing would be to do is to nationalize institutions that are systemically important








Agreed. :asianofapproval:


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Asante]
    #26563954 - 03/28/20 06:50 PM (3 years, 9 months ago)

It takes a lot of political balls to let huge swaths of industry fail.

Taleb also has the saying "it isn't what doesn't kill me makes me stronger, it's what kills my enemies makes me stronger" When you can allow weak parts of a system to occasionally fail the entire system becomes more resilliant and less fragile.

We've been propping up weak businesses for so long that the system is inherently fragile.

Capitalism where industry gets all the reward, but can unload all of the risk to the tax payer isn't really a viable long term solution, nor did anyone ever intend to let it become that way.


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26566104 - 03/29/20 09:43 PM (3 years, 9 months ago)

Maybe Asante you can chime in, but do you think the current crisis could bleed out into the Euro zone and cause the long term viability of the Euro as a currency to be dropped?

It certainly looks like there are some articles on the issue, but I'm not sure what the prevailing sentiment is over there. Thanks.


https://www.express.co.uk/news/world/1259031/coronavirus-news-italy-cases-deaths-eu-italexit-gdp-recession-spt

I just don't see countries will not be able to print their way out of this situation.


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OfflineSempeur
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26566128 - 03/29/20 10:16 PM (3 years, 9 months ago)

Quote:

Ahab McBathsalts said:
It takes a lot of political balls to let huge swaths of industry fail.

Taleb also has the saying "it isn't what doesn't kill me makes me stronger, it's what kills my enemies makes me stronger" When you can allow weak parts of a system to occasionally fail the entire system becomes more resilliant and less fragile.

We've been propping up weak businesses for so long that the system is inherently fragile.

Capitalism where industry gets all the reward, but can unload all of the risk to the tax payer isn't really a viable long term solution, nor did anyone ever intend to let it become that way.




It takes balls to let things fail, but the longer we wait the more bitter the medicine.

I agree that allowing so called "zombie" businesses to die will increase the overall resiliency of the economy as a whole, but a big problem with this is the shortsightedness of the people voting our governments in. If a healthy system is ever expected to return, there will definitely be a rough patch between now and then. Whatever ruling party is in at the time will be the villain who allowed businesses to fail and the economy to tumble. If this system is to be changed from within, we'd need a party to fall on its' sword and gamble with its' long term ability to be elected (or even exist).

Another issue with letting businesses fail is the weak state of antitrust laws in a lot of Western countries. Lots of IP/R&D goes up for sale when companies get sold off for parts, I could see the Amazons of the world monopolizing industries pretty quickly if all of their competition is suddenly available for purchase.

Privatized profits and socialized losses is tough to swallow, is there a way to bail companies out while ensuring a change in their behavior? I don't think so. But the "Moral Hazard" of doing things like this has been made a little more on the nose during this crisis compared to 2008. At least propping up the banks kept things functioning, but when mismanaged companies like Boeing get bailed out (while you and I are expected to keep a 3-6mo emergency fund for occasions such as this), people start to notice.


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InvisibleAsante
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26566738 - 03/30/20 08:25 AM (3 years, 9 months ago)

The ECB is no doubt, like The Fed, going to resort to printing money out the wazoo to deal with this.

Many people are unhappy about the Euro but the support base is solid.

My personal sentiment is the the US, and the $ will be worse off, so I expect the Euro to rise in value compared to the dollar in some time.

People worldwide have had it that the dollar is the reserve currency, and so that they too bear Americas burden in the lavish spending of its government.

Problem has always been: if you got out of the dollar, bam, you got bombed.

Now America is:

1) printing an openended QE
2) plans to buy up world oil reserves with it
3) is becoming increasingly unfit for war due to COVID.

A recipy for the outside world pulling out of the dollar.

The long hypothesized fall of the dollar, I do believe its coming.


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Asante]
    #26568819 - 03/31/20 10:50 AM (3 years, 9 months ago)

I haven't heard a single mainstream pundit or article even say that there could be a depression from this.

I'm beginning to believe that it is possible.

Extremely high unemployment, lack of stability with prices. Bank failures.

The virus scare could last a full year. Last I read the S&P was priced in for a 1.5 month shut down. It is way under what could happen. I'm still buying puts on banks even with how high IV is, but I should switch to spreads.


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OfflinegeokillsA
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26568893 - 03/31/20 11:34 AM (3 years, 9 months ago)

Quote:

I'm still buying puts on banks even with how high IV is, but I should switch to spreads.




Yeah, IV is so high that unless you're selling, options are a pretty big risk right now.  I've been swinging intraday moves via SPXS and SPXL, leveraged S&P funds.  Taking a little ride on SPXS on its move above the volume weighted average price today, although it's been a bit of a grind.  Stop is above my break-even at this point, so I can't complain.

On a more general note, I think the potential for a depression is there, but everything is so variable right now that I couldn't really bank on that assumption.  Congress is likely to continue pumping out more stimulus as this drags on, which is a whole other problem, but it could conceivably allow the economy an easier path to recovery once virus related restrictions are lifted, which equities are likely to benefit disproportionately from, seeing as there is no yield available anywhere else these days.


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OfflineTripsurfer
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: geokills] * 1
    #26569023 - 03/31/20 12:31 PM (3 years, 9 months ago)

European financial instititions are putting out warnings for a massive recession

Our lockdown has just been extended to the end of April


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Tripsurfer]
    #26578343 - 04/04/20 11:18 PM (3 years, 9 months ago)




I heard a great interview with El-Erian a favorite economist of mine. He was saying that instead of thinking this economic "sudden stop" as a pause and we will be able to press play afterwards, you have to think of it as a major interruption that a developing economy experiences sometimes. Like the fall of the Berlin Wall, The collapse of the Soviet Union, The Cuban Revolution, The latin American Debt Crisis, The Yugoslavian war.

If leaders are declaring a "war" against the virus, you almost have to assume that a "war-like" major economic interruptions will occur.


Kind of an interesting thought.


I'm still torn as to if deflation or hyper-inflation will be the ultimate result. I think deflation will occur in the immediate term. Mortgages will default, there will be debt crisises and many companies will go bankrupt and there will be high unemployment, but I'm not sure if the rapid devaluation of dollars and currencies will lead to hyper-inflation in areas.

If the Great recession was monetary policy threading a needle to get it right, the virus crisis will be landing a man on the moon.


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts] * 1
    #26592519 - 04/11/20 01:13 AM (3 years, 9 months ago)

https://www.vox.com/2020/4/10/21215494/coronavirus-plans-social-distancing-economy-recession-depression-unemployment

This Vox article has some pretty likely scenarios for how the economy will restart, I believe.

Quote:

The CAP and Harvard plans both foresee a digital pandemic surveillance state in which virtually every American downloads an app to their phone that geotracks their movements, so if they come into contact with anyone who later is found to have Covid-19, they can be alerted and a period of social quarantine can begin. Similarly, people would scan QR codes when boarding mass transit or entering other high-risk public areas. And GPS tracking could be used to enforce quarantine on those who test positive with the disease, as is being done in Taiwan.

To state the obvious: The technological and political obstacles are massive. While similar efforts have borne fruit in Singapore and South Korea, the US is a very different country, with a more mistrustful, individualistic culture. Already, polling shows that 70 percent of Republicans, and 46 percent of Democrats, strongly oppose using cellphone data to enforce quarantine orders.




Quote:

he alternative to mass surveillance is mass testing. Romer’s proposal is to deploy testing on a scale no one else is contemplating — 22 million tests per day — so that the entire country is being tested every 14 days, and anyone who tests positive can be quickly quarantined. He shows, in a series of useful simulations, that even if the test has a high false-negative rate, the retesting is sufficient to keep the virus contained, and thus the country can return to normalcy rapidly. Of the various plans, this one seems likeliest to permit a true and rapid economic recovery.





So both choices are politically tough, expensive and require massive planning and execution. I fear that failing to decide which approach to take will be in itself the 3rd choice and it will be rolling waves of spread, mass shut downs and an economic stop for 18 months until a vaccine is developed and deployed widespread. The USA has already spent 25% of GDP on stimulus this month. If the government fails to form a cogent plan, you might as well nationalize all private industry and deal with the rampant hyperflation because the economy will be so fucked it won't really matter.


I've been thinking today that as people can't pay mortgages, or landlords can't pay mortgages or property taxes it would be better for the government to take an equity stake in the property at a reduced price. Like 30% less than assessed would be a market floor that the government could come in and buy a building or a share of the building and then rent it back to you. It would be shitty to lose your house, but you wouldn't lose your place to live, the government could put in some buy-back provision and it would keep people out of the streets. But like it is straight up losing your property to the state.
At least it sets a floor for how low property prices can go. In the long term the government would own a fuck ton of houses and make money on the deal. Everyone that has like 3 airBnBs and are overleveraged to the tits can get rid of their properties quickly without a long bankruptcy and it helps the housing crisis in unaffordable markets. But it is the state seizing private property because of the failure of private markets, so I don't think that would go over too well.

Longer term I think you see quite a barbell range of outcomes where things are pretty severe and outcomes are not distributed uniformly, but bunched up in the extremes. I don't think it is out of the question for some countries to nationalize huge chunks of industry and housing as a form of bailout while providing a universal basic income for many months. Alternatively you could see huge swaths of industry fail, extreme price instability in goods, deflationary forces and economic depression. Because not all countries will have the same approach there could be massive swings in currency markets as different countries devalue their currency at different rate, but I believe the Euro will suffer greatly because of the common currency and range of policy decisions.

On an optimistic note, I read that a hard-hit town in Germany did some mass testing and found that about 15% had been infected and we might well be much closer to herd immunity than anyone had previously thought and the death rate might be as low as 0.37 percent.
https://www.express.co.uk/news/world/1267405/coronavirus-herd-immunity-europe-death-toll-covid-19-germany-angela-merkel

The fourth option would be to generally wait until the health system for hard hit areas are not grossly overwhelmed and open up the economy again. Yes many people will die and seniors and high risk groups will generally stay inside for the next 18 months, but you take the ~18 million deaths globally and just go with it. That will largely be the approach that poorer countries with bad infrastructure will need to take. Their death rate will be considerably higher, but they don't have have the luxury of the other approaches.

Only time will tell.


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InvisibleAsante
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Asante]
    #27102003 - 12/22/20 04:53 AM (3 years, 1 month ago)

Well Played, puppeteers of the government.

1) a president who does fuck all about COVID so it spreads like wildfire - because hes a republican.

2) a president who will overspend towards the big corporations to fight COVID - because he's a democrat.

Spit roasted like a rotisserie chicken between Trump and Biden.





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