What’s Up With the Market?

Machine Learner's picture
Rank: Human | 11,116

What's going on with the market? I have been so distracted by a whole bunch of life stuff and see everything falling sort of drastically. Not at alarming levels (I don't think) but definitely not usual. It is this COVID-19 freak out? Or something deeper underlying? Just interested to hear from the perspectives of people whose very jobs are to be as informed on the market as possible. Surprised I'm the first to make this post that I've seen.

Comments (52)

Controversial
Mar 10, 2020

Covid-19 + Incompetent response from the Trump Administration + Saudi Oil Price War + It was arguably overheated anyhow.

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Mar 10, 2020
CRE:

Covid-19 + Incompetent response from the Trump Administration + Saudi Oil Price War + It was arguably overheated anyhow.

Also, all of the above makes it likelier that Dems will have good results in Presidential and Legislative elections come November.

I wouldn't expect the sell-off to end anytime soon. These momentary pops (like a few times last week and today) are false flags imo.

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Mar 10, 2020

Where do you see this going? Nobody has a crystal ball. But interested to hear your opinion on the matter. Is this Nassim Taleb's black swan or just a temporary dip?

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

Previously Malta Monkey

Mar 10, 2020

Oh hell I don't know.

Paging @thebrofessor

Most Helpful
Mar 12, 2020

I was hoping a raging bull market would allow me to retire from WSO (been lurking and haven't posted since the peak ironically, and it was about wilder fury), no such luck.

first thing's first, all you youngins out there, welcome to your first bear market. get comfortable here, because this will not be over soon, and it will not feel good for a long time. that said, it's times like these that make a big long term difference in your CAGR.

  1. stop trying to predict, it's a waste of time. no one does it well, so the sooner you get that through your thick skulls (not you CRE), the sooner you can focus on what's actually important
  2. don't blow your load early. yes, you should be bargain hunting (they're out there now!), but don't spend all your cash at once, this is not going to be your only opportunity
  3. strap in. bear markets (with the lone exceptions of the Iraq War 1 and cuban missile crisis) tend to take a while to work themselves out, there's periods of a fake out upward move, bad news, and eventually a feeling of hopelessness. ever heard the phrase it's always darkest before the dawn? we're not there yet, so get ready for more pain.
  4. don't try to trade this. I am not a trader so maybe some of you disagree, but this is an opportunity to either pick individual names which are now suddenly cheap, buy index funds with excess cash, etc., but this is not a time to be in and out. so don't get cute, don't use market orders, and for the love of all that is holy, don't buy leveraged ETFs
  5. this aint that bad yet. if you invested $100 in SPY first of last year, you'd have $100.78 as of close of business today. look at a chart from 1970-1980, 2000-2010, and so on. if you think this is bad and can't see how much worse it could get, you should probably not be managing money for yourself or others.
  6. stop reading and watching the news. your thomson/bbg screen is all you need during times like this. look at valuations on your buy list, slowly work in your average cash, and ignore the media. you will be a better investor because of it
  7. focus on what actually makes you money: your job. this could easily turn into a recession with a subsequent spike in unemployment. your portfolio performance will mean shit if your work product has suffered. focus on what really matters, and unless you're a professional day trader, that's not your folio

now, I may not be back, I might be. I've grown tired of WSO, so we'll see. if you need me, you know where to get me. toodaloo mofos

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Mar 11, 2020

Nassim Taleb actually writes about globalization and epidemics in Black Swan. So, yes - it very much is.

Mar 10, 2020

What the FUCK is up Kyle?

Mar 14, 2020

real bros of simi valley

Mar 16, 2020

This really made me realize how California I am

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

Previously Malta Monkey

Mar 10, 2020

The virus might be a trigger for the recently volatility and declines but it is not the root cause of issue. The recent turbulence is likely being caused by excessive valuations, The virus will cause expected earnings to fall and therefore valuations become unjustifiably high. In addition, valuations were high even before the virus became an issue.

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Mar 11, 2020

Makes sense. Do you believe we will see a correction for valuations?

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

Previously Malta Monkey

Mar 11, 2020

We have already seen a correction in valuations. How much of a correction is the issue? I have concerns about the level of volatility, which is usually associated with poor stock market performance. With bear markets, it is common to see large swings in performance. I also have concerns about the government's ability to take any action (fiscal or monetary) that would have a meaningful impact on the economy and market. I do not think the payroll tax cut is a good idea because the effects might be felt too far into the future. A few extra bucks in one's paycheck is not likely going to reduce investor concerns about the economy or markets

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Funniest
Mar 11, 2020

With lunatics like MBS and Putin at the wheel, what can you expect?

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Mar 11, 2020

The response to pandemics can / is hard on business. Depending on where you live, the restrictions can vary from "keep a disinfection dispenser close to entrances" to "close everything". Various European counties have started limiting the number of people that can be in the same vicinity, so you can imagine the effects that has on any business which deals with larger groups of people.

Not to mention that this can last for months - IIRC, SARS had peak time period which lasted for something like two months - and that was something that got contained reasonably well. If COVID-19 starts spreading like wildfire, it's gonna be a shit-show like nothing we've ever seen before, as far as business earnings go.

Mar 11, 2020

https://www.tierneyrealnewsnetwork.com/post/real-n... Thousands of people in the US have died from the common flu this year and the media says NOTHING about that - but is creating a huge panic around the 37 US deaths from the Wuhan virus.

DR DREW: "A bad flu season is 80,000 dead and we've got 18,000 dead this year from the flu so far and 100 dead from Corona. Which should you be worried about, influenza or Corona? 80,000 versus 100, it's not a trick question. What I have a problem with is the panic and the fact that businesses are getting destroyed and people's lives are getting upended. Not by the virus, but by the panic. The panic must stop, and the press they really need to be held accountable, because they are hurting people."

Array

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Mar 11, 2020

I may have missed this but is the Coronavirus or COVID-19 seasonal?

  • Prospect in Other
Mar 11, 2020

That's what I've heard. Doesn't like warmth or humidity.

Mar 12, 2020
WolfofWSO:

https://www.tierneyrealnewsnetwork.com/post/real-n... Thousands of people in the US have died from the common flu this year and the media says NOTHING about that - but is creating a huge panic around the 37 US deaths from the Wuhan virus.

DR DREW: "A bad flu season is 80,000 dead and we've got 18,000 dead this year from the flu so far and 100 dead from Corona. Which should you be worried about, influenza or Corona? 80,000 versus 100, it's not a trick question. What I have a problem with is the panic and the fact that businesses are getting destroyed and people's lives are getting upended. Not by the virus, but by the panic. The panic must stop, and the press they really need to be held accountable, because they are hurting people."

Are you really blaming the media here? The coronavirus is ~30x deadlir than the flu. Current numbers are somewhere around ~3%.... We need to make a concerted effort to stop widespread contraction otherwise it will especially ravage the senior population (15% death rate at 80+, ~4% at 60-69, and 8% at 70-7).

The media didn't make China shut their entire country down. The media isn't making Italy basically shut their entire country down. The media hasn't caused the NBA to end its season. This is our sober reality. Comparing the flu which has a 0.1% death rate to the coronavirus is the height of ignorance. If coronavirus becomes as widespread as the common flu, we're going to get alot more than 80,000 dead. Which is why every competent government is trying to limit it.

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Mar 12, 2020

i think the biggest concern is that you have flu shot but no vacc yet for Conora. Containment might slow down but can't stop. Fingers crossed for the summer heat...

Mar 12, 2020
BobTheBaker:

The media isn't making Italy basically shut their entire country down.

And the spread rate in the US is at a similar rate to Italy

Mar 14, 2020
BobTheBaker]
[quote=WolfofWSO:

https://www.tierneyrealnewsnetwork.com/post/real-n...
Are you really blaming the media here?

This is straight out of the Republican playbook in the era of Trump. Everything is the media's fault to these knuckle draggers. Dr. Drew is one of the few on the right with even a basic understanding of science.

Mar 12, 2020
WolfofWSO:

Thousands of people in the US have died from the common flu this year and the media says NOTHING about that - but is creating a huge panic around the 37 US deaths from the Wuhan virus.

DR DREW: "A bad flu season is 80,000 dead and we've got 18,000 dead this year from the flu so far and 100 dead from Corona. Which should you be worried about, influenza or Corona? 80,000 versus 100, it's not a trick question. What I have a problem with is the panic and the fact that businesses are getting destroyed and people's lives are getting upended. Not by the virus, but by the panic. The panic must stop, and the press they really need to be held accountable, because they are hurting people."

Dr. Drew is a TV hack.

There are two important distinctions:

  1. Covid-19 is 10x as deadly as the flu. Full stop. The flu has killed a greater number of people because it has been around longer. Covid-19 just recently hit America. The flu has been here all flu season.
  2. There is a flu shot. There is literally a vaccine right now. There will not a be a coronavirus vaccine for 12-18 months.
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Mar 14, 2020

This is not political. My brother is a fighter pilot and I don't vote, period. But don't dumb yourself down to the media's level where there's some political bent to this conversation.

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  • Prospect in RE - Comm
Mar 18, 2020

It's not necessarily panic, and it's somewhat foolish to compare it to the flu, seeing as though Covid-19 has just been introduced and hasn't had a real run at things. Give it time.

What we do know is that it is deadly for underlying health conditions and over 60's, and spreads like wildfire. The impact is not necessarily on younger people, but on their family members they can pass it on to (without even realising they have the virus). But in Europe (where I'm writing from) we are seeing more and more younger people (20-35y.o.) without any underlying health conditions being taken into critical care. Things are not pretty.
Give it time and that'll be the US too. A huge influx of people in critical condition causes a huge strain on all health infrastructure which is the real issue. In Italy, a country with more ICU beds than the US, they are unfortunately having to decide who to treat based off of their "likelihood" of survival as there simply isn't the infrastructure to treat everyone all at once.

What Bill Ackman was saying earlier on CNBC about shutting the country down for 30 days is what's needed, as that will stop the virus. Otherwise, it will drag on and on forcing a bigger recession than necessary. The UK tried to implement herd immunity but realised quickly that it wouldn't work as well as trying to flatten the curve.

This isn't panic over nothing, this is deadly serious.

Mar 11, 2020

Honestly I think covid 19 is the catalyst that could be the trigger for the next recession. After it gets cured I think we'll have to deal with the oil companies that defaulted and the junk bond market, CLO funds, maybe SPACs and SPV depending on what type of business they invested in. Also CDO market could heat up from this.

Mar 12, 2020

While we certainly have to be concerned about heath related issues stemming from the Corona virus, it is just not clear how serious this virus is for the average person. With that said, the virus continues to have a substantial impact on the economy/markets and seems to be getting worse every day. Economic growth in certain sectors is slowing down dramatically. This reduces earnings expectations and increases valuations. I am very surprised that the NBA is suspending the season. This may lead to other sports suspending their seasons.

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Mar 12, 2020
financeabc:

While we certainly have to be concerned about heath related issues stemming from the Corona virus, it is just not clear how serious this virus is for the average person.

It is actually very clear. For the vast majority of people who are not elderly or immuno-compromized, it will not be that big of a deal. It might feel like a cold, or at worst, a rough bout of bronchitis.

Overall though, it is roughly 10x as deadly as the flu. This is driven almost entirely by elderly deaths.

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Mar 12, 2020

I tend to agree but what matters most (for the economy and markets) is how people and institutions have reacted to it Their reactions have assumed that there is a possibility that the virus could have a negative impact on the average person.

Mar 13, 2020

I thought a decrease in future earnings expectations decreases valuations, not increases?

Mar 13, 2020

not exactly

take company ABC, earnings of $10, price of $200 a share, PE = 20

if forward earnings are expected to decline 10% to $9, valuation increases assuming no drop in P. 200/9=22.22

if, however, the price falls 20% on the expectation of a 10% earnings decline, the P goes to $160 for a PE of 17.78, or a valuation decline of roughly 12%.

so, if prices decline but earnings are also expected to decline, that means that the actual discount from fair value is less than the price decline

TLDR - if CV crushes earnings (it will), this decline has NOT made everything 25% cheaper, more like 10-15% cheaper (back of the envelope)

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Mar 12, 2020
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