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InvisibleAsante
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The Economic and Investment Consequences of the COVID-19 Coronavirus
    #26509387 - 02/29/20 08:21 AM (3 years, 10 months ago)

Covid-19 Coronavirus has increasingly important medical and social impact which we document in a designated sticky Pub thread.

How bad the virus is or isnt or the human consequences, thats not what this thread is about, let's leave that to the Pub thread.

This thread is about the economic and investment consequences of COVID-19.

700 million Chinese are quarantined.

Manufacturing areas are shut down.

Ports are shut down.

There will be a Supply Shock.

People are selling, buying, to roll with this

Cryptos, Stocks, Precious Metals!

Let us discuss the Economic and Investment risks and opportunities that arise from this, because every event that tilts the table to any side has investment opportunities as well as investment nightmares.

Let's discuss the Economy and Investment consequences of COVID-19.


:biohazard:


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OfflinegeokillsA
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Asante] * 1
    #26509581 - 02/29/20 10:34 AM (3 years, 10 months ago)

As I noted over in the STOCKS thread:
Quote:

I cannot hold any confidence in medium to longer term trades, as the vast majority of businesses have some relation to China (either buying products made there or selling products there), so the collapse in that economy will be fairly devastating to global economic activity.  It is simply not knowable at this point when China will normalize, or whether the rest of the world, or to what extent, will experience similar disruptions as (in my opinion) futile attempts to contain SARS-CoV-2 are implemented.




In so far as the domestic US markets are concerned, sentiment readings were stretched rather far to the downside Friday, which would typically portend some sort of relief rally next week.  However, any positions should be initiated under a short-term "reversion to the mean" thesis, as the economic disruption derived from this event is fluid and not currently quantifiable.

There are a number of spec plays on the virus, such as Moderna (MRNA), a biotech working on a vaccine, and Lakeland (LAKE), a international protective clothing provider.  Secondary plays such as Netflix (NFLX) have been holding up well, as in the event of continued outbreaks, people will tend to hole up at home.  Clorox (CLX) is another company that stands to benefit from their lineup of disinfectant products.  Zoom Video (ZM) may benefit if more people are mandated to work remotely instead of coming into an office.  Teladoc Health (TDOC) could also benefit as concerned people flock to the platform to ask questions from the comfort of their own homes.  Airline stocks in particular, and other travel industry stocks like Bookings Holdings (BKNG) and Marriot (MAR) are likely to feel some of the most pain from this event as people scale back from both work and pleasure related travel.

Most industries will be affected in some way, as supply chains are very much global, which is why the smart trade right now is to preserve capital until more clarity is gleaned.  Big money is hiding out in treasuries, driving yields to ever lower levels.  Central banks such as the Federal Reserve may attempt to support markets through rate cuts, which could lead to some quick rallies that I suspect to be short-lived, as while it can provide additional liquidity, it won't really do anything to address the fundamental economic effects of the containment effort.  Without clarity, the markets will remain volatile with a downside bias.  And at this stage, clarity is not something you're going to find, even as the talking heads in the media are constantly trying to sell it to you.  In big events like these, it usually pays to be patient and conservative.  There will undoubtedly be great opportunities for active traders, but if you don't have experience doing that, I wouldn't recommend starting here.


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: geokills]
    #26510208 - 02/29/20 06:48 PM (3 years, 10 months ago)

I have spent a lot of time thinking about this, but within 6 months there will be a vaccine and many things will bounce off the lows when it gets announced.



Still, airlines, cruise ships, hotels, chemical manufacturing, railways, oil markets are all affected and probably a bunch of other things too.


El-erian is saying that credit markets will freeze up, and I can see it. If your debt servicing is based on full year revenue and your revenue gets slashed in half you start bleeding cash. I could see this sinking a lot of US frackers.


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26510216 - 02/29/20 06:53 PM (3 years, 10 months ago)

Personally, I work for a global manufacturer of heavy equipment with global supply chains for parts. Fuck, like I got a foreign work visa that is all drafted up and ready to send out and to go for my interview at the embassy or whatever. I'm fully expecting a lay off for a few months once we run out of Chinese and Spanish components. It's probably still a few months out, but supply chains have been slimmed down to "just-in-time" for almost everything.


Fast-fashion might also suffer greatly once it spreads to the textile industry countries in Asia. That instance is probably way worse for the workers than society as a whole, but it's extremely far reaching. It will be on par with the Oil Crisis in the 70s.


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InvisibleAsante
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts] * 1
    #26510764 - 03/01/20 04:27 AM (3 years, 10 months ago)

Air pollution in China has decreased sharphly as COVID qyarantine ground production to a halt:



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OfflineSempeur
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26511108 - 03/01/20 09:42 AM (3 years, 10 months ago)

Quote:

Ahab McBathsalts said:
Personally, I work for a global manufacturer of heavy equipment with global supply chains for parts. Fuck, like I got a foreign work visa that is all drafted up and ready to send out and to go for my interview at the embassy or whatever. I'm fully expecting a lay off for a few months once we run out of Chinese and Spanish components. It's probably still a few months out, but supply chains have been slimmed down to "just-in-time" for almost everything.




This is what I'm more curious about. With corporate debt being as high as it is, can companies survive a shock to their supply chains and still service their debt payments? Bad debt in the business sector has been a major concern for a couple years now.

Many of the problematic loans (20%) are due for repayment by the end of 2020 as well. We may see a thinning of the herd, depending on what the central banks of the world are willing to do.


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Edited by Sempeur (03/01/20 09:44 AM)


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Sempeur]
    #26511885 - 03/01/20 07:32 PM (3 years, 10 months ago)

Some industries are worse than others. Automobile manufacturing is probably going to get shit kicked when they run out of parts. I think Ford is having trouble with debt repayment as it is. Airlines are run on debt. US fracking also US coal mining. Industries that are teetering already will be pushed over the edge.


Some might be able to consolidate, some will be fucked.


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OfflineTripsurfer
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26512819 - 03/02/20 12:53 PM (3 years, 10 months ago)

Already having issues sourcing parts


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InvisibleAsante
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Tripsurfer]
    #26512989 - 03/02/20 02:44 PM (3 years, 10 months ago)

A lot of pharmaceutical precursors, pharmaceuticals and medical supplies are Made In China.

Imagine lack of availability of medical necessities. Physical patients and mental patients not getting their necessary medications, nurses and doctors not getting their disposables such as gloves, masks, gauzes, syringes, desinfectants :blah:

Old people not getting their meds, doctors not getting their supplies AND especially old people getting slammed by a dangerous virus.

Those ships with those containers are NOT sailing NOW. Ports are closed, manufacture has largely stopped in China, to the point of air pollution, ceasing.


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OfflineSempeur
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Asante]
    #26513401 - 03/02/20 06:35 PM (3 years, 10 months ago)

Quote:

Asante said:
A lot of pharmaceutical precursors, pharmaceuticals and medical supplies are Made In China.

Imagine lack of availability of medical necessities. Physical patients and mental patients not getting their necessary medications, nurses and doctors not getting their disposables such as gloves, masks, gauzes, syringes, desinfectants :blah:

Old people not getting their meds, doctors not getting their supplies AND especially old people getting slammed by a dangerous virus.

Those ships with those containers are NOT sailing NOW. Ports are closed, manufacture has largely stopped in China, to the point of air pollution, ceasing.




This is a much more serious problem. If I need to wait a few months to buy a new car that's not a big deal. But what if medical professionals don't have PPE and basic tools? What percentage would willingly expose themselves to that kind of risk? Likely not 100% (and I can't blame them).


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OfflineTripsurfer
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Sempeur]
    #26514420 - 03/03/20 10:56 AM (3 years, 10 months ago)

Production is running again in China

Just ordered a bunch a stuff from Shenzhen


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OfflineBrian Jones
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Tripsurfer]
    #26514481 - 03/03/20 11:44 AM (3 years, 10 months ago)

The FED lowered interest rates a half percent to combat Corona economic shock.


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Brian Jones]
    #26515332 - 03/03/20 07:33 PM (3 years, 10 months ago)

An interest rate cut is probably the least effective tool for a pandemic. Fiscal stimulus is unlikely because of the upcoming election and Trump's need to hold to the line that the economy is so strong. There needs to be huge public funding programs like it is a natural disaster, but that won't come. You have to look at the other times the Fed has had emergency cuts in recent years, Post 9/11, 2008. Both times the market fell hard after the cut. The fed knows it's late and it doesn't have the tools or mandate to deal with the virus.

The USA not having a public healthcare system or widespread paid sick leave could be disastrous. China was able to quarantine, monitor and isolate those affected, but I don't think that will be possible in America. I think best case the S&P still falls to 2700, worst case it goes to like 2000.


I opened up a june put for Walmart, bought some TQQQ, and PSQ. Not giant positions like 2-3%, but I think the genie is out of the bottle for the USA. It isn't going to be contained, and it's still a year away from being cured. I'm still like 1/3 in gold, 1/5 in bonds and the rest long stocks.

I don't think it is the apocalypse or anything, but it might be a negative earnings for the USA for like half a year. It could rock financial markets. A cure will come and the world will move on. The virus affects mostly older populations, so it might kill many boomers and cause a realestate glut, but who knows.


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26517041 - 03/04/20 06:13 PM (3 years, 10 months ago)

I won't lie. I'm on Wallstreetbets.


This is the port of LA today. A fucking ghost town. 10 year is going to zero, recession incoming. It's a 4 month shut down.


https://twitter.com/someknew/status/1234322630468984832


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26517070 - 03/04/20 06:31 PM (3 years, 10 months ago)

I'm buying TQQQ all the way down man. Going for a Cadillac or bust!


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OfflinegeokillsA
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26517647 - 03/04/20 10:38 PM (3 years, 10 months ago)

I'm not saying we aren't going lower.  I get the feeling that this is the first shot across the bow and we will ultimately see lower levels.  On the other hand, I live in Los Angeles, and I was down at the Aquarium of the Pacific right next to the port just a few days ago and still saw lots of traffic on the docks.  Not sure what that Twitter post is all about, but I don't really use Twitter ('less someone links me to a feed) 'cause I feel like it's susceptible to that sort of sensational BS.


On top of the 0.5% rate cut that the US Federal Reserve implemented yesterday, expectations are being set for another 0.25% cut on March 18th (the usual Fed meet date), and another 0.25% during their April meeting.  A 1% cut in the Fed funds inside of a few months is a pretty massive amount of liquidity.  On the other hand, they've kept rates low for so long, they don't have a whole lot of fire power available.  Bad February numbers coming out on economic activity, a lot of major industrials telegraphing "business as usual" within a month (hah!), we'll see how it goes...  I have no confidence in either direction, but I will pay attention to price and do the best I can.  Buy the dip has been the motto.  Maybe it won't be, this time.  Maybe it will?  The weekly chart remains intact.


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: geokills]
    #26519491 - 03/05/20 08:01 PM (3 years, 10 months ago)

The 10 year is at .832 right now overnight. Italy reporting 42 deaths in the past 24 hours and the Nikkei is down 3.2%. I think we are are headed lower into the weekend and it will be a grim monday.


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26520248 - 03/06/20 09:06 AM (3 years, 10 months ago)

My mate is in the gold trading business and he says invest, invest, invest in gold right now.

He expects it to break the september 2011 record real soon


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Tripsurfer]
    #26520987 - 03/06/20 05:12 PM (3 years, 10 months ago)

I wonder if that means silver might move with it


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OfflineTripsurfer
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: ManianFH]
    #26521594 - 03/07/20 03:04 AM (3 years, 10 months ago)

Im assuming it will. Any crisis of the money kind usually lifts the value of physical investment assets


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InvisibleAsante
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: ManianFH]
    #26524330 - 03/08/20 05:45 PM (3 years, 10 months ago)

Quote:

mick said:
I wonder if that means silver might move with it





Silver will catapult I think. The gap between silver and gold has increased, silver is a voilatile and panic metal.

Theres going to be panic.


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Asante]
    #26545427 - 03/19/20 08:03 PM (3 years, 10 months ago)

open your eyes ppl


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: deej101]
    #26545607 - 03/19/20 10:07 PM (3 years, 10 months ago)

I've kept a short position this whole time, but I've mostly been cashing out gains pretty regularly and moving gold into stocks. I've got some puts on financials. I think it's only about 2 or 3 weeks from peak fear, but I'm buying on the way down.

Coca-cola
Disney
Microsoft
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Some really good stuff.


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26545609 - 03/19/20 10:09 PM (3 years, 10 months ago)

If I had more balls when this thread started I could have made 100k, but I made safe little 2-3% positions and cashed them out every couple of days. Try again in a decade I guess.


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OfflineSempeur
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26549002 - 03/21/20 02:03 PM (3 years, 10 months ago)

Quote:

Ahab McBathsalts said:
If I had more balls when this thread started I could have made 100k, but I made safe little 2-3% positions and cashed them out every couple of days. Try again in a decade I guess.




I think there's still money to be made off the volatility, but it's definitely more of a gamble at this point.


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InvisibleAhab McBathsalts
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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Sempeur]
    #26549213 - 03/21/20 04:07 PM (3 years, 10 months ago)

I'm thinking there will be a relief rally after the fed eases liquidity ratios for the banks on the 26th, followed by more downside.


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26553328 - 03/23/20 03:36 PM (3 years, 10 months ago)

Any further opinions on silver over the next month? Looking to put some money into a few things, silver being one of them.




Recently broke through a support from 2015 and 2018. Thinking of holding on for a little longer to see if we get a further dip :shrug:


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Kittlebean]
    #26554145 - 03/23/20 10:19 PM (3 years, 10 months ago)

Quote:

Kittlebean said:
Thinking of holding on for a little longer to see if we get a further dip :shrug:




good idea


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Kittlebean]
    #26554755 - 03/24/20 09:15 AM (3 years, 10 months ago)

Yessh, that is a nasty chart.  I would advocate allocating to Bitcoin if you're looking for an inflation hedge that also has other upside catalysts going for it.


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: geokills]
    #26554859 - 03/24/20 10:27 AM (3 years, 10 months ago)

Quote:

Yessh, that is a nasty chart.




Nasty chart?

This is partly to protect against inflation however also as a general investment. Its not something I planned on taking out anytime soon, just thought I would buy in whilst the price was low.


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Kittlebean]
    #26554875 - 03/24/20 10:36 AM (3 years, 10 months ago)

Bill Gates on a TED stream just now: "Nothing like this has happened to the economy in our lives."


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Kittlebean]
    #26554993 - 03/24/20 11:52 AM (3 years, 10 months ago)

Quote:

Kittlebean said:
Quote:

Yessh, that is a nasty chart.




Nasty chart?

This is partly to protect against inflation however also as a general investment. Its not something I planned on taking out anytime soon, just thought I would buy in whilst the price was low.




From a price perspective (which is generally the most honest and unbiased perspective one can take), the series of lower highs and the recent plunge through multi-year support does not portend future positive price action.

I own silver, gold and palladium as part of my aggregate asset allocation strategy, however I have no interest in buying more.  I personally believe that the crypto markets can provide a lot of the same inflationary hedging benefits that precious metals have historically offered, alongside greater utility with regard to remittances and second layer solutions involving decentralized finance and other smart contract iterations.  Because crypto is a much smaller market, it does carry more risk.  Which is to say, precious metals are very likely to always hold  some value, whereas crypto may not.  On the other hand, this comparatively small market and increased risk also allows for a potentially outsized reward if the adoption of crypto related services continues to expand.


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: geokills]
    #26555290 - 03/24/20 03:11 PM (3 years, 10 months ago)

Quote:

From a price perspective (which is generally the most honest and unbiased perspective one can take), the series of lower highs and the recent plunge through multi-year support does not portend future positive price action.





I see what your saying. Still only just getting into trading and investments so have a lot to learn. The fact that it's dipped below this support level, does that not provide a good opportunity for some longer term gains? Out of interest what do you think was the main reason for its surge in price in 2010 followed by the downtrend and then years of sideways movement?

When it comes to crypto I do hold several positions, some doing better than others, however I am cautious of putting more money into it right now whilst I am still learning due to the volatility of it. I guess I'm looking for more long term options that provide a bit more stability.


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Kittlebean]
    #26555370 - 03/24/20 03:52 PM (3 years, 10 months ago)

Im pretty salty I let myself wait for BTC to hit %4,5K again after the big plummet. Been going up ever since


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Tripsurfer]
    #26555835 - 03/24/20 08:02 PM (3 years, 9 months ago)

that market goes all over the place. youll probably have another shot

in related news, looks like the Fed is working to create a digital dollar, taking a page out of the crypto playbook. I wonder how the crypto market will respond if it gets up and running


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Kittlebean]
    #26556755 - 03/25/20 10:11 AM (3 years, 9 months ago)

Quote:

Kittlebean said:
Quote:

From a price perspective (which is generally the most honest and unbiased perspective one can take), the series of lower highs and the recent plunge through multi-year support does not portend future positive price action.




I see what your saying. Still only just getting into trading and investments so have a lot to learn. The fact that it's dipped below this support level, does that not provide a good opportunity for some longer term gains? Out of interest what do you think was the main reason for its surge in price in 2010 followed by the downtrend and then years of sideways movement?




The ultimate goal is obviously to buy lower than you sell.  However, when a long term support level is broken, it often turns into a resistance level, whereby those who had accumulated at or above that mark, now use that mark as a price target in attempts to "get their money back" by selling whenever price rises back to that level.  Now I don't know whether or not silver is going to be higher in 1 or 5 or 10 or 50 years.  The reason for the surge in precious metal prices around 2010 had a lot to do with the vast expansion of federal bank balance sheets, which is another way of saying that governments worldwide were fabricating money in attempts to stimulate their economies after the 2008 financial crisis.  This level of money expansion caused people to worry about the risk of inflationary pressures, which investors tend to hedge by holding tangible assets such as gold and silver.  That trade worked for a while, until it didn't.  Hyperinflationary incidents did not come to pass amongst the world's most developed economies, and the economic numbers did turn positive, driving money back into equities and away from traditional safe haven assets like the metals.

Well, here we are again, with massive stimulus being implemented by government in attempts to deal with the economic halt brought on by the SARS-CoV-2/COVID-19 epidemic.  So I can generally see why people might think the metals trade could work again here.  And maybe it will, I just don't know.  But if you're going to take that thesis, at least go with the chart that's moving higher instead of breaking down.  Gold is showing considerably better price action than silver.


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: geokills]
    #26557391 - 03/25/20 04:30 PM (3 years, 9 months ago)

US bonds turned negative for the first time in 5 years or so today. The banks are saying how well capitalized they are and well funded, but I think long term the banks will suffer from razer thin margins.


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26559931 - 03/26/20 07:56 PM (3 years, 9 months ago)

What does everyone think about FDIC lowering the required reserve for banks in the US down to 0%? To be honest I'm not that familiar with how all this stuff works, but that seems pretty concerning to me. Combined with this kind of tweets from the FDIC https://twitter.com/FDICgov/status/1242455082551164934, seems somewhat concerning.


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: deadwk] * 2
    #26560031 - 03/26/20 08:52 PM (3 years, 9 months ago)

It's a moral hazard. Bank reserve ratios and stress tests are out the window. They don't mean anything anymore. Banks can lend as much money as they want with no reprecussions and they are being encouraged to lend money to small businesses without regard. It will lead to a bunch of zombie companies like Japan has, eventually. It might take 2 or 3 years but unprofitable companies will be able to keep hanging around and just scraping by with record high debt loads.






There is a really good graph I can't find right now, but it shows the profitability of Japan's,Europe, and the USA banks from 1985ish to present.  Basically Japan pioneered unconvential monetary policy and zero interest rates. It's banks never recovered from 1989 or 1990 or whatever. Then Europe went to zero after the finanial crisis in 2009 and never went positive again. Deutche Bank is a zombie walking into bankruptcy. The US banks recovered because they could raise rates above zero during the last 10 years and had profitable interest rates, but  the virus crisis will ensure that interest rates are never meaningfully raised above zero again, and the US banks will follow Europe's banking malaise, zombie companies, and unprofitabilty.


So China is the one of the only places left in town with good banking margins.


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Re: The Economic and Investment Consequences of the COVID-19 Coronavirus [Re: Ahab McBathsalts]
    #26560270 - 03/27/20 12:00 AM (3 years, 9 months ago)



The US and European banks will have the same asset quality and non-performing loan problems as China, but without the credit spread margins or foreign reserves of the government.


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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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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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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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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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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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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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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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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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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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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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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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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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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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