Bull Trap or restarting a Bull run?

[donheff]

Bear trap. I've resigned myself to a massive dislocation lasting years. More depression than recession. Too many sectors not likely to bounce back anytime soon. I hope I am way off. And, if it is as bad as it seems, I hope Congress has the fortitude to keep pumping individual and business relief (tied to maintaining payrolls) into the economy. Time to test the limits of Modern Monetary Theory.

 

[Tiger8693]

The market is fluctuating during a period of great volatility.

That's all that can be said or inferred, really.

+1

I think that the market may have done correction based on the predictions of "hundreds of thousands of deaths" in teh US from COVID 19, so deaths in the single digit thousands will be a major relief and could drive things up.

For China, suppliers are shipping, and the product (manufactured assembly) we provide to China, they are asking us to increase our shipments by 20%.

 

[eytonxav]

For me no point in predicting, because what ever I pick it will do the opposite.

 

[Toocold]

I think -35% was the bottom of the dip, as most of the uncertainty is gone and new news that truly impact the market will generally be more favorable (ie. less negative) than what is already priced in.

I think it will zig and zag with a general upward trend.

 

[pb4uski]

Bear trap. I've resigned myself to a massive dislocation lasting years. More depression than recession. Too many sectors not likely to bounce back anytime soon. I hope I am way off. And, if it is as bad as it seems, I hope Congress has the fortitude to keep pumping individual and business relief (tied to maintaining payrolls) into the economy. Time to test the limits of Modern Monetary Theory.

I hope you are way off too.

I'm not quite as pessimistic, but I do think it is highly likely that we will have a deep and long recession... as bad as 2008 but not near as bad as the Great Depression.

 

[jollystomper]

I am taking the long view, so while the past three days were good I am on Admiral Ackbar's side on this:

 

[cyber888]

As others have noted, a bull trap is when a market is going down, blips up, brings bulls in, then traps them and heads lower.

Yep, I was referring to the 3-day bull rally .. when I mentioned the bull trap

 

[brewer12345]

The GS economic forecast is a -24% YoY print for US GDP in the second quarter. At the moment they have a rosy outlook for the third and fourth quarter, but a huge rebound in Q3 seems quite unlikely to me. This bump looked a lot like a bear market rally and I was getting ready to short S&P500 if it got up to 2700 on the bounce.

 

[foxfirev5]

And what about inflation? Too much money chasing too few goods? Lower GDP and more $ in circulation?
Now I'm hearing that they're preparing another round 3 months from now, if needed. Like it won't be needed?
Now we'll have people that will be getting a raise by not working at all. What is next?

 

[Fermion]

What is next?

UBI baby!

 

[Dtail]

UBI baby!

My son has been talking about this concept for years.

 

[pb4uski]

My son has been talking about this concept for years.

We never should have paid those kids an allowance.

 

[donheff]

And what about inflation? Too much money chasing too few goods? Lower GDP and more $ in circulation?
Now I'm hearing that they're preparing another round 3 months from now, if needed. Like it won't be needed?
Now we'll have people that will be getting a raise by not working at all. What is next?

We haven't had an inflation problem thru massive war spending, recession spending, and trillion dollar tax cuts. This infusion of debt spending may test the limits. The MMF crowd has been saying you can keep printing money until you can't. Seems better to risk a round of inflation than unemploy a third of the country with no relief.

 

[foxfirev5]

We haven't had an inflation problem thru massive war spending, recession spending, and trillion dollar tax cuts. This infusion of debt spending may test the limits. The MMF crowd has been saying you can keep printing money until you can't. Seems better to risk a round of inflation than unemploy a third of the country with no relief.

What about a situation like today where Nothing is being produced? Maybe it is different this time.

 

[BeachOrCity]

bull trap. Down about 2%+ at end of day here.

Heard a talk by Ethan Penner (CMBS guy...kind of a charlatan).... Anyway, he made a compelling case that the US is headed to Japan like situation...where the FED / Gov't basically are funding the economy.

Very bullish on certain types of commercial real estate.

 

[donheff]

What about a situation like today where Nothing is being produced? Maybe it is different this time.

Yes, maybe it is.

 

[jmp470]

Bull Trap and the market is still overpriced.

Oil industry has a crap ton of debt on the books and a significant float on top of the debt. This alone will hamper the overall market.

Younger people were not buying oil stocks before the crash, I don’t see them changing their minds.

The generational thinking will change tomorrows market, big money will rotate to the new sectors.

 

[aaronc879]

My crystal ball has never worked quite right. That being said, I think that the worst is yet to come with Covid-19 and the stock market.

 

[SeattleRocks]

+1 Bull Trap.

So much unknown carnage. I think the virus is ramping quickly outside of Seattle, LA, San Fran and NYC. I think the market is still over priced. We haven't seen the next unemployment number and I think we are going to see a lot of collateral damage (bankruptcies, housing prices plummet, etc.)

I also think the projections for Q3/Q4 is far too optimistic. I go by the Dow because the S&P is too heavy in a few companies and I was looking for Dow 15,000 or so.

But then again, what the hell do I know. Nobody has ever seen this before. Just think the $2T isn't going to be enough and in an election year they are going to throw ALOT more money at this...

 

[WyomingLife]

My grandparents lived through WWI and the Great Depression. My grandfather was grievously wounded in WWI.

My Dad fought in WWII.

My Uncle fought in the Korean War.

My Brother fought in Vietnam.

So this is a bad situation, for sure, but it is just the next shock. Not making light of it at all. Great sympathy for those impacted health wise, and for those facing sequence of return risks. And the situation has revealed just how messed up parts of society are. It has also revealed how fragile life is. But it is just life. And it is nature doing its thing. From a cosmological perspective, nearly everything in the cosmos is hostile to life and basically trying to kill us.

The society that emerges will be more resilient, however. And science will ultimately resolve this. I put my faith in science. It will be fascinating to see the advances in the health sciences that emerge from this.

It feels to me like the major market drop is over. We are happily continuing to invest, month after month, dollar cost averaging. Nothing has changed.

Hope everybody is safe and healthy. Stay away from people. Follow the CDC's advice.

 

[copyright1997reloaded]

We haven't had an inflation problem thru massive war spending, recession spending, and trillion dollar tax cuts. This infusion of debt spending may test the limits. The MMF crowd has been saying you can keep printing money until you can't. Seems better to risk a round of inflation than unemploy a third of the country with no relief.

Through globalization we have reduced inflationary pressures, at the cost of an industrial and manufacturing base. The rise of populism was already putting strains on that approach - and this event is a watershed moment that will stop/reverse that trend (at least for a number of year, perhaps decades).

I liken what will happen to be a "Ka-BOOM". In the Ka phase, it is deflationary due to the loss of jobs, bankruptcy of business, etc. In the BOOM phase it will be inflationary as all that newly created $ keeps cycling through the economy along with a higher cost base for goods production.

But what do I know? I also thought this was possible after the 2008/2009/2010 downturn, but it did not turn out that way. Yes, gold was $870 or so in 2008 ($1675 today), but the thesis was overall incorrect. I think this was due to two factors: 1) the velocity of money decreased in that period and has not returned to the 2007 values and 2) the import of cheap goods (as mentioned above) ramped up considerably. I don't think those two things will play as large of a roll this time around, and quite frankly the stimulus being applied now makes 2008/09 look like child's play.

 

[jmp470]

My grandparents lived through WWI and the Great Depression. My grandfather was grievously wounded in WWI.

My Dad fought in WWII.

My Uncle fought in the Korean War.

My Brother fought in Vietnam.

So this is a bad situation, for sure, but it is just the next shock. Not making light of it at all. Great sympathy for those impacted health wise, and for those facing sequence of return risks. And the situation has revealed just how messed up parts of society are. It has also revealed how fragile life is. But it is just life. And it is nature doing its thing. From a cosmological perspective, nearly everything in the cosmos is hostile to life and basically trying to kill us.

The society that emerges will be more resilient, however. And science will ultimately resolve this. I put my faith in science. It will be fascinating to see the advances in the health sciences that emerge from this.

It feels to me like the major market drop is over. We are happily continuing to invest, month after month, dollar cost averaging. Nothing has changed.

Hope everybody is safe and healthy. Stay away from people. Follow the CDC's advice.

If you think back to your Dad and Grand Parents and their behaviors, a lot of the survival instincts that the older generation is not in today’s society. I remember my grandparents having hordes of cash at the house, because they didn’t trust the bank. Their pantries were always stocked, with chickens in the yard, and some form of garden.

Right now we are off kilter with the major cities. There will come a shift. Young money was keen on smaller houses on a small plot of land with community pools, and entertainment features. Will they still think that way?

Of all the battles I’ve fought in, the person I was when I entered them, was not the person I was when I left them! I believe that to be true for any crisis.

 

[ESRwannabe]

So what do you think. - 1) Bull Trap and we retest lows due to more unemployment, no economic growth, no end yet to covid-19 situation or 2) start of a Bull Run with a Fed tools (QE, buying equities) and Stimulus supported stock market ?

It could go either way and it all depends on how quickly people can start going back to work. If people are back to work by August then I think we have roughly seen the bottom (might retest it or go a little lower).

If people are stuck in quarantine for the rest of the year then look out below.

 

[Closet_Gamer]

And what about inflation? Too much money chasing too few goods? Lower GDP and more $ in circulation?
Now I'm hearing that they're preparing another round 3 months from now, if needed. Like it won't be needed?
Now we'll have people that will be getting a raise by not working at all. What is next?

I do think we could see a re-emergence of inflation. In a lot of ways, the last 25 year has been characterized by global supply chains that have continued to soak up an unbelievable amount of low cost labor as entire continents shifted into a global capitalist economy. IT and other advances of course compounded those gains, but the global supply of cheap labor was a major contributing factor.

If the world revisits global supply chains as a result of seeing how tenuous this is -- especially if global politics amplifies that effect -- you could see real inflation.

And its not just manufacturing. When India shut down almost every major company on the planet lost call center and significant IT capacity.

When the smoke clears, there will be A LOT of discussion on how to avoid this in the future.

There could also be short term inflation when people come out of their homes and start spending again into supply chains that have ground to a halt.

All in all, the above might be a good thing if it happens in moderation. It will give countries a legitimate reason to start normalizing interest rates (vs. worrying about a deflation spiral) and repatriation of jobs may help moderate some of the income inequality and other tensions in the system.

It will be hard on everyone who's out buying bonds at 1% right now, but good for the governments and big companies that sold the debt.

 

[audreyh1]

My grandparents lived through WWI and the Great Depression. My grandfather was grievously wounded in WWI.

My Dad fought in WWII.

My Uncle fought in the Korean War.

My Brother fought in Vietnam.

So this is a bad situation, for sure, but it is just the next shock. Not making light of it at all. Great sympathy for those impacted health wise, and for those facing sequence of return risks. And the situation has revealed just how messed up parts of society are. It has also revealed how fragile life is. But it is just life. And it is nature doing its thing. From a cosmological perspective, nearly everything in the cosmos is hostile to life and basically trying to kill us.

The society that emerges will be more resilient, however. And science will ultimately resolve this. I put my faith in science. It will be fascinating to see the advances in the health sciences that emerge from this.

It feels to me like the major market drop is over. We are happily continuing to invest, month after month, dollar cost averaging. Nothing has changed.

Hope everybody is safe and healthy. Stay away from people. Follow the CDC's advice.

I appreciate your perspective essay!