Coronavirus Stimulus - Will it help?

teddythebear's picture
Rank: Neanderthal | 2,708

Congress is at gridlock again...no surprise there. They all have different ideas for the bill. However, I imagine they'll come to an agreement on something soon or we are all screwed. If we do see a $2T injection into the economy, do you think this can cause a V-shaped recovery in the market or is there a chance that significant damage has been done to the consumer that will take time. Thoughts?

Comments (52)

Mar 24, 2020

This is a good and timely topic. Well, fiscal stimulus is certainly better than monetary stimulus, which I do not think made a lot of sense given that rates are already low. Markets should react positively based on the news of the stimulus. Also, I believe fiscal stimulus is appropriate given the environment. It is difficult to say if that is why futures are up alot today. Whether or not the stimulus will help beyond the near term is unclear. TBD

Mar 24, 2020

I have such a hard time understanding why people think dumping cash into the economy is going to bounce back.

T&E will be restricted no matter what, retail will take a hit because whether people have $40 or $4,000 in their pocket they aren't leaving their house to casually go shopping.

Companies shut down to quarantine -> people stay home to quarantine -> goods & services don't get purchased b/c of this -> firm revenue projections take a hit -> reflected in financials -> reflected in valuations.

70% of equity markets owned by institutional investors. Suzie and Johnny from next door being able to afford food / rent / utilities (not saying this is a bad thing, obviously hourly workers need help) doesn't mean the market will bounce 30%...

I know the flow from above is pretty simplistic but I have to believe that it's at least 60-70% of the cause of the decline, in addition to oil tensions, consumer sentiment (which IDK if this fiscal stimulus will help that), global growth concerns.

Americans having cash on hand doesn't help apple start up production, delta bring 70% of their fleet out of retirement, or open up borders for imports / exports / T&E / travel spend to jump back...

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Controversial
Mar 24, 2020

Until the virus outbreak heals, the economy won't heal. This did not start as an economic crisis, its a healthcare crisis. Stay home and ignore Trump and Co. who want to reopen the economy early so he can get re-elected even if Grandpa dies.

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Mar 24, 2020

It's almost as if he realizes his fans won't blame him for grandpa Joe dying, but they'll blame the Chinese government (which is rightful imo, they did try to keep it under the rug and should've restricted flying. Not saying the two blames are mutually exclusive).

"The three most harmful addictions are heroin, carbohydrates, and a monthly salary." - Nassim Taleb

Most Helpful
Mar 24, 2020
Malta Monkey:

It's almost as if he realizes his fans won't blame him for grandpa Joe dying, but they'll blame the Chinese government (which is rightful imo, they did try to keep it under the rug and should've restricted flying. Not saying the two blames are mutually exclusive).

Both the Chinese govt. and the Trump administration took too long to react, dismissed the initial concern, and tried to shirk blame for their respective responses. We can blame both.

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Mar 27, 2020

the US fucked up the containment of the virus pretty bad though

didn't help that trump said it was a dem hoax and half the country believed him

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Mar 24, 2020

I think it needs to be separated out into two pieces. The first needs to be for individuals and small business who will invariably suffer as a result. The second needs to be for corporates who are large enough to theoretically make due. I want to really focus on the distinction here because individuals and small businesses are going to suffer far worse than companies who can access the public markets for funding (even if it is drying up). On the individual side, it's not about spending and going casually shopping. It's about being able to pay the bills. If you have a labor force that can't survive because of this, it's going to be much harder to bounce back from this. Being unemployed is looked at as a Stigma by people even if there's a damn good reason behind it. Being long term unemployed? That's even worse of a stigma to have. Those are the folks who need help if you ask me. For large companies (especially ones that have access to the public and privatte markets for debt and equity issuance) and industries who are asking for help, I want as many strings as possible put on the help - and I don't think it's unfair to ask that strings be attached. That's part of the reason that I want it broken up into two bills. You can't shoehorn everything into one bill when you're dealing with two very different population sets. It just makes for a bill that doesn't work and does more harm than good for those that need it most. Requiring a taxpayer relief bill to include terms that require Green New Deal regulations for the airlines doesn't 'help and only delays economic relief from happening. If you want to include that in a corporate focused relief bill, then fine - but without separating out the tax payers and small businesses, it just shows no one in Washington is willing to put aside petty differences to actually help people.

Mar 24, 2020

Agreed but I think a further distinction to make is that giving individuals / SMB the stimulus they need to survive is NOT going to boost the markets back up (at least not fully).

The aid to Individuals /SMB needs to come from long term viewpoints of taking care of the country and it's populace, while FULLY understanding that it may, for this administration, be a "thankless" act. (I.E. no market bounce-back / no way to gloat / quantify their actions).

Mar 24, 2020
FinancelsWacc:

Agreed but I think a further distinction to make is that giving individuals / SMB the stimulus they need to survive is NOT going to boost the markets back up (at least not fully).

The aid to Individuals /SMB needs to come from long term viewpoints of taking care of the country and it's populace, while FULLY understanding that it may, for this administration, be a "thankless" act. (I.E. no market bounce-back / no way to gloat / quantify their actions).

I mean, expecting this Administration to do anything even for thanks is a tall order. Mr Trump wants remuneration for his help, not just plaudits.

That being said, bringing the markets "fully back up" shouldn't be a goal. Having the Dow at 30,000 should never have been a policy goal, and if you ask me (no one is, thankfully), part of the reason this is hurting so bad is because we've had three years of policymaking geared towards hitting all-time highs in the markets. Having Americans able to afford food and healthcare and rent is a valid policy goal. I have money in the markets, and I have lost/will lose as much as anyone else, and I think it's fine that the Dow stabilizes at 20,000 or whatever.

Also, to @Frieds" point about larger companies accessing public markets - that's spot on. I don't give a shit that American Airlines wants a bailout; they should go ahead and water down their stock and issue another 13b or whatever their total buybacks were to the markets, and take the resulting hit. Enough fucking nonsense of privatized gains and socialized losses.

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Mar 24, 2020

This will not be a V shaped recovery, This is more like a slow, upward sloping L. $2T won't come close to replacing the lost GDP.

Few players recall big pots they have won, strange as it seems, but every player can remember with remarkable accuracy the outstanding tough beats of his career.

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Mar 25, 2020
WillHunting:

This will not be a V shaped recovery, This is more like a slow, upward sloping L. $2T won't come close to replacing the lost GDP.

Agreed. Al these folks saying we will be right back to recent levels by end of year or next year should get out of this industry. This triggered a much more severe slowdown than 2008 and that took almost a decade to fully bounce back

This meltdown will be one for the history books and there's a real risk this breaks the system so bad we don't recover but instead rebuild in a different direction entirely

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Mar 25, 2020

Took almost a decade to bounce back?

Please show your work...

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Mar 24, 2020

The stimulus will only soften the worst case scenario. It's unlikely it will completely eliminate it. Only a vaccine or full control of its spread will eliminate it.

Mar 25, 2020

All I know is that bulls better enjoy Wendsday because markets are plummeting by Thursday unemployment claims.

Buying tesla weeklies is literally free money.

Mar 27, 2020

Well, this aged poorly.

Don't @ me

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Mar 25, 2020

It could be worse. You could have the libs in power for once:

This when 70% of victims are men.

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Mar 25, 2020
neink:

It could be worse. You could have the libs in power for once:

This when 70% of victims are men.

SB. The media has to pull gender into everything

Always go to other people's funerals, otherwise they won't come to yours.

Mar 25, 2020

By far the stupidest thing I've ever read. She's getting ROASTED in the comments & rightfully so.
MIND BOGGLING HOW SHE GOT ELECTED to the Australian Senate, but then again, we have AOC so can we really say anything

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Mar 25, 2020

But what about the other 30%?!

Mar 27, 2020

How is that relevant to American politics?

Mar 27, 2020

It's not really any different from the BS Pelosi tried to add to the bill.

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Mar 25, 2020

In the short term, I don't mind lol. My portfolio's up 20% in the past two days.

Always go to other people's funerals, otherwise they won't come to yours.

Funniest
Mar 25, 2020

I wonder how all those Jefferies associates will spend their $1200.

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Mar 25, 2020
WolfofWSO:

I wonder how all those Jefferies associates will spend their $1200.

The check phases out after $99,000 in income for someone filing as single. Don't think alot of us are getting that check bruv.

Mar 27, 2020

Obviously some didn't get the joke...

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Mar 25, 2020

Lot of deleveraging needs to be done and I think it will take a long time. Stimulus always helps but I wouldn't call it a v-shaped recovery at all. Think of how long it takes to unwind all the dislocations from 10 years of easy money and all that bad investment.

Maybe the Real Estate experts here can weigh in on this, but as a non-RE expert it feels to me that there's been a ton of overbuilding in hotels and offices.

I've heard it estimated by macro guys that the sum total of value loss in the US will be 10T, and that's being offset by $6T in stimulus now (2T from this bill and 4T of estimated impact from Fed actions). Only solves half the problem.

Of course there will be some continued benefit from holding rates at zero for a while, and maybe another stimulus bill down the line. But v-shaped recovery, I can't see it happening.

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Mar 31, 2020
Dr. Rahma Dikhinmahas:

Lot of deleveraging needs to be done and I think it will take a long time. Stimulus always helps but I wouldn't call it a v-shaped recovery at all. Think of how long it takes to unwind all the dislocations from 10 years of easy money and all that bad investment.

Maybe the Real Estate experts here can weigh in on this, but as a non-RE expert it feels to me that there's been a ton of overbuilding in hotels and offices.

I've heard it estimated by macro guys that the sum total of value loss in the US will be 10T, and that's being offset by $6T in stimulus now (2T from this bill and 4T of estimated impact from Fed actions). Only solves half the problem.

Of course there will be some continued benefit from holding rates at zero for a while, and maybe another stimulus bill down the line. But v-shaped recovery, I can't see it happening.

I agree with this. Everything everywhere is overleveraged on the premise that markets will keep going up. Now they're not and they won't for a while.

I think a bail out will ease the suffering of the average person and prevent America from unraveling entirely, but I don't think for a second we're going to get a V recovery. The "rally" we see now is dead cat bounce.

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Mar 26, 2020

It looks like the stimulus may have given the stock market a boost, at least for now. I do wonder where the government is going to get the money to fund the stimulus? We already have a large deficit and now we are adding 2 trillion to the number.

Mar 26, 2020
financeabc:

It looks like the stimulus may have given the stock market a boost, at least for now. I do wonder where the government is going to get the money to fund the stimulus? We already have a large deficit and now we are adding 2 trillion to the number.

Don't forget about the addition of 1.5T from the tax cut a couple years ago. At least Bernie claims MMT.

Mar 26, 2020

US just passed China in total cases: 81,864 vs. 81,285. Stay safe everyone. https://www.worldometers.info/coronavirus/

Few players recall big pots they have won, strange as it seems, but every player can remember with remarkable accuracy the outstanding tough beats of his career.

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Mar 26, 2020

If economies are relative to each other, then if all major countries took a hit (ie increased money supply), then nothing really happened?

Mar 31, 2020
odog808:

If economies are relative to each other, then if all major countries took a hit (ie increased money supply), then nothing really happened?

LoL from an FX trading perspective...theoretically yes. Thing is they crash at different times as the virus hits different places over time. As far as investing goes, dead wrong: you had ten dollars, you spent five bucks on a sandwich and invested five, now that five invested is one, but a sandwich is still five bucks...you can wait for it to go back up to five but will die of starvation in the meantime. Hence the major recession I expect soon :(

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Mar 26, 2020

Weird markets are performing well as we are ENTERING a recession..

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Mar 26, 2020

Markets typically fall in anticipation of a recession, which is probably why the stock market had lost 30% prior to a few days ago. I am not sure where we go from here. Based on the environment, I would think that the recession would be deeper than we saw in 2009ish

Mar 26, 2020
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Mar 26, 2020