Talking Stocks 2.0

[SMD]

I read all of this and think that many here did not live through 2007/08.

[Doc Savage]

Originally Posted by np2016

The fed action of $700 billion of QE and rate cut to almost 0% tonight because of the Wuhan virus will give the market a floor even though trading will be volatile initially. Anyone with money on the sidelines should slowly add to their positions of solid blue chip companies, with low balance sheet debt, and high growth. Markets will recover back to all time highs by summer and more retail and hedge fund money will be put into the market because money market accounts will pay pennies.

Do what you want with your money, but I see absolutely nothing to stop the continued downfall of this market for the foreseeable future. The Fed announced an emergency cut of interest rates to ZERO, and the result is Dow futures are down more than 1,000 points. I'm not sure how that helps the market find a floor. All major indices futures are down about 5%.

Expect a continued bumpy ride down. We'll have up days here and there, but the next few months will likely echo the past few weeks.

[superdog]

Originally Posted by SMD

I read all of this and think that many here did not live through 2007/08.

Please elaborate.

I’m sure many didn’t. But what’s your point?

[Bearxj86]

The Fed can always go negative :); ammo is unlimited. Money can always be printed. In that situation, is cash really king?

I think the bottom line is none of us know what is going to happen day to day. History will say if you are in the market, stick it out. Trying to time the market at this point is out of my competency. I'll add to my positions as a net buyer and then go on and go back to watches.

As for the Companies I am involved in - having lower interest rates means the hurdle rate for projects and the cost of doing business just got a lot lower.

For those of us with Mortgages, now might be the time to refinance and get a historically low rate.

[enjoythemusic]

Zero reserve requirements now.... let that sink in.

[Tha Baron]

Originally Posted by Doc Savage

Do what you want with your money, but I see absolutely nothing to stop the continued downfall of this market for the foreseeable future. The Fed announced an emergency cut of interest rates to ZERO, and the result is Dow futures are down more than 1,000 points. I'm not sure how that helps the market find a floor. All major indices futures are down about 5%.

Expect a continued bumpy ride down. We'll have up days here and there, but the next few months will likely echo the past few weeks.

Agreed... I’ll just leave this here

[superdog]

Originally Posted by enjoythemusic

Zero reserve requirements now.... let that sink in.

I’ve learned to appreciate and really listen to your thoughts.

Can you explain what you see as the implications?

[Letsgodiving]

US stock futures hit 'limit down' again.

[m j b]

Originally Posted by enjoythemusic

Zero reserve requirements now.... let that sink in.

Yeah, this concerns me as well.

[SMD]

Summary for a recent Goldman call:

From Goldman today:

Summary of Goldman Sachs Investor call...

where 1,500 companies dialed in. The key economic takeaways were:

50% of Americans will contract the virus (150m people) as it's very communicable. This is on a par with the common cold (Rhinovirus) of which there are about 200 strains and which the majority of Americans will get 2-4 per year.

70% of Germany will contract it (58M people). This is the next most relevant industrial economy to be affected.

Peak-virus is expected over the next eight weeks, declining thereafter.

The virus appears to be concentrated in a band between 30-50 degrees north latitude, meaning that like the common cold and flu, it prefers cold weather. The coming summer in the northern hemisphere should help. This is to say that the virus is likely seasonal.

Of those impacted 80% will be early-stage, 15% mid-stage and 5% critical-stage. Early-stage symptoms are like the common cold and mid-stage symptoms are like the flu; these are stay at home for two weeks and rest. 5% will be critical and highly weighted towards the elderly.

Mortality rate on average of up to 2%, heavily weight towards the elderly and immunocompromised; meaning up to 3m people (150m*.02). In the US about 3m/yr die mostly due to old age and disease, those two being highly correlated (as a percent very few from accidents). There will be significant overlap, so this does not mean 3m new deaths from the virus, it means elderly people dying sooner due to respiratory issues. This may however stress the healthcare system.

There is a debate as to how to address the virus pre-vaccine. The US is tending towards quarantine. The UK is tending towards allowing it to spread so that the population can develop a natural immunity. Quarantine is likely to be ineffective and result in significant economic damage but will slow the rate of transmission giving the healthcare system more time to deal with the case load.

China’s economy has been largely impacted which has affected raw materials and the global supply chain. It may take up to six months for it to recover.

Global GDP growth rate will be the lowest in 30 years at around 2%.

S&P 500 will see a negative growth rate of -15% to -20% for 2020 overall.

There will be economic damage from the virus itself, but the real damage is driven mostly by market psychology. Viruses have been with us forever. Stock markets should fully recover in the 2nd half of the year.

In the past week there has been a conflating of the impact of the virus with the developing oil price war between KSA and Russia. While reduced energy prices are generally good for industrial economies, the US is now a large energy exporter, so there has been a negative impact on the valuation of the domestic energy sector. This will continue for some time as the Russians are attempting to economically squeeze the American shale producers and the Saudi’s are caught in the middle and do not want to further cede market share to Russia or the US.

Technically the market generally has been looking for a reason to reset after the longest bull market in history.

There is NO systemic risk. No one is even talking about that. Governments are intervening in the markets to stabilize them, and the private banking sector is very well capitalized. It feels more like 9/11 than it does like 2008.

[EEpro]

This will not be ironed out in 2020. The lack of productive business cannot be recreated with low interest rates.

[Bearxj86]

Thanks for the summary.

Originally Posted by SMD

Summary for a recent Goldman call:

From Goldman today:

Summary of Goldman Sachs Investor call...

where 1,500 companies dialed in. The key economic takeaways were:

50% of Americans will contract the virus (150m people) as it's very communicable. This is on a par with the common cold (Rhinovirus) of which there are about 200 strains and which the majority of Americans will get 2-4 per year.

70% of Germany will contract it (58M people). This is the next most relevant industrial economy to be affected.

Peak-virus is expected over the next eight weeks, declining thereafter.

The virus appears to be concentrated in a band between 30-50 degrees north latitude, meaning that like the common cold and flu, it prefers cold weather. The coming summer in the northern hemisphere should help. This is to say that the virus is likely seasonal.

Of those impacted 80% will be early-stage, 15% mid-stage and 5% critical-stage. Early-stage symptoms are like the common cold and mid-stage symptoms are like the flu; these are stay at home for two weeks and rest. 5% will be critical and highly weighted towards the elderly.

Mortality rate on average of up to 2%, heavily weight towards the elderly and immunocompromised; meaning up to 3m people (150m*.02). In the US about 3m/yr die mostly due to old age and disease, those two being highly correlated (as a percent very few from accidents). There will be significant overlap, so this does not mean 3m new deaths from the virus, it means elderly people dying sooner due to respiratory issues. This may however stress the healthcare system.

There is a debate as to how to address the virus pre-vaccine. The US is tending towards quarantine. The UK is tending towards allowing it to spread so that the population can develop a natural immunity. Quarantine is likely to be ineffective and result in significant economic damage but will slow the rate of transmission giving the healthcare system more time to deal with the case load.

China’s economy has been largely impacted which has affected raw materials and the global supply chain. It may take up to six months for it to recover.

Global GDP growth rate will be the lowest in 30 years at around 2%.

S&P 500 will see a negative growth rate of -15% to -20% for 2020 overall.

There will be economic damage from the virus itself, but the real damage is driven mostly by market psychology. Viruses have been with us forever. Stock markets should fully recover in the 2nd half of the year.

In the past week there has been a conflating of the impact of the virus with the developing oil price war between KSA and Russia. While reduced energy prices are generally good for industrial economies, the US is now a large energy exporter, so there has been a negative impact on the valuation of the domestic energy sector. This will continue for some time as the Russians are attempting to economically squeeze the American shale producers and the Saudi’s are caught in the middle and do not want to further cede market share to Russia or the US.

Technically the market generally has been looking for a reason to reset after the longest bull market in history.

There is NO systemic risk. No one is even talking about that. Governments are intervening in the markets to stabilize them, and the private banking sector is very well capitalized. It feels more like 9/11 than it does like 2008.

[enjoythemusic]

Originally Posted by superdog

I’ve learned to appreciate and really listen to your thoughts.
Can you explain what you see as the implications?

jmho ymmv... banks backed by / members of the Federal Reserve just announced stopping stock buy backs combined with 0% swaps with main central bank buying MBS, etc now-failing financial holdings... scramble to avoid 'bankruptcy' of Fed member investment banks. Simply put, unlimited Fed 'liquidity' for everyone at 0% interest on 'loan'... or put another way, free money for 'anything', added with unlimited currency swaps with other major central bank currency product SKU.

Remember, the Federal Reserve Central bank has only a single SKU product... the United States Debt Note (aka Dollar). What is the intrinsic value?

Think of it like a company releasing another, let's say for the heck of it, 20% more stock qty. What does that do to the perceived 'value' of previously-released stock? What if the stock was from a company that, technically, has no intrinsic value and thus based on perception alone?

Perhaps the question is, how can you minimize your exposure to this failing product?

[Bearxj86]

Agreed. However in the short term the outlook is as follows for me:

1) Virus actual damage and exposure is limited until the Summer. These viruses die, people will die, it will be a tough few months but after that the key is the NEXT flu season, vaccine and getting back to work.

2) From an economic perspective, why not pull out the big guns? Analysts aren't calling the Fed cut to zero a "bazooka", they are calling it an "atom bomb". The sooner you squash any threat (perceived or actual) to the financial system or liquidity, the sooner we can all return to business. Economic engines take a long time to restart and this is the right move imho. Treating the virus exactly like an insect to me makes sense.

3) Once the dust settles, the Fed can "clean" up and re-institute restrictions in Q3/Q4 once the Virus has been squashed for good.

4) Bear in mind that EU govt debt is also a risk.

5) We're preparing for a full nation shutdown for 2 weeks to a month. Liquidity is very important.

6) In an era of free money, cash is NOT king. Say hyperinflation sets in - nice to have all that cash become worthless overnight eh?

Originally Posted by enjoythemusic

jmho ymmv... banks just announced stopping stock buy backs combined with 0% swaps for MBS, etc... scramble to avoid 'bankruptcy' of Fed member investment banks. Simply put, unlimited Fed 'liquidity' for everyone at 0% interest on loan... or put another way, free money for 'anything', added with unlimited currency swaps with other major central bank currency product SKU.

Remember, the Federal Reserve Central bank has only a single SKU product... the United States Debt Note (aka Dollar).

Perhaps the question is, how can you minimize your exposure to this failing product?

[walds11]

Originally Posted by bearxj86

Thanks for the summary.

+1

@SMD: is there a link to this?

[enjoythemusic]

Originally Posted by bearxj86

3) Once the dust settles, the Fed can "clean" up and re-institute restrictions in Q3/Q4 once the Virus has been squashed for good.

You make various good points, yet the above begs the question if the 2008 debacle was ever truly resolved? And of course how / if this time is 'different'?

Overall, yes we don't want mass panic and faith-based currency is all they got, yet in the long-term this 'solution' will cause consequences that need larger and larger 'solutions'. In a sense, the Fed is already trapped within a 'feedback loop' of ever-declining product value. How much lower can the value go until...…. or if users reject acceptance of said product (doubtful given the CONfidene game at play, yet never say never).

We live in interesting times.

PS: GS, JPM, etc goal is their own survival as is their parent company the Fed. Watch carefully what they do, not what they say. Remember, they have no ethical problems outright misleading you into selling you "shi^^y deals", as the major bank CEO plainly admitted to congress. Did CEO go to jail?

[superdog]

Really appreciate the comments here team.

A lot to think about. A lot to absorb.

[Duey]

You probably don't want to buy MGM or Wynn stock on Monday - Both are closing down for 2 weeks starting Tuesday

[EEpro]

Originally Posted by Duey

You probably don't want to buy MGM or Wynn stock on Monday - Both are closing down for 2 weeks starting Tuesday

My AD is inside the Wynn. I'll be sure to pop in on opening day.

[avidflyer]

Originally Posted by Duey

You probably don't want to buy MGM or Wynn stock on Monday - Both are closing down for 2 weeks starting Tuesday

Depends....

[SMD]

Originally Posted by superdog

Please elaborate.

I’m sure many didn’t. But what’s your point?

Way too optimistic of a rebound. This is not a quick bounce back. This is not a 2020 bounce back. ABS credit markets seized up July/August 2007. That was the canary in the coal mine. Everyone on the street saw deal flow collapse, saw the financial infrastructure seizing up. From there it was a slow fuse to Lehman and then ML and on. Market did not recover those losses for 6 years. We have no idea where bottom is let alone how long until we get back to where we started.

[SMD]

Originally Posted by walds11

+1

@SMD: is there a link to this?

No. Circulated internally at a bank.

[Letsgodiving]

Just received an e-mail from REI that they are closing all 162 of their retail stores until March 27th.

[walds11]

Originally Posted by SMD

No. Circulated internally at a bank.

Got it, thanks. This is the most informative info I’ve read so far.

[77T]

Originally Posted by SMD

Global GDP growth rate will be the lowest in 30 years at around 2%.

S&P 500 will see a negative growth rate of -15% to -20% for 2020 overall.

There will be economic damage from the virus itself, but the real damage is driven mostly by market psychology. Viruses have been with us forever. Stock markets should fully recover in the 2nd half of the year.

I stripped out the extraneous healthcare info to focus on the investment points. This is because without a link it is impossible to fact-check it.

As of yesterday’s call with the Fed, the GS strategic equities forecaster revised that S&P data. (The Fed call that millions heard live via CNBC in late afternoon)

GS chief equity strategist, David Kostin, says the S&P 500 will likely head back down by almost 10% in the next three months to 2,450. (Today’s S&P futures comport)

Kostin did deliver a measure of hope, reiterating his stance that V-shaped recoveries in stocks usually follow “event-driven” bear markets. He expects the S&P 500 to end 2020 at 3,200. (That’s about -5% from its high earlier this year)

This link is from Bloomberg but several financial networks have the same story.

https://www.bloomberg.com/news/artic...article_inline



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[beshannon]

Limit down this morning, a lot of info to digest.

Need to see how the markets respond at 10:00 before making decisions

[maximus1]

With the extended hours markets trading down 10% this might be red Monday.

[Kowaco]

Originally Posted by beshannon

Limit down this morning, a lot of info to digest.

Need to see how the markets respond at 10:00 before making decisions

I’m curious I’ve noticed the markets usually make a move about 10 is that because of the west coast or is something else going on


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[maximus1]

Originally Posted by beshannon

Limit down this morning, a lot of info to digest.

Need to see how the markets respond at 10:00 before making decisions

The SQQQ trading up 28.5% $29.70 bid in pre market. How much farther do we go?

[beshannon]

Originally Posted by Kowaco

I’m curious I’ve noticed the markets usually make a move about 10 is that because of the west coast or is something else going on


Sent from my iPad using Tapatalk

That is usually about the time when all the overnight orders and early trades have been paired off and the traders get a look at the day

Originally Posted by maximus1

The SQQQ trading up 28.5% $29.70 bid in pre market. How much farther do we go?

Well if I knew that I would not be here