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.

 

[horsebiscuit]

@jabdallah Stocks are still down over 15 percent from peak. Its weird how people are perceiving this as not a significant decline.

 

[dianakrakow]

@horsebiscuit DJIA, yes. The Nasdaq closed at an all time high YESTERDAY. This is making people very angry.

The markets are not pricing in the political risk of a new Sherman Anti-Trust Act which targets Big Tech. They just aren’t. Which... makes perfect sense, given that you have 80 year old senators that don’t understand Big Tech asking Mark Zuckerberg how Facebook makes money.

But honestly, there is no way — none — that anyone will catch Amazon organically. It’s not going to happen; Jeff Bezos has built the most impressive private company of all time. The only real threat to Amazon is the federal government. Give it time, but if you have a President Ocasio-Cortez in 2024 with strong Democratic majorities... yeah. Amazon will be broken up, and companies like Apple/Google/Facebook/Netflix/Microsoft — you know, the big names — will also be at risk.

EDIT Nasdaq was not at ATH and I had been parroting a bad source w/o verifying.

 

[resjudicata]

@dianakrakow I'm not sure on what basis you think Netflix is a monopoly and US telecoms are not. If you want to break companies, can you please not touch the companies that provide actual positive value to me as the consumer?

I'd like to hear the consideration on why Netflix and not Disney for example.

Apple has multiple viable competitors.

Facebook.. well, other social networks exist. People just don't want to use them. I'm not sure if breaking up Facebook would help that.

I'm not sure what Microsoft is monopolizing.

 

[dianakrakow]

@resjudicata They aren’t at risk because they are a monopoly — they are at risk because they are a FAANG which is printing money while 20% of the country has lost a job.

Politics does not care for your (correct) bifurcation.

 

[veritasvii]

@dianakrakow

Give it time, but if you have a President Ocasio-Cortez in 2024 with strong Democratic majorities... yeah. Amazon will be broken up, and companies like Apple/Google/Facebook/Netflix/Microsoft — you know, the big names — will also be at risk.

Given Bernie's massive defeat in the Dem primaries, I don't see any progressives having a chance in 2024. Youth doesn't go out and vote. Whoever Boomers want will get in, since they actually vote, and it's going to be a Dem moderate or republican.

 

[dianakrakow]

@veritasvii No, but youth will be four years older in 2024 and more boomers will be dead in 2024, not least because of COVID.

On top of that — you had a number of very progressive candidates do quite well in the primary. Bernie is fundamentally an angry outsider, but his ideas dominated the conversation — especially on healthcare. Pete Buttigieg, for example, used the rather brilliant phrase “Medicare for All Who Want It.” It’s brilliant because it coopted Bernie’s language — but remember, implicit in such a phrase is a VAST expansion of healthcare coverage, and his plan reflected that.

If you have a progressive candidate who can sell himself as a moderate (women have a hard time selling themselves in this way because of bias), that is historically a very powerful combination for Democrats.

I’m not writing off a Trump win in 2020. No way, not with a Joe Biden who shows every bit of his age as the candidate. But if Trump wins re-election, that would mean that the most hated President of all time (and he is, I don’t think it’s close) would be off the ballot in 2024 but still in the White House. The Democrats could run Joseph Stalin and win a landslide in that environment.

 

[horsebiscuit]

@dianakrakow Really good points.. But while tech stocks have held their own well, oil, airline stocks and reits have been hammered far greater than 15 percent.

Back in late March, the market was pricing in an Italy type situation which never materialized. Thank fuck. But it makes sense that there would have been a partial but not full recovery since then. Dont quite understand the shock i keep reading about from the lay people crowd. They are cherry picking april data without looking at what transpired in March.

 

[dianakrakow]

@horsebiscuit We have 30 days of data, which is just not enough time to make an informed decision. Everyone is just taking a shot in the dark.