Do you think Dow 18,000 was the bottom?

[OldShooter]

... the labor market nuclear winter ...

I think people's language, at least, is a bit over the top. In our state, 78% of jobs are exempt from the shutdown. The St. Louis fed is predicting 32% unemployment, so if you subtract the base rate you have about 27% in additions. It is hardly the case that the economy is shut down.

Target and Home Depot parking lots that I drove by yesterday both had more cars than a usual week day. With takeout from a favorite restaurant yesterday we put $40 in the till. I have probably bought a half-dozen or more things from Amazon and eBay in the past two weeks. We have made several trips to our regular grocery store and in addition have done two curbside pickups.

Demand is down, for sure, and will not instantly recover. But it is also the case that many of the "lost" jobs are sitting and waiting for the employees to return. That is completely unlike jobs lost in a classic recession. It will be fascinating to watch this show as it develops.

It will not, however, be fascinating to watch the suffering in poor countries -- which is not well covered by our self-centered media and which is probably just beginning.

It's a major economic hit, to be sure, but the economic world has not ended.

 

[brewer12345]

Um, you don't consider unemployment figures that rival the great depression to be a big deal? A lot of the businesses that puked those people out will either go bankrupt or be badly damaged and in survival mode for an extended period of time. I think you underestimate the highly leveraged and shaky balance sheets of the vast majority of smaller businesses.

 

[OldShooter]

Um, you don't consider unemployment figures that rival the great depression to be a big deal? A lot of the businesses that puked those people out will either go bankrupt or be badly damaged and in survival mode for an extended period of time. I think you underestimate the highly leveraged and shaky balance sheets of the vast majority of smaller businesses.

My point is that the figures mean something totally different than they have meant in classic recessions. So, no, I do not see the numbers as prima facie to be as big a deal as obviously you do. They may be; only time will tell. This time, this aspect, really is different.

Re understanding small businesses, in my years as a SCORE small business mentor I have certainly worked with over 100. And I ran one for over 10 years. So I do have some dim understanding. And, to your point, most small businesses are not highly leveraged. They are chronically cash-short, however, so they are under great pressure now.

 

[brewer12345]

My point is that the figures mean something totally different than they have meant in classic recessions. So, no, I do not see the numbers as prima facie to be as big a deal as obviously you do. They may be; only time will tell. This time, this aspect, really is different.

Re understanding small businesses, in my years as a SCORE small business mentor I have certainly worked with over 100. And I ran one for over 10 years. So I do have some dim understanding. And, to your point, most small businesses are not highly leveraged. They are chronically cash-short, however, so they are under great pressure now.

Then you should be aware that a lot of these businesses will vurl up and die pretty quickly.

We will all get to find out how real the numbers are. Even the optimistic v recovery forecasts I have seen show about 10 percent unemployment by the end of the year.

 

[VanWinkle]

I think people's language, at least, is a bit over the top. In our state, 78% of jobs are exempt from the shutdown. The St. Louis fed is predicting 32% unemployment, so if you subtract the base rate you have about 27% in additions. It is hardly the case that the economy is shut down.

Target and Home Depot parking lots that I drove by yesterday both had more cars than a usual week day. With takeout from a favorite restaurant yesterday we put $40 in the till. I have probably bought a half-dozen or more things from Amazon and eBay in the past two weeks. We have made several trips to our regular grocery store and in addition have done two curbside pickups.

Demand is down, for sure, and will not instantly recover. But it is also the case that many of the "lost" jobs are sitting and waiting for the employees to return. That is completely unlike jobs lost in a classic recession. It will be fascinating to watch this show as it develops.

It will not, however, be fascinating to watch the suffering in poor countries -- which is not well covered by our self-centered media and which is probably just beginning.

It's a major economic hit, to be sure, but the economic world has not ended.

Thank you for bringing this point of view to the discussion. As a retired small business owner, I agree with your assessment. I do not consider the current job loss to be unemployment, but instead job displacement due to government decree and common sense.

VW

 

[OldShooter]

Then you should be aware that a lot of these businesses will vurl up and die pretty quickly. ...

Just curious; what is your personal experience that leads you to such authoritative predictions?

We will all get to find out how real the numbers are.

We agree on that. A year or two from now, the view in the rear view mirror will be fairly clear.

Even the optimistic v recovery forecasts I have seen show about 10 percent unemployment by the end of the year.

Economic forecasts are not much more than astrology for politicians and investors. To my knowledge, mankind has never developed a model or other forecasting technique for ANY complex system, anywhere. Weather forecasting is the best we have and even though the mathematics is very well known, the proverbial chaos theory butterflies in South America keep the forecasts from being useful out more than a couple of weeks.

Nassim Taleb in "The Black Swan" has an example of modeling a billiards problem. By about the ninth impact it becomes necessary to include in the model the mass of someone standing near the table. You require more minerals: Nassim Taleb: Predicting the future

I have read a good story, probably apocryphal: About two months before D-Day the met(erological) office received a request from SHEAF command for a weather forecast on a specific day. The met guys threw up their hands and refused, saying such a thing was impossible. Back came the directive from SHEAF that a forecast was required "for planning reasons." Economic forecasts, anyone?

 

[atmsmshr]

But it is exactly the forward thinking extrapolation of information for an unknown world phenomenon that I find so appealing.

 

[Keim]

I think people's language, at least, is a bit over the top. In our state, 78% of jobs are exempt from the shutdown. The St. Louis fed is predicting 32% unemployment, so if you subtract the base rate you have about 27% in additions. It is hardly the case that the economy is shut down.

Target and Home Depot parking lots that I drove by yesterday both had more cars than a usual week day. With takeout from a favorite restaurant yesterday we put $40 in the till. I have probably bought a half-dozen or more things from Amazon and eBay in the past two weeks. We have made several trips to our regular grocery store and in addition have done two curbside pickups.

Demand is down, for sure, and will not instantly recover. But it is also the case that many of the "lost" jobs are sitting and waiting for the employees to return. That is completely unlike jobs lost in a classic recession. It will be fascinating to watch this show as it develops.

It will not, however, be fascinating to watch the suffering in poor countries -- which is not well covered by our self-centered media and which is probably just beginning.

It's a major economic hit, to be sure, but the economic world has not ended.

THis perfectly encapsulates what I have been wanting to say in this thread. I think ALL predictions are out the window. This time really is different than all past economic upheavals.

 

[pb4uski]

I think people's language, at least, is a bit over the top. In our state, 78% of jobs are exempt from the shutdown. The St. Louis fed is predicting 32% unemployment, so if you subtract the base rate you have about 27% in additions. It is hardly the case that the economy is shut down.

Target and Home Depot parking lots that I drove by yesterday both had more cars than a usual week day. With takeout from a favorite restaurant yesterday we put $40 in the till. I have probably bought a half-dozen or more things from Amazon and eBay in the past two weeks. We have made several trips to our regular grocery store and in addition have done two curbside pickups.

Demand is down, for sure, and will not instantly recover. But it is also the case that many of the "lost" jobs are sitting and waiting for the employees to return. That is completely unlike jobs lost in a classic recession. It will be fascinating to watch this show as it develops.

It will not, however, be fascinating to watch the suffering in poor countries -- which is not well covered by our self-centered media and which is probably just beginning.

It's a major economic hit, to be sure, but the economic world has not ended.

I think we agree that there will be a major economc hit, so the question then becomes how much of an economic hit and how long before economic recovery.

If 78% of jobs are exempt from shutdown that means that 22% are subject to shutdown.... that is a lot. I was in Home Depot just this morning and it was much slower than normal... probably 50% of normal based on cars in the parking lot and people in the store. Ditto when I went to Walmart the other day.

 

[MichaelB]

Some posts were deleted, looks like a SW glitch. Carry on ..

 

[OldShooter]

Some posts were deleted, looks like a SW glitch. Carry on ..

 

[k-man]

Thank you for bringing this point of view to the discussion. As a retired small business owner, I agree with your assessment. I do not consider the current job loss to be unemployment, but instead job displacement due to government decree and common sense.

VW

I understand your viewpoint. In a perfect world, our state and federal government would have already have sent out stimulus to individuals and small businesses who are unemployed and bleeding money at an unprecedented level. Keep in mind, that if you are even reading the forum on this website...you likely are someone who is a planner and has some resources stuffed aside, at a minimum. That is most definitely not most Americans.

If this was simply a "pause"....where the money got to individuals and Main Street, and lenders/owners gave all of the borrowers a break for 2-3 months...we'd probably have that "U" recession. The fantasy of the "V" is over. However, it's taking them too long to get the stimulus out.

But I can tell you that my wife applied for the PPP deal today...and it's a mess. I think it will get better with time. But it's going to take awhile. The state unemployment infrastructure is on par with Soviet Russia. In my state, New Jersey, the state is trying to hire people familiar with code that is decades old. That's what they use. It's going to be a long, long time before that all catches up. And the ICs and Gig workers....there's nothing set up for them at all yet.

I think we're all about to really grasp how we got to 3.5% unemployment. A lot of those stats are thanks to people who are sole proprietors, ICs and gig workers...and that work isn't all just going to bounce back. And they're all particularly vulnerable because they will be the absolute last group to get any money.

The money is taking too long to get to many of these smaller and even mid-size businesses. Yes, many will survive, but there will be an awful lot that will not. And those jobs won't just be "waiting there" for people to return to when this all blows over.

 

[2177V]

Adding huge additional Debt to already swollen Feds balance sheet of over $3 trillions means only one thing: there will be far greater inflation at some point.

I am also concerned about inflation. Here is a link on the causes of inflation during the 1970's which I found interesting:

https://www.investopedia.com/articles/economics/09/1970s-great-inflation.asp

In a nutshell, High oil prices and loose money caused the 1970's inflation.

We now have low oil prices which is anti-inflationary. We have loose money and high national debt which is inflationary.

As the link noted, Nixon was willing to have inflation in order to achieve high employment so he can get re-elected. We now have high unemployment so the government has to print money mainly because there is no other choice.

Generally, going into debt should not be a problem, if the economy returns to normal and the economy generate the tax revenues. I am more concerned about printing money, increasing the debt, but the virus lingered so the tax revenues are not there.

Venezuela got into trouble because they had expensive socialists programs in place and the oil revenues crashed which was supposed to pay for the socialists programs. The $1200 per person is a good thing in the short term but they have to be careful about the USA becoming too much of a socialist nation by giving out too many handouts. FDR had the right idea: Instead of a handout, give everyone a job in his new deal program. The only other solution is to tax the very rich.

 

[cyber888]

I think ...Yes, we can revisit the low 18,000 to answer the OPs question.

 

[Mountain skier]

I think ...Yes, we can revisit the low 18,000 to answer the OPs question.

Yes very possible that we revisit the low of 18,000. Wall street seems happy again, however, main street is very unhappy. I doubt that can last. Can it?

 

[2177V]

Here is a cut and paste on a V shape recovery:
________________________________________________

V-Shaped Recovery

By Clay Halton
Updated Jul 22, 2019

What Is V-Shaped Recovery?

V-shaped recovery is a type of economic recession and recovery that resembles a "V" shape in charting. Specifically, a V-shaped recovery represents the shape of a chart of economic measures economists create when examining recessions and recoveries. A V-shaped recovery involves a sharp decline in these metrics followed by a sharp rise back to its previous peak.

Understanding V-Shaped Recovery

V-shaped recovery is one of the countless shapes a recession and recovery chart could take, including L-shaped, W-shaped, U-shaped and J-shaped. Each type of recovery represents the general shape of the chart of economic metrics that gauge the health of the economy. Economists develop these charts by examining the relevant measures of economic health, such as employment rates, gross domestic product (GDP) and industrial output.

In a V-shaped recession, the economy suffers a sharp economic decline, but quickly and strongly recovers. Such recoveries are generally spurred by a significant shift in economic activity caused by increased consumer demand and spending.

The recession of 1953 in the United States is a clear example of a V-shaped recovery. The economy was booming in the early 1950’s, but the Federal Reserve anticipated inflation, and thus raised interest rates which then tipped the economy into a recession. Growth began to slow in the third quarter of 1953, but by the fourth quarter of 1954 was back at a pace well above the trend. Therefore, the chart for this recession and recovery would represent a V shape.

V-Shaped Recovery Compared to an L-Shaped Recovery

In contrast to a V-shaped recovery in which the economy rebounds as strongly as it declined, an L-shaped recovery is type of economic recession and recovery characterized by a steep decline in economic growth followed by a slow recovery. In an L-shaped recovery, a steep decline caused by plummeting economic growth is followed by a straight light indicating a long period of stagnant growth. An L-shaped recovery is the most dramatic type of recession, and recovery can take as long as a decade.
___________________________________________________


Per above article....Here is the critical factor of a V shape recovery:

"Increased consumers demand and spending". The question is will "Increased consumers demand and spending" happen with a large number of unemployment?

 

[k-man]

Here is a cut and paste on a V shape recovery:
________________________________________________

V-Shaped Recovery

By Clay Halton
Updated Jul 22, 2019

What Is V-Shaped Recovery?

V-shaped recovery is a type of economic recession and recovery that resembles a "V" shape in charting. Specifically, a V-shaped recovery represents the shape of a chart of economic measures economists create when examining recessions and recoveries. A V-shaped recovery involves a sharp decline in these metrics followed by a sharp rise back to its previous peak.

Understanding V-Shaped Recovery

V-shaped recovery is one of the countless shapes a recession and recovery chart could take, including L-shaped, W-shaped, U-shaped and J-shaped. Each type of recovery represents the general shape of the chart of economic metrics that gauge the health of the economy. Economists develop these charts by examining the relevant measures of economic health, such as employment rates, gross domestic product (GDP) and industrial output.

In a V-shaped recession, the economy suffers a sharp economic decline, but quickly and strongly recovers. Such recoveries are generally spurred by a significant shift in economic activity caused by increased consumer demand and spending.

The recession of 1953 in the United States is a clear example of a V-shaped recovery. The economy was booming in the early 1950’s, but the Federal Reserve anticipated inflation, and thus raised interest rates which then tipped the economy into a recession. Growth began to slow in the third quarter of 1953, but by the fourth quarter of 1954 was back at a pace well above the trend. Therefore, the chart for this recession and recovery would represent a V shape.

V-Shaped Recovery Compared to an L-Shaped Recovery

In contrast to a V-shaped recovery in which the economy rebounds as strongly as it declined, an L-shaped recovery is type of economic recession and recovery characterized by a steep decline in economic growth followed by a slow recovery. In an L-shaped recovery, a steep decline caused by plummeting economic growth is followed by a straight light indicating a long period of stagnant growth. An L-shaped recovery is the most dramatic type of recession, and recovery can take as long as a decade.
___________________________________________________


Per above article....Here is the critical factor of a V shape recovery:

"Increased consumers demand and spending". The question is will "Increased consumers demand and spending" happen with a large number of unemployment?

"V" won't happen...no way. Big/long "U" at best. Really hoping it's not "L" at this point.

Too much damage has already been done. The market seems to have dislocated on what is happening in the real economy...aka....Main Street. Wall Street seems to think that because NY has peaked in new cases and that there are many therapeutic possibilities for treatment in the short to mid-term....that we're "all good". And we're heading back to 29K on the Dow soon. We *may* actually get there in this crazy world...who knows.

But the true economic fallout is not baked in yet...no way. Massive job destruction is happening by the minute. The only way the market continues to rise...unfettered in an pandemic...is if the Fed...possibly ordered by the President (he has powers that we apparently don't know about...read that nightmare scenario today)......begins to buy equities. It's an election year...and well, he is who he is. I wouldn't put anything passed that guy.

And I'll tell you what...if we head down that road, where the Fed or Treasury can purchase equities to backstop the entire market. Then we're Venezuela folks. And I'll take my nest egg...that is currently in a Vanguard Treasury fund....and park it under my mattress.

 

[targatom2019]

I guess the DOW are moving a lot further north of 18K or could we officially say FOMO time.

 

[brewer12345]

I guess the DOW are moving a lot further north of 18K or could we officially say FOMO time.

Speak for yourself. I am in capital preservation mode.

 

[targatom2019]

Speak for yourself. I am in capital preservation mode.

nothing wrong with capital preservation but sell and try to get back in is always a losing game.

 

[brewer12345]

nothing wrong with capital preservation but sell and try to get back in is always a losing game.

This far I am way ahead of buy and hold this year.

 

[atmsmshr]

Big and medium business survival mode has been something like:

- Pull the earnings forecast for next quarter and next year
- Draw down all available credit to raise cash
- Stop stock buybacks
- Employees 'work' from home
- Employee PPE for those working at location
- Furloughs and Layoffs
- Exec Pay cuts
- Mothball factories, airplanes, ships, oil rigs, hotels, amusement parks.
- Suspension of dividends
- Apply for government grants and loans
- Renegotiation of debt with banks
- Fight downgrades from ratings agencies
- Renegotiation of planned purchases with suppliers
- Renegotiation of leases / mortgages
- Plead with state governors to reopen asap
- Layoff everyone except skeleton crew
- Develop Public Safety plans to show how clean the business really is

Small businesses don't have as many levers to pull.

The stock market is shrugging all of this off. Irrational Exuberance?

 

[Beststash]

The stock market is shrugging all of this off. Irrational Exuberance?

I think so... but from recent history tells me ....."Don't fight the FED". Since they included "the market" in their mandate it goes against conventional wisdom.

 

[Ready]

I sold some equities today. I normally maintain 55% equities but I decided to trim it back a little to get closer to 50%. I don’t really understand what these market rallies are all about. Nobody has any idea what the recovery is going to look like. But it seems like it going to go very slowly so I don’t share in the market optimism right now.

 

[RobLJ]

I've been playing the bounce: went from 57% stocks Jan 1; decided to scrape off at least half of 2019 gains, so reduced to 53% in Jan, then the market went up; scraped off some more; reduced from 49% stock to 45% stock 3rd week of January, then saw the market take me down to 40% in March. Bought enough a day after the low (by accident) to raise to 43%, then saw the market take me up to 48% last Friday, so brought myself back down to 44%.
I'll ride this out for a while but will put more cash to work if I get down close to the 40% level.
Never thought I'd sit on 30% cash, but that's OK. I'm essentially even with where I was a year ago, which I would take anyday, but I'm not sure the V shaped recovery is the most likely outcome. I'll let the Fed take me up further before I scrape off some more. The volatility is probably going to snap our heads off; I think I was up 65K one day last week or the week before, which is reminiscent of 2008/9.

Online gig runs out next month, so I'm just trying to coast into full SS age in 4 years without losing an arm and a leg.