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Bmrboy- That is true about Japan. If you look at a long term chart of their equity markets, you will see that their stock market has gone nowhere for over three decades.
I hope you're right nelson. I fear the last twelve years have instilled a complacency regarding the consequences of massive QE and government debt. Previously, it has been a gradual process with no significant negative consequences. We've gone parabolic by orders of magnitude over what occurred during the past twelve years.
You may be correct that this will propel the markets to new highs due to the massive liquidity. There is also a possibility that the shear magnitude could accelerate the realization of the negative consequences.
I fear we could be in for a decade plus of poor returns in equity markets.
RCMT doesn't have the best debt to equity set up, and they may very well see a significant spike in new debt to get through this shut down.
Japan has attempted similar types of monetary and fiscal policies. Anyone that believes that unlimited QE and fiscal policy can't go wrong needs to look at a 50 year chart of how that has worked out for Japan.
They hit a market high of roughly 31,700 in November of 1989. The recent high in January of 2020 before the big global market collapse was roughly 24,000.
The brilliance of central bankers is being celebrated. The magic of printing money and piling up sovereign debt will save everything. It has worked out well for Japan. Their stock market recently got above their 1996 high.
It has worked out so well for every other nation that has tried it.
Public Company Relief
To address potential compliance issues, the Commission issued an order that, subject to certain conditions, provides public companies with a 45-day extension to file certain disclosure reports that would otherwise have been due between March 1 and July 1, 2020. Today’s Order supersedes and extends the Commission’s Original Order of March 4, 2020. Among other conditions, companies must continue to convey through a current report a summary of why the relief is needed in their particular circumstances for each periodic report that is delayed. The Commission may provide extensions to the time period for the relief, with any additional conditions it deems appropriate, or provide additional relief as circumstances warrant. Companies and their representatives are encouraged to contact SEC staff with questions or matters of particular concern.
cliffvb-it will be interesting to see how the extended reporting deadline affects the timing of 1st q earnings reports.
bbotcs what currencies would you consider?
India is under a national quarantine, so that may not be an example of what would happen if everything was operating without restriction.
Just like any ponzi scheme it is too good to be true.
In this case, the United States doesn't have to find new investors to perpetuate the fraud. They just print a new dollar which steals a little value from everyone that currently holds a dollar.
All ponzi schemes have a tipping point. We've been ramping the scheme over the past decade with little consequence. The global slow down and malfeasance of other nations has allowed the dollar to maintain relative strength.
The scheme has now gone parabolic. Millions are lining up to get their freshly minted dollars, but that happiness may not last if this is the tipping point for the dollar.
We are in the process of a parabolic expansion of debt. There seems to be little concern regarding that expansion. The consensus seems to be that we will return to business as usual once this virus is under control.
I have my doubts about the consensus. I think we will see corporations undergoing cost cutting measures in order to improve their cash flow and decrease leverage. I believe that corporations will pullback on capital spending and hiring.
I don't see an environment where we return to business as usual. I think the effects of this shock will last longer then most people expect.
I fear were about to be humbled. I hope I'm wrong about that.
Typical politics. Never allow a crisis to go to waste. As a nation we are either extremely arrogant or ignorant regarding fiscal responsibility.
That's an alarming mistake. Thankfully it turned out better then feared.
I don't think there is any escape either. There will be a day (possibly not to far in the future) when we lose our status as the reserve currency of the world. China now has a large economy with a debt to GDP or around .5.
If/when they chose to decouple their currency from the dollar that inflation could be here in a hurry.
The highest debt to GDP ratio in our history was 119% in 1946. We entered this crisis at 108% ($23.5 trillion). We've already approved up to $10 trillion with talk of more to come.
Just for perspective, at the beginning of the great depression we were at 16%.
Is the cure going to be worse then the problem?
There are a lot of corporations that are going to see a big increase in debt. Highly leveraged corporations don't tend to invest. They focus on improving cash flow in order to decrease debt. Were going to be facing some new variables that weren't present prior to today.
Europe is more fragile then the US?
The United State currently ranks 10th on the list of countries government debt to GDP. The only western European nations we trail are Greece, Italy and Portugal. With the things we've passed to date we are very likely to reach $10 trillion in additional debt with the talk of more to come.
We have the potential with current legislation to achieve a 43% increase in our national debt trying to make everyone whole. We may very likely end up behind only Japan and Greece at the end of this Modern Monetary experiment. I fear our future.
There seems to be a consensus among economists and Wall Steeters that we'll bounce back from this and things will get back to normal. No one seems too concerned with any consequences.
We've levered our way to the longest bull market in history. National debt has expanded from $8 trillion to $23 trillion. We've maintained crisis level fiscal deficits for the past twelve years. Corporate debt entering this year was at record levels, the national debt to gdp ratio is 1.08. Corporate debt, personal debt and government debt is going to balloon in an unprecedented fashion. The explosion of debt will most likely create some short term benefit, but then what?
I believe the United States status as the reserve currency of the world has enabled a complacency regarding fiscal responsibility. We've recklessly printed money without consequence. People have often referred to the U.S. as the best option in a bad neighborhood. Will that be true going forward?
It is within the realm of possibility that we will exit this crisis with a national debt to GDP ratio approaching 1.3 to 1.5. We are going to be a precariously levered nation. We will be printing our currency like monopoly money. Can that continue without consequence?
Are we reaching the point where people no longer seek to hold US debt?
China has a debt to GDP ratio of .51. Could they become the reserve currency of the world?
The theories that our policy makers have been using have repeatedly failed to achieve the expected outcome, yet we continue to double down on those theories.
I'm skeptical that were set-up for a return to normalcy.
I'll second that. Politicians never let a crisis go to waste. We may be approaching a tipping point with the growth in debt and printing of cash. Those actions are all sunshine until they break.
Jumping into the pool with Weimar, Zimbabwe, etc. doesn't seem like something to rally behind.
Picked up some FONR today.
I have a theory about that theory, but that is another story.
mnuchin just said that now is not the time to fix the deficit.
I agree that now is not the time, but we just ended the longest bull market in history with a 2020 projected deficit greater then $1 trillion dollars before the coronavirus blew up the economy.
What I would like to know is when would be the right time?
What is the over under on how many trillions that will be added to the federal debt and central bank balance sheet?
I'm guessing the federal debt will grow by $2.5 trillion for 2020 and the central bank will add another $2 trillion to their balance sheet. Financial irresponsibility is the fun part, but there will be a day when the joy ride ends. I hope the day of reckoning is a long way off.
skillz1 I have no opinion regarding CUBI individually, but something else to consider with financials is the liquidity issues in the repo market. The issues that caused repo rates to spike to 10% back in September and caused the Fed to launch QE4 may be a part of the story.
The Fed announced yesterday that they were adding $50b in additional liquidity to $100b already committed. That was necessary because cracks started to show up again.
There is ample liquidity in the banking system, so these breaks in the repo market seem to be signaling trouble in the financial system.
COHN I jumped in on this when gp22 brought it to the board. Thanks again gp22.
My bad jtomm. Math is hard. 1.7m is approximately .5% of the total US population.
Thanks for cathcing my error.
If you assume 1/3 of the US population gets infected before a vaccination is developed, a .5% death rate equates to 1.7m people.
nelson that is an interesting point. I have a lot of concerns about this repo market breakdown, but I hadn't considered it as a possible catalyst.
One other thing that I've read is that China will not allow the WHO into the Wuhan province. If they are being truthful then why would they impose that restriction?
Just an fyi. Tencent which is a major social media site has maintained a virus tracker. On more then one occasion they posted some omninous numbers regarding the virus, and that data was quickly taken down and revised. The speculation is that someone behind the scenes was trying alert people regarding the magnitude of the crisis.
On 2/1, the official numbers for China were 25,000 cases with 500 deaths. Tencent on that date reported 154,023 cases and 24,589 deaths. That information was quickly taken down.
I have no idea what numbers are correct, but China's response at that time did not reconcile with 500 deaths.
There are multiple videos on twitter where the doors of sky rise buildings were being welded shut.
I really pray this isn't going to be a pandemic, I'm paying close attention to how the data evolves in more trustworthy areas outside of China. So far the numbers in Italy are alarming. 2502 confirmed with 79 deaths (3% death rate).
Well said Bobwins.
littlefish I know this is evolving very quickly, but have you observed any noticeable changes in consumer behavior in your community?
I pray that you're right, but I'm not sure I would take any comfort in China data.
There have been six deaths out of roughly 700 infections from the Diamond Princess cruise. Italy has reported 2036 cases and 52 deaths. Italy's numbers have been jumping rapidly. They were under 1700 cases earlier today with 34 deaths.
I highly doubt a flu bug being passed around on the Diamond Princess cruise would have killed 6 passengers let alone 10x as many.
You can also check places like Home Depot and Lowes for N95 masks. They might be sold out as well, but they do carry N95 masks.
Be safe Nelson. Are you going to wear a mask on your flights? It might be worth it.
I can't verify the accuracy of this information, but I did come across this on twitter.
Over the past 2 weeks, options traders spent more than $16 billion buying speculative calls.
That's 60% more than any other 2-week period since 2000.
Maybe this is a nothing-matters-forever kind of market, but holy moly.
Worthy they were upgraded to a buy by Stifel.
Sadly I agree with you.
One of things that doesn't add up for me is that the repo market is short term. Typically less then a week. Based on that why would the Fed's balance sheet expand for more then a very short period? Shouldn't the assets they've purchased be repurchased by now?