V-shaped or U-shaped recovery?

[MikeyMarks]

Any theories out there on how long it will take for markets to recover once we’ve gotten COVID-19 under control? I’m thinking markets will pop back up quickly (V) because the economy was very strong going into this and the shock to the system was sudden and dramatic. Agree? Disagree?

 

[Fermion]

I am thinking either V L W or maybe Z

 

[OldShooter]

Agree; it will be V-shaped or U-shaped.

 

[REWahoo]

No idea, I'm just hoping it isn't an L-shaped recovery.

 

[38Chevy454]

I think U, because it will take a while for confidence and momentum in the economy to build. I would like it to be quicker V, but with such a drastic and fast fall, concern about really being the bottom will be lurking for a while.

 

[Fermion]

It is such a total guess though you might as well ask if the ball is going to land on black or red.

 

[MikeyMarks]

It is such a total guess though you might as well ask if the ball is going to land on black or red.

I know, but it’s still therapeutic sometimes to talk about it.

 

[Toocold]

It's funny. There hasn't been a wide swath of layoffs yet and we're already trying to imagine the path.

I think it's going to be a V, as long as the virus can be contained. With the amount of support from government, very few companies are going to go under and if they tie 0% interest loans to keeping their staff and directly subsidize individuals for any losses, it should bounce back.

 

[unclemick]

Hmm - Started investing in 1966 and lived with the DOW under 1000 for a very very long time - 1982?

Not interested in seeing that again!

heh heh heh - Lets hear a cheer for the big V!

 

[Kwirk]

I’m thinking U, at best. I’ve seen the economy as considerably over-inflated with spending and debt. The effects of distancing and fear on spending will be extensive. Unemployment seems certain to rise substantially. Bankruptcies for many businesses, small and large, appear unavoidable. Extreme distancing will have to continue until testing can enable quarantines and individual isolation to take hold but it’s still (due to various shortages) not clear that extensive testing will be possible soon. All of this leads to a vicious circle of decline. Unemployment compensation and cheap loans (who will make these to little guys?) may blunt the fall but won’t be enough to turn it around. Maybe something magical (highly effective treatment or vaccine) will happen to break the fall but I’m not counting on it. Sorry, but that’s my take. Good luck to you all.

 

[Fermion]

I think it is greatly the responsibility of the government to step in and keep all of these businesses from going bankrupt since the government is the one forcing them to shut down. In a normal world I would say just let the market sort itself out but this is a case where a business is being told to shut down and it is unfair to make them go bankrupt because of that.

So I predict a massive bailout of businesses and maybe even a moratorium on credit holders being able to force payment.

If they do this, then the recovery should be fairly fast.

 

[Midpack]

I don't know what shape, but I agree the economy was reasonably strong going in so we could recover quickly BUT. It depends on how bad and how long we let this go on as people's incomes are going to be impacted, so spending may be weak as the recovery begins. Lots of shoes left to drop. I'm afraid recovery will be slow as businesses and households are all going to take (big) hits, and the strength of businesses going in won't matter much.

 

[Spock]

There is a lot of damage being done to businesses that are being ordered to close.
Rhetorical questions:
How are they going to pay their leases while closed? The restaurants are going to lose all the inventory on hand... even if they restart they are going to cause another supply shock restocking in order to re-open.
How are the workers going to pay rent while their company is closed?


The Fed has already been printing magic money. They are going to have to print a lot more. Plus the supply shocks still to come its going to be major heartburn.


I'll caveat all of this in full disclosure I am a perma-bear. But I don't see any recovery any time soon.

 

[BeachOrCity]

Too early to be talking recovery....

 

[Fermion]

There is a lot of damage being done to businesses that are being ordered to close.
Rhetorical questions:
How are they going to pay their leases while closed? The restaurants are going to lose all the inventory on hand... even if they restart they are going to cause another supply shock restocking in order to re-open.
How are the workers going to pay rent while their company is closed?


The Fed has already been printing magic money. They are going to have to print a lot more. Plus the supply shocks still to come its going to be major heartburn.


I'll caveat all of this in full disclosure I am a perma-bear. But I don't see any recovery any time soon.

I really do expect something to be announced in the next couple of days or even today to address a lot of what you said.

Extension of unemployment benefits by significant amount. Large loans or maybe even grants to businesses that close to protect the public. A moratorium on defaults. The last thing they might do is issue a check to every american to help with the crisis. I would guess somewhere between $1000 and $5000.

 

[Spock]

I really do expect something to be announced in the next couple of days or even today to address a lot of what you said.

Extension of unemployment benefits by significant amount. Large loans or maybe even grants to businesses that close to protect the public. A moratorium on defaults. The last thing they might do is issue a check to every american to help with the crisis. I would guess somewhere between $1000 and $5000.

I agree.
They would have to UBI that much per month until restrictions are lifted. Just think how hard its going to be to shut that spigot back off again.

 

[Fermion]

I agree.
They would have to UBI that much per month until restrictions are lifted. Just think how hard its going to be to shut that spigot back off again.

They shut it off the last time IIRC. They did the benefit extension and they did some helicopter money.

This is some really bad stuff and restaurant workers and all the cascading other jobs losses from this virus are really significant.

It is very easy for someone to sit inside with their pension, bonds and 1%SWR and lament that this is adding to the government debt, but if this shutdown continues, a lot of working families are going to be in trouble.

 

[atmsmshr]

So many economic ripples with this pandemic. A few we can see with 20/20 hindsight.

Chinese totalitarian government denies any problem until it gets to the point of having to lockdown 10's of millions of people. Factories close, transportation dries up. Oil stockpiles rise so prices decline. A Saudi Prince picks a fight with Russia at this time to support prices by cutting production. Nyet. Price collapse. Shale drillers squeezed and suspend exploration. No new drilling rigs manufactured in USA. Steel demand takes a hit and prices fall. Layoffs.

Meanwhile, Chinese tourists and cruise operators keep on trucking. Beautiful Italy stays open for business until it is too late. Cruise lines shut down for several months. Airline travel is suspended and hourly workers are laid off. Less demand for oil - Saudi Prince and Putin remain mad at each other as prices decline further - and the USA shale patch and suppliers suffer more. Who the heck knows what impact oil price collapse and virus pandemic has on Iranian leaders whose people dislike their corrupt government. NHL and NBA shut down. Vendors suffer. Theaters and churches empty out, civic functions are cancelled, and Disney closes. Italians in apartment blocks wave at each other as now the ENTIRE country sits in quarantine.

The stock market wakes from its stupor after nearly two months of bad news and the bear comes out of hibernation. People who have not set their AA to match their appetite for risk do panic selling and feed the bear even more. The Fed starts to bring out helicopter money and puts cash in the window to stave off liquidity issues.

Younger people who are less vulnerable party like its spring break (which it is) and the universities shut down. Mayors and Governors suspend gatherings at public bars and restaurants. Hourly workers suffer. Mall traffic dries up even further. Hourly workers suffer.

The pandemic peak comes and heath care / first responders are overwhelmed. Supply chains have all been built on the 'China Price'. Key supplies for health care and the economy in general are unavailable. For the unfortunate - People die or suffer lung damage while recovering.

What we are doing now appears to be an over reaction to some. When the peak of the pandemic is past - it may very well seem we did not do enough.

U-shaped. We cannot even imagine all of the ripples to come.

 

[Fermion]

Dang atm, what you described sounds more like | shapped.

 

[MikeyMarks]

So many economic ripples with this pandemic. A few we can see with 20/20 hindsight.

Chinese totalitarian government denies any problem until it gets to the point of having to lockdown 10's of millions of people. Factories close, transportation dries up. Oil prices stockpile so prices decline. A Saudi Prince picks a fight with Russia at this time to support prices by cutting production. Nyet. Price collapse. Shale drillers squeezed and suspend exploration. No new drilling rigs manufactured in USA. Steel demand takes a hit and prices fall. Layoffs.

Meanwhile, Chinese tourists and cruise operators keep on trucking. Beautiful Italy stays open for business until it is too late. Cruise lines shut down for several months. Airline travel is suspended and hourly workers are laid off. Less demand for oil - Saudi Prince and Putin remain mad at each other as prices decline further - and the USA shale patch and suppliers suffer more. NHL and NBA shut down. Vendors suffer. Theaters and churches empty out, civic functions are cancelled, and Disney closes.

Younger people who are less vulnerable party like its spring break (which it is) and the universities shut down. Mayors and Governors suspend gatherings at public bars and restaurants. Hourly workers suffer. Mall traffic dries up even further. Hourly workers suffer.

The pandemic peak comes and heath care / first responders are overwhelmed. Supply chains have all been built on the 'China Price'. Key supplies for health care and the economy in general are unavailable. For the unfortunate - People die or suffer lung damage while recovering.

What we are doing now appears to be an over reaction to some. When the peak of the pandemic is past - it may very well seem we did not do enough.

U-shaped.

Ouch. Remind me not to call you next time I’m feeling low and need a pick me up. [emoji4]

 

[OldShooter]

... What we are doing now appears to be an over reaction to some. When the peak of the pandemic is past - it may very well seem we did not do enough. ...

Sir John Templeton: "The most expensive four words in investing are 'this time its different.' '"

Please wake me in December when it's time for us to do our annual portfolio review.

For me, watching this market chaos is like going to one of those restaurant/bars where they have tv sets all over the place with no sound. The tvs always show people running around, usually in connection with some kind of ball. Sometimes I don't even recognize the game and for sure I don't recognize the players. The score is of no interest to me either, but the video action keeps drawing my eye to the TV. When we're done eating I leave without any knowledge or memory of what went on. And that's fine with me.

 

[MikeyMarks]

Sir John Templeton: "The most expensive four words in investing are 'this time its different.' '"

Please wake me in December when it's time for us to do our annual portfolio review.

For me, watching this market chaos is like going to one of those restaurant/bars where they have tv sets all over the place with no sound. The tvs always show people running around, usually in connection with some kind of ball. Sometimes I don't even recognize the game and for sure I don't recognize the players. The score is of no interest to me either, but the video action keeps drawing my eye to the TV. When we're done eating I leave without any knowledge or memory of what went on. And that's fine with me.

I like your style. [emoji106]

 

[ERD50]

Upper case, lower case, or cursive? -ERD50

 

[ckelly78z]

I think many folks will be getting aggressive to regain some of the losses they are incurring right now. By the end of Summer (September), we should see a turn around that will turn into a raging bull market by November....my opinion !

 

[Clone]

I think we are going to pull the trigger on some more ROTH conversions today. Just in case this is a V recovery. Of course, it may still be a V recovery where we are far from the bottom. Oh well.