I think the 2 trillion is a temporary repair. No amount of QE will work once the dam finally breaks.
Printable View
I think the 2 trillion is a temporary repair. No amount of QE will work once the dam finally breaks.
This a wood quote - Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.” -Samuel Johnson.
Is that how a lot us feel these days
Good cartoon
One theory... As Buffett said, if the 10 year bond yield stays where it is or goes lower for a long period of time then stocks are 'ridiculously cheap'. The reach for any yield.
You can borrow money under 3% so even high PE companies are attractive.
It's the E of the PE that can blow up that ratio though. I think the Sp500 got to A PE of 147 during the GFC... Not because of high prices but extreme drop in earnings.
Howard Marks of market cycle fame put out a good little memo today https://www.oaktreecapital.com/insig...rd-marks-memos
Bull case: everything opens in 6 weeks. The unemployed can go back to old jobs or as true Americans, bootstrap. Economy back to normal within 6 months. 2T $ in PE dry powder, low gas prices and 0% interest rates pour fuel onto on the economy. The roaring 20’s mean the 2020's now.
Bear case: Unemployment goes to 20%+. Everything does NOT go back to normal before at least a year or two, and in the meantime, there is a huge demand shock. The effects of the lockdown on businesses as well as the oil shock create depression-like conditions.
In the Global Financial Crisis, I worried about a downward cascade of financial news, and about the implications for the economy of serial bankruptcies among financial institutions. But everyday life was unchanged from what it had been, and there was no obvious threat to life and limb.
Today the range of negative outcomes seems much wider, as described above. Social isolation, disease and death, economic contraction, enormous reliance on government action, and uncertainty about the long-term effects are all with us, and the main questions surround how far they will go.
Nevertheless, the market prices of assets have responded to the events and outlook (in a very micro sense, I feel last week’s bounce reflected too much optimism, but that’s me). I would say assets were priced fairly on Friday for the optimistic case but didn’t give enough scope for the possibility of worsening news. Thus my reaction to all the above is to expect asset prices to decline. You may or may not feel there’s still time to increase defensiveness ahead of potentially negative developments. But the most important thing is to be ready to respond to and take advantage of declines.
I can't think of anything.
A lot of new share market investors are about to be burnt and put off for life like '87. Of course they keep telling people to not switch their kiwisavers to conservative/cash...that advice isn't going to feel so warm and fuzzy if it transpires we're at the "return to normal" blip on Peat's picture. We were over due a correction anyway, so take that, throw in a dash of common sense around what's happening here and the end result is not going to be pretty.