Coronavirus and the economy.

Señor Tony

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If there is one this that markets hate, it is uncertainty. The past couple of months have reflected this with record daily losses followed by large gains in many global markets. Nobody knows how bad or how long this will end up being and market volitility is reflecting that.

The Australian reserve bank has already stepped in once to provide emergency cash in repo markets to avoid a banking liquidity crisis. I understand the US Federal reserve has done something similar. Possibly other countries have as well?

Interest rates are already at record lows in many countries, will we see more countries with negative rates?

I can't even begin to get my head around how hard this is going to be on so many small businesses.

Pick an industry that involves gatherings of large people or travel and then expand the small businesses, contractors and sole traders that will be affected.

Take something like weddings: caterers, bands, florists, venues for hire, wait staff, photographers, dress shops, tuxedo hire places, wedding planners...

How about large annual cultural festivals: think state fairs, food and wine festivals, multi-day music festivals, rodeos, art festivals etc where many participants or vendors get a large percentage of their annual earnings from ONE event.

Professional sporting events: game day ticket sales and stadium concessions. Pre-gaming at bars, pubs and restaurants. People watching sports games in bars and pubs.

Don't even get me started on the travel and tourism industry.

Still very early days but if the GFC can be reflected on as a "trickle-down" financial crisis I believe Covid-19 will develop as a "trickle-up" financial crisis.

Let's try to keep partisan politics out of this discussion and focus on the economics of the pandemic in general.
 

DrStrange

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The Federal Reserve in the USA just cut rates to 0.00% - 0.25%, the lowest in out history. This terrified the stock market, causing it to move limit down in after hours trading Sunday night. The reason being, a special Fed meeting, ON SUNDAY, to set the lowest rate in history means there are flash indicators showing something horrible coming. Not in a health sense, but in an economic sense.

Yes, you will see more negative rate environments. Not that such things will help in the short run, but they might be useful as we recover.

The meta problem is, the effects of a coronavirus crash aren't sensitive to financial remedies. Much of the economy is on lockdown. Customers aren't getting paid so they aren't very inclined to spend money. And even if they want to spend money, many of the places they might spend are closed. So low interest rates can't stimulate. Business loans aren't helpful beyond allowing a shuttered company perhaps stay alive in hibernation until after the public life gets back to normal.

What would be more helpful would be a source of money for people out of work. So, sick pay, expanded unemployment, paid family leave, direct cash payments are sorts of things that might be helpful for individuals. Some sort of debt / rent holiday for business owners, but I can't figure how to make that work. I think we are going to see a long period of distress in the business community.

Also, it isn't limited to the obvious victims. The USA economy is 70% services. People being out of work (or afraid they might be) / people being locked in their homes under quarantine is not conducive to success for most service businesses. Much of the lost business is lost forever. Dinners I don't eat out for example. Or trips I didn't take. Or movies I didn't see. I think the overall contraction is going to be astonishingly sharp.

When the Fed "pulls the fire alarm for a 5-alarm fire" we might not be able to see the fire, but we know it is going to be a big deal. Nothing anyone has said leads me to think the next two quarters are going to be anything less than brutal.

My little contribution is to leave big tips for small meals. $10 or $20 for a burger or a bag of breakfast tacos or fried chicken plate. Maybe $25 or $30 for a meal. Roughly I tip 100% the last couple of weeks. I know it is a little spoon of water on a forest fire, but at least I can make a few people smile. Somehow I think meals eaten out are going to be a thing of the past very soon.

The time for financial stimulus will come on the back side of the medical problem. Things aren't going to rebound nearly as fast as they fell. I think 3rd maybe 4th quarter 2020 would be about right. Worst case first quarter 2021. That isn't "back to normal", it is more like "not so afraid anymore".

it is going to be a bumpy ride -=- DrStrange
 

davin

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When u say they cut rates 0.00-0.25 are you talking interest rates on home mortgage? Sorry I’m not knowledgeable in this aspect
 

DrStrange

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The Fed rates are roughly the prices banks pay to borrow money from the government. That sort of sets the rates banks charge each other for very short term loans.

Also this time around, it appears the Fed will loan banks money for longer periods, up to three months rather than overnight. This will keep banks from being wiped out in a panic and is QUITE remarkable. I can't say with certainty until I read the morning's press. Everything about today's Fed action is remarkable.

Your mortgage rates will be somewhat higher, but still they likely will hit all time lows in the coming weeks. A great chance to refinance, if you can,
 

davin

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The Fed rates are roughly the prices banks pay to borrow money from the government. That sort of sets the rates banks charge each other for very short term loans.

Also this time around, it appears the Fed will loan banks money for longer periods, up to three months rather than overnight. This will keep banks from being wiped out in a panic and is QUITE remarkable. I can't say with certainty until I read the morning's press. Everything about today's Fed action is remarkable.

Your mortgage rates will be somewhat higher, but still they likely will hit all time lows in the coming weeks. A great chance to refinance, if you can,
Or buy
 

Anthony Martino

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Jenn and I went to our favorite local Chinese restaurant for dinner tonight and they were very aporeciative, as this whole situation is definetly hurting their business

Bill was $30 and left a $10 tip, not quite Dr Strange level of generosity, but trying to give more than usual
 

inca911

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Looking to put $$$ into the market fairly soon. I suspect Monday will be a rough day and right now I’m thinking of going with an index fund plus these individual companies: Disney, 3M, Medtronic, and Boeing. Apple is a maybe. Any individual stock recommendations and/or reasons for/against any of these? I’m not touching the cruise lines, as I don’t think they will recover very well at all. I think the floating Petri dish aspect of cruises is going to really change that Industry. Thanks for sharing!
 
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Sparty

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Looking to put $200k into the market fairly soon. I suspect Monday will be a rough day and right now I’m thinking of going with an index fund plus these individual companies: Disney, 3M, Medtronic, and Boeing. Apple is a maybe. Any individual stock recommendations and/or reasons for/against any of these? I’m not touching the cruise lines, as I don’t think they will recover very well at all. I think the floating Petri dish aspect of cruises is going to really change that Industry. Thanks for sharing!
Personally, I’d stay away from Disney and pick a good Pharma company or two instead.
 

Big Jilm

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On the topic of a ReFi

3.375% Fixed on a 30 year Conventional-- that is what I am getting on my refi, not to mention I am finally getting rid of my pesky PMI and dropping the rate from 4.0%. It is in underwriting NOW. Anyone doing any better? What do you guys think refinance mortgage rates will fall to in the coming weeks??
 

Señor Tony

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Looking to put $200k into the market fairly soon. I suspect Monday will be a rough day and right now I’m thinking of going with an index fund plus these individual companies: Disney, 3M, Medtronic, and Boeing. Apple is a maybe. Any individual stock recommendations and/or reasons for/against any of these? I’m not touching the cruise lines, as I don’t think they will recover very well at all. I think the floating Petri dish aspect of cruises is going to really change that Industry. Thanks for sharing!

I'm also waiting to deploy some excess cash on top of my regular index investing schedule.

I'm leaning toward waiting until Q1 results season to get a better sense of how everything is playing out.
 

aaronroch

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Looking to put $200k into the market fairly soon. I suspect Monday will be a rough day and right now I’m thinking of going with an index fund plus these individual companies: Disney, 3M, Medtronic, and Boeing. Apple is a maybe. Any individual stock recommendations and/or reasons for/against any of these? I’m not touching the cruise lines, as I don’t think they will recover very well at all. I think the floating Petri dish aspect of cruises is going to really change that Industry. Thanks for sharing!
Wow- really?!? An index fund?
Do you think the worst is not ahead of us? Am intensely curious why you are thinking of putting money in soon (assuming soon is like within the next few weeks..)
 

inca911

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Perfectly timing the bottom will be challenging. My thinking is that we will be low enough to do something this week. Even if the market does go lower, I think there is strong value on these right now. Potential $50-100/share upside.
 

Tarheel4Life

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Speaking of economy, look at this human piece of filth who bought stuff people wanted to stay healthy and then sold them at tremendous markups at Amazon:

“Coronavirus: Tennessee brothers hoard nearly 18,000 bottles of hand sanitizer, say they have nowhere to sell it”

https://www.foxnews.com/us/coronavirus-tennessee-brothers-sanitizer

They tried to defend it by calling it “arbitrage”. No, it’s called “your being a selfish piece of shit and trying to profit from a pandemic on your fellow citizens”.

Despicable.

How does a rate cut help anyone? Businesses aren’t looking to take loans - they want this crisis over with so they can reopen.

This was a move that only an administration with blinders on that were economy-only focused could’ve made. Put that much energy towards COVID-19 testing and temperature stations and healthcare worker protection and respirators and ventilators and masks and reimbursing hourly workers that are out of a job.

It’s hard to get excited about a rate cut when you’re going to lose your income.

The federal response to this has been pathetic.
 

Lemonzest

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Looking to put $200k into the market fairly soon. I suspect Monday will be a rough day and right now I’m thinking of going with an index fund plus these individual companies: Disney, 3M, Medtronic, and Boeing. Apple is a maybe. Any individual stock recommendations and/or reasons for/against any of these? I’m not touching the cruise lines, as I don’t think they will recover very well at all. I think the floating Petri dish aspect of cruises is going to really change that Industry. Thanks for sharing!

I love the 3M pick and somehow their price has actually gone down over the past month. Id pass on Apple since I believe their best days are in the past, likewise with Boeing.

I would wait to pull the trigger until the full effects of the virus have hit the US. It could get much worse.
 

EventHorizonVII

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Market has been bananas. I'm waiting to see if SPY hits $231 or if it will recover sooner. Most of my investment portfolio is in tech. About 5 years ago I dropped $20k in to AMD. They were at $1.67 then. Did that completely out of spite because I hate Intel's price gouging. AMD closed at $43.90 on 3/13. It's treated me well but the other places Iv'e dabbled in outside of tech are murdering me.

If SPY hits $231, I'll buy more, it will recover without a doubt. I never sell, always buying.
 

slisk250

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The Federal Reserve in the USA just cut rates to 0.00% - 0.25%, the lowest in out history. This terrified the stock market, causing it to move limit down in after hours trading Sunday night. The reason being, a special Fed meeting, ON SUNDAY, to set the lowest rate in history means there are flash indicators showing something horrible coming. Not in a health sense, but in an economic sense.

Yes, you will see more negative rate environments. Not that such things will help in the short run, but they might be useful as we recover.

The meta problem is, the effects of a coronavirus crash aren't sensitive to financial remedies. Much of the economy is on lockdown. Customers aren't getting paid so they aren't very inclined to spend money. And even if they want to spend money, many of the places they might spend are closed. So low interest rates can't stimulate. Business loans aren't helpful beyond allowing a shuttered company perhaps stay alive in hibernation until after the public life gets back to normal.

What would be more helpful would be a source of money for people out of work. So, sick pay, expanded unemployment, paid family leave, direct cash payments are sorts of things that might be helpful for individuals. Some sort of debt / rent holiday for business owners, but I can't figure how to make that work. I think we are going to see a long period of distress in the business community.

Also, it isn't limited to the obvious victims. The USA economy is 70% services. People being out of work (or afraid they might be) / people being locked in their homes under quarantine is not conducive to success for most service businesses. Much of the lost business is lost forever. Dinners I don't eat out for example. Or trips I didn't take. Or movies I didn't see. I think the overall contraction is going to be astonishingly sharp.

When the Fed "pulls the fire alarm for a 5-alarm fire" we might not be able to see the fire, but we know it is going to be a big deal. Nothing anyone has said leads me to think the next two quarters are going to be anything less than brutal.

My little contribution is to leave big tips for small meals. $10 or $20 for a burger or a bag of breakfast tacos or fried chicken plate. Maybe $25 or $30 for a meal. Roughly I tip 100% the last couple of weeks. I know it is a little spoon of water on a forest fire, but at least I can make a few people smile. Somehow I think meals eaten out are going to be a thing of the past very soon.

The time for financial stimulus will come on the back side of the medical problem. Things aren't going to rebound nearly as fast as they fell. I think 3rd maybe 4th quarter 2020 would be about right. Worst case first quarter 2021. That isn't "back to normal", it is more like "not so afraid anymore".

it is going to be a bumpy ride -=- DrStrange

Yeah... I think the economic fallout from this could be something the states hasn't experienced since the 1930s...regardless of what administration is in place. This is going to hit everyone in the pocketbook. It has already cost me about 6K in additional travel costs related to my kids. Schools closing also creates higher bills as we figure out room and board for the university kids that just were bounced. I still have to figure what feeding/boarding my kids will cost. Hopefully the universities respond with room and board refunds for the families this impacts sooner than later. These folks need relief, not just wall street.
 

DrStrange

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Invest in tranches rather than all at once in my opinion. The bottom for this will be quite tricky because we don't know how bad it might get. Though the Fed gave us a clue that they see bad times just over the horizon. Split you cash into several packages and dollar cost average.

I have a sizable chunk of funding coming from a real estate sale < I hope > next Monday. My target for the S&P is 2,300 for the first of five purchases < S&P closed at 2,700 on Friday > . I rarely touch individual companies these days, and wouldn't encourage anyone to do so without doing the homework.

I expect several months of bad to terrible financial news. I also expect panic over the health risks, likely more than is warranted. So I am not so eager to make all of my investments. Let's get the true picture of how many thousands of sick people are really in the USA. Let's see how sharp the contraction looks. Let's wait just a few weeks and see what unfolds.

As for mortgage rates: I think they are going lower, maybe a full percent. Even so, please don't wait. Lenders could easily shut off the tap and then you are screwed. You can always try a refinance in the next ninety days - I wouldn't take the risk the deals are all going to go poof. Also, no matter how sure you are that you aren't getting laid off, you aren't that sure.

True story. I had a home and lots of acreage up for sale in 2008 just as the crash happened. I ended up having to owner finance a huge note because my buyer with a 800ish credit score couldn't get a loan even with a 20% down payment. Banks get crazy cautious in bad times. There is a reason why the fed is extending three month lines of credit for banks.
 

ekricket

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In this age of social distancing I’d think UPS is going to be doing pretty good delivering stuff right and left. It’s probably a trend that’s going to take off even more, so delivery companies are going to do good.

Other areas that might do well
Netflix
Board game companies
Online gaming companies
Pizza chains that deliver
Marijuana dealers (legal and illegal)
Beer companies
Hobby Lobby and the like
Bicycles and motorcycles
Pet adoptions
Golf courses
And as it warms up fishing equipment
I forgot this one, but Scams will also do well
Plumbers too
 
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Darson

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People have been predicting Apple’s downfall for decades. They’ve all been wrong, it’s an incredibly well run company.

I don’t think we’ve seen the bottom yet. The only way there will be a rapid recovery is if the government spends their way out by either dropping taxes on low earners or by just handing out cash. I can’t see that coming.

This is what I'm paying attention to (and I'm no pro so following my advice is not recommended - research for yourself):

Well run companies with lots of cash who's business model isn't likely to be overly disrupted and should be quick to recover: Apple, Google, Facebook, Amazon, Microsoft. Note I don't include Netflix here - of all the tech stocks, they have dropped the least so I don't see all that much upside.

Somewhat more speculative but still large companies unlikely to be a risk but slower to recover: ExxonMobil, Chevron, Southwest, United Airlines. UAL may be a bit of a risk given their debt but they're well run and I can see them being bailed out before going under.

Disney is an interesting one - at face it seems like a good bet but a massive chunk of their revenue comes from ESPN. ESPN brings in more money than all their resorts and parks combined. With no sports events happening, I wonder what impact this will have - people who can will drop expensive subscriptions since there's nothing to watch. ESPN is likely still having to pay the huge fees they do for rights to these events and I'm not sure how able they are to renegotiate. They'll come back but will likely be having some pain along the way. I'm a big fan of Disney and will likely pick up a piece but I can see it going down a lot more before it recovers.
 

Sprouty

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3.375% Fixed on a 30 year Conventional-- that is what I am getting on my refi, not to mention I am finally getting rid of my pesky PMI and dropping the rate from 4.0%.

We are in the same boat as you (currently at 4% and looking to remove PMI). They quoted us at 3.375 and it made sense for us to persue it. Hoping to lock in at or below that quote but everything is all over the place right now from the sounds of it. Not sure where everything is at right now and I know my mortgage person has been working from 7am till midnight to try to keep up. She actually called me on Saturday to do over a few things.
 
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