A dangerous gap: The market v the real economy — The Economist, May 7 2020 edn

[seeker4peace]

@sunboy Something to think about, I have a few friends who work in auto sales. They permanently fired 6 of their 10 auto salesman, as no one is buying cars. Instead, customers are trying desperately to sell their car to dealers to get out from under their monthly payment. People are strapped for cash and with an unemployment rate of 14.7% a couple months into this with a possible second wave, I'm not sure people will return to their jobs in a 1:1 fashion. when people lack the liquidity to spend, it'll eventually work itself up the chain. But perhaps the fed does intervene again with a follow up stimulus, how much longer can they keep this ship afloat to weather this storm until a vaccine is developed? Time will tell.

 

[sunboy]

@seeker4peace Seeing an the fed’s power is unlimited, I’d bet on America and that the fed will juice up the markets and economy a bit until the vaccine makes it landing.

 

[bluekron77]

@sunboy The fed can't just give cash to american's, Congress has to approve that. It's an election year. They've already approved unprecedented aide packages. How much more will they do? Who will it go to? What will be the timing? Had to say. I just know I'm not in the boat saying, "This time is different. The recession is over and we're back to normal". Think we're in for more turmoil ahead, will just take a few more months than people expect.

 

[sunboy]

@bluekron77 I can tell you are quite intelligent but market so distorted. Best to buy and hold. Don’t fight the fed, the fed is INVINCIBLE UNLIMITED LIQUIDITY. there is NO LIMIT to the money that can be produced out of thin air, and no inflation!
I love it!!

Premarket is up again today, a few more days of this (which is pretty much guaranteed I’d say) and my portfolio will be bursting at the seams with newfound gains. Retirement by 40, perhaps?

 

[kiwipeach]

@sunboy It’s looking like Insto accumulation with mums and dads still in cash from March.

 

[davenj]

@sunboy The Federal Reserve is not all powerful, they can address liquidity (creating a bigger debt bubble and opening up new moral hazards) but they can not make companies magically generate revenue. Sure they have not bought any corp bonds but saying they would do so allowed people to take the risk buying up Boeing and now GM bonds. But these companies still have to create revenue and that is unlikely for both in the long term, in the near term the corporate bubble has expanded absurdly. GM and Boeing should be doing chapter 11 and restructuring easing out the unsustainable debt mess they have created, The political forces have prevented this just to keep the market up. Has everyone already forgotten what happed to GM bonds in 2008 and they are issuing 7% bonds now?! lol.