Dalal.Holdings Posted March 3, 2020 Posted March 3, 2020 Atrocious. I'm not sure that I quite understand the fixation on having "correct" and up to date statistics. What would governments in the US do differently if they had "good" statistics resulting from more prevalent testing? So, suppose that there was more testing being done of people who sought medical attention for respiratory disorders and it came back that there were 1,000 positive Covid-19 cases. If that were true, how many cases would there be that had not sought medical attention because the symptoms were not so severe? Perhaps it would be 1,000 more that wouldn't show up in the official statistics? And then what would the US government do with those numbers? Look, either this virus can be controlled and we can put the genie back in the bottle, or it cannot be controlled and the genie is on the loose. If you are in the camp that this thing has already spread so much that the world has lost control of it, then "good" statistics don't strike me as too useful. If you are not going to impose mandatory quarantines and if you are not going to suspend international travel, what are the remaining levers that governments can pull and how are better statistics actually useful? I guess that I'm in the camp that the genie is out of the bottle and that it's time to focus on managing a situation which is no longer preventable. But, maybe I'm alone in that camp? SJ It makes a huge difference. Investors are supposed to understand exponential growth, right? This means that time matters a lot and early interventions in the right places, in the right ways, giving correct info to population so they can act in the right way, etc, can have a tremendous impact on the rate at which things unfold. Since healthcare system capability isn't built for huge peaks, these delays can help it absorb increases much better and will result in saved lives. Also, vaccines and other drugs are being tested and developed, and delays help get more people across that line. In short, bungling the public health response will cost lives, could be your grand-parents or some friend who has a weaker immune system because they survived cancer or have asthma or whatever. Ironically doesn’t seem like too many people understand significance of exponential growth on a value investing site. So the greatest country on earth with the *greatest healthcare system* had a huge headstart on tackling this and bungled it up, far worse management than Canada or Europe and people on here asking “so what”. Lol. The only good thing this admin did was cutting off travel with China early which helped us have a delay in cases. Everything else was botched.
Castanza Posted March 3, 2020 Posted March 3, 2020 Atrocious. I'm not sure that I quite understand the fixation on having "correct" and up to date statistics. What would governments in the US do differently if they had "good" statistics resulting from more prevalent testing? So, suppose that there was more testing being done of people who sought medical attention for respiratory disorders and it came back that there were 1,000 positive Covid-19 cases. If that were true, how many cases would there be that had not sought medical attention because the symptoms were not so severe? Perhaps it would be 1,000 more that wouldn't show up in the official statistics? And then what would the US government do with those numbers? Look, either this virus can be controlled and we can put the genie back in the bottle, or it cannot be controlled and the genie is on the loose. If you are in the camp that this thing has already spread so much that the world has lost control of it, then "good" statistics don't strike me as too useful. If you are not going to impose mandatory quarantines and if you are not going to suspend international travel, what are the remaining levers that governments can pull and how are better statistics actually useful? I guess that I'm in the camp that the genie is out of the bottle and that it's time to focus on managing a situation which is no longer preventable. But, maybe I'm alone in that camp? SJ It makes a huge difference. Investors are supposed to understand exponential growth, right? This means that time matters a lot and early interventions in the right places, in the right ways, giving correct info to population so they can act in the right way, etc, can have a tremendous impact on the rate at which things unfold. Since healthcare system capability isn't built for huge peaks, these delays can help it absorb increases much better and will result in saved lives. Also, vaccines and other drugs are being tested and developed, and delays help get more people across that line. In short, bungling the public health response will cost lives, could be your grand-parents or some friend who has a weaker immune system because they survived cancer or have asthma or whatever. Ironically doesn’t seem like too many people understand significance of exponential growth on a value investing site. So the greatest country on earth with the *greatest healthcare system* had a huge headstart on tackling this and bungled it up, far worse management than Canada or Europe and people on here asking “so what”. Lol. The only good thing this admin did was cutting off travel with China early which helped us have a delay in cases. Everything else was botched. What is "everything else"? Testing? That's not doing anything but delaying the exponential growth by maybe a month or two. If you have 1 individual who test positive and you quarantine 100 individuals believed to have come in contact with that person. You still have another 1000 (probably more) individuals who may have been exposed by the 100 during the 14 day incubation period. It's futile...If you miss a single infected individual it's already too late. The ONLY thing testing is good for at this point is alerting individuals that COVID-19 is in their immediate area. And by then you're likely 14 days too late... By your standards the best thing that could have possibly been done was on day 1 of COVID-19 being discovered is go into full nationwide quarantine. And that would likely be ineffective as well due to the long incubation period.
Liberty Posted March 3, 2020 Posted March 3, 2020 Atrocious. I'm not sure that I quite understand the fixation on having "correct" and up to date statistics. What would governments in the US do differently if they had "good" statistics resulting from more prevalent testing? So, suppose that there was more testing being done of people who sought medical attention for respiratory disorders and it came back that there were 1,000 positive Covid-19 cases. If that were true, how many cases would there be that had not sought medical attention because the symptoms were not so severe? Perhaps it would be 1,000 more that wouldn't show up in the official statistics? And then what would the US government do with those numbers? Look, either this virus can be controlled and we can put the genie back in the bottle, or it cannot be controlled and the genie is on the loose. If you are in the camp that this thing has already spread so much that the world has lost control of it, then "good" statistics don't strike me as too useful. If you are not going to impose mandatory quarantines and if you are not going to suspend international travel, what are the remaining levers that governments can pull and how are better statistics actually useful? I guess that I'm in the camp that the genie is out of the bottle and that it's time to focus on managing a situation which is no longer preventable. But, maybe I'm alone in that camp? SJ It makes a huge difference. Investors are supposed to understand exponential growth, right? This means that time matters a lot and early interventions in the right places, in the right ways, giving correct info to population so they can act in the right way, etc, can have a tremendous impact on the rate at which things unfold. Since healthcare system capability isn't built for huge peaks, these delays can help it absorb increases much better and will result in saved lives. Also, vaccines and other drugs are being tested and developed, and delays help get more people across that line. In short, bungling the public health response will cost lives, could be your grand-parents or some friend who has a weaker immune system because they survived cancer or have asthma or whatever. Ironically doesn’t seem like too many people understand significance of exponential growth on a value investing site. So the greatest country on earth with the *greatest healthcare system* had a huge headstart on tackling this and bungled it up, far worse management than Canada or Europe and people on here asking “so what”. Lol. The only good thing this admin did was cutting off travel with China early which helped us have a delay in cases. Everything else was botched. What is "everything else"? Testing? That's not doing anything but delaying the exponential growth by maybe a month or two. If you have 1 individual who test positive and you quarantine 100 individuals believed to have come in contact with that person. You still have another 1000 (probably more) individuals who may have been exposed by the 100 during the 14 day incubation period. It's futile...If you miss a single infected individual it's already too late. The ONLY thing testing is good for at this point is alerting individuals that COVID-19 is in their immediate area. And by then you're likely 14 days too late... By your standards the best thing that could have possibly been done was on day 1 of COVID-19 being discovered is go into full nationwide quarantine. And that would likely be ineffective as well due to the long incubation period. This isn't the first epidemic in human history, right? Some have been handled better than others, there are things to do, they make a difference to rate of progression and at what level things get contained and how many people die. It's not binary. The "well, it's all pointless, just throw your hands in the air and do nothing" approach clearly isn't the best.
james22 Posted March 3, 2020 Posted March 3, 2020 The only good thing this admin did was cutting off travel with China early which helped us have a delay in cases. Racist.
Liberty Posted March 3, 2020 Posted March 3, 2020 Thread about someone with symptoms and high-risk situation trying to get tested in Seattle:
StubbleJumper Posted March 3, 2020 Posted March 3, 2020 Atrocious. I'm not sure that I quite understand the fixation on having "correct" and up to date statistics. What would governments in the US do differently if they had "good" statistics resulting from more prevalent testing? So, suppose that there was more testing being done of people who sought medical attention for respiratory disorders and it came back that there were 1,000 positive Covid-19 cases. If that were true, how many cases would there be that had not sought medical attention because the symptoms were not so severe? Perhaps it would be 1,000 more that wouldn't show up in the official statistics? And then what would the US government do with those numbers? Look, either this virus can be controlled and we can put the genie back in the bottle, or it cannot be controlled and the genie is on the loose. If you are in the camp that this thing has already spread so much that the world has lost control of it, then "good" statistics don't strike me as too useful. If you are not going to impose mandatory quarantines and if you are not going to suspend international travel, what are the remaining levers that governments can pull and how are better statistics actually useful? I guess that I'm in the camp that the genie is out of the bottle and that it's time to focus on managing a situation which is no longer preventable. But, maybe I'm alone in that camp? SJ It makes a huge difference. Investors are supposed to understand exponential growth, right? This means that time matters a lot and early interventions in the right places, in the right ways, giving correct info to population and medical staff so they can act in the right way, etc, can have a tremendous impact on the rate at which things unfold. Since healthcare system capability isn't built for huge peaks, these delays can help it absorb increases much better and will result in saved lives. Also, vaccines and other drugs are being tested and developed, and delays help get more people across that line. In short, bungling the public health response will cost lives, could be your grand-parents or some friend who has a weaker immune system because they survived cancer or have asthma or whatever. So are you in the camp that the genie is *not* out of the bottle? I'm in the camp that this thing cannot be contained at this point because there are too many confirmed cases, and quite likely far more that have not sought medical care. This is not like Ebola, where 100% of cases seek medical attention and therefore offer a reasonable prospect of a trace-back. Investors are supposed to understand known unknowns, right? So what's the unknown of how many asymptomatic cases are floating around and how many mild cases have resulted in people not bothering with the doctor? The general theory is that those categories are larger than the group that has actually sought medical attention which is the only group that could possibly be miscounted. It's like having only half of a P/L statement and pretending that it's useful. SJ
mcliu Posted March 3, 2020 Posted March 3, 2020 It's interesting how we all became qualified pandemic experts all of a sudden. ::)
Castanza Posted March 3, 2020 Posted March 3, 2020 COVID-19 is likely going to be a seasonal virus like influenza. Wash your hands, avoid crowded areas, drink lots of water, eat your fruit and veggies. A vaccine is what, 1-2 years out? And likely will only be 50% effective for healthy individuals. It sucks for sure, and will have a definitive impact on the elderly and those suffering with other illnesses. That's where we should be focusing out attention. Cut off all contact to elderly and chronically ill. This whole things can be summed up with a meme... I will happily eat crow if I'm wrong and the world governments find a way to contain and eradicate COVID-19 from the planet.
Liberty Posted March 3, 2020 Posted March 3, 2020 So are you in the camp that the genie is *not* out of the bottle? I'm in the camp that this thing cannot be contained at this point because there are too many confirmed cases, and quite likely far more that have not sought medical care. This is not like Ebola, where 100% of cases seek medical attention and therefore offer a reasonable prospect of a trace-back. Investors are supposed to understand known unknowns, right? So what's the unknown of how many asymptomatic cases are floating around and how many mild cases have resulted in people not bothering with the doctor? The general theory is that those categories are larger than the group that has actually sought medical attention which is the only group that could possibly be miscounted. It's like having only half of a P/L statement and pretending that it's useful. SJ *sigh* I'm in the camp of what I explained. I'm in the camp that it's not a genie, it's a virus, and the public health reaction makes a difference to how many people die or get really sick once all is said and done, as I've explained previously. There are many factors that cause this, and I don't feel like re-writing them all every time. "If we reduce the spread, even if we ultimately have the same total number of cases, we 'flatten the curve,' which means that, at any given time, our health care system can cope with the COVID-19 cases, hopefully. USA has lower hospital capacity (2.9 beds/1,000 people) than China (4.2), Australia (3.8 ), Italy (3.4), Japan (13.4), & Korea (11.5). Reports indicate COVID-19 epidemic filled the hospitals in Wuhan and Milan regions Another advantage of 'flattening the curve' of the COVID-19 epidemic by implementing social distancing now is that more of the cases that ultimately occur will occur at a (later) time point when (perhaps!) a vaccine or better treatment is available" "The US is somehow still unable to do large scale coronavirus testing. "The incompetence has really exceeded what anyone would expect with the CDC,” said Dr Michael Mina, an epidemiologist at Harvard. “This is not a difficult problem to solve." China has tested millions of people, South Korea testing 10,000 a day. US has tested *hundreds*. "China had five commercial tests on the market 1 month ago and can now do up to 1.6 million tests a week; South Korea has tested 65,000 people so far. The U. S. Centers for Disease Control and Prevention (CDC), in contrast, has done only 459 tests""
RichardGibbons Posted March 3, 2020 Posted March 3, 2020 I'd say that America at this point has one of the best western cultures for encouraging the spread of the disease. Large structural barriers in place to prevent testing Monetary incentive not to be tested Potentially massive personal costs/bankruptcy should one be hospitalized "Continue working while sick" culture Leaders who will spread disinformation about the disease, and be believed by a significant percentage of the population Once individual cases are identified, I'd expect a solid medical response in those cases, but I suspect the factors above mean that the USA is pretty likely to get something like Wuhan where hospitals are overwhelmed. And then I think from there, second-order effects will cause bad things to happen to the economy. From an investment perspective, the thing to worry about isn't a loss of a quarter or a year's discounted cash flow. It's the second-order effects like debt rollovers, supply chain disruption, and layoffs due to the slowing economy leading to unemployment spikes, consumer fear, and demand disintegration.
Viking Posted March 3, 2020 Posted March 3, 2020 I am shocked that people do not understand the absolute importance of doing everything possible to slow this virus in the very early stages. And every stage after that. Sounds like people still do not understand this virus and its potential to cause a severe human and economic tragedy. We have a real world example of what happens when a government does not take the issue seriously and do everything possible to slow this virus in the early stages: Wuhan If you do not find a way to slow it the virus it will overwhelm your medical system. If you do not understand why, then you need to educate yourself. If you think this virus is simply a little worse than the flu (so what's the big deal?) then you need to educate yourself. Holy shit! I posted a video of what Wuhan has been through and what they had to do to get the virus under control (re-posted below). Watch this video if you haven’t. Their key mistake was their inactivity the first two weeks. The incompetence of the government resulted in a human and economic tragedy. - And if you want real-time information of how well the US is currently responding to this virus I posted this CNBC interview from yesterday. The doctor (who is on the front line) explains in very clear language what the issues are and what needs to be done. -
DocSnowball Posted March 3, 2020 Posted March 3, 2020 If you want to hear the unvarnished truth of where the US is at and what is coming next watch this CNBC video. Dr. Scott Gottlieb, member of the boards of Pfizer and biotech company Illumina and former FDA commissioner, and Dr. Matt McCarthy, an infectious disease physician, join "Squawk Box" to discuss the latest on the coronavirus outbreak. NYC ER doctor: I have to 'plead to test people' for coronavirus Guest 1: Dr. Matt McCarthy - The problem right now is I still do not have a rapid diagnostic test available - In New York State 32 tests have been done. That is a national scandal. - We know there are 88 cases in the US. There are going to be hundreds by the middle of the week. And thousands by next week - The message today we are hearing from this administration that the risk is low, that things are probably going to be OK, that you don’t need to change your lifestyle. That is simply not true. - You are going to see widespread disruption to daily life. Do not believe the false reassurance. - We are hearing that life is going to go about normal. This is just not true. - The longer we wait to get testing up and running the worst this will be. - A week or two from now is when we will begin to get real information. Now we are still largely flying blind. Guest 2: Dr. Scott Gottlieb - A vaccine is a year or two away. - Hopefully this will start to dissipate in July and August - We need a backstop in place – it is likely going to come back in the fall - For a while this is going to be regional. We are probably a couple of weeks away from significant measures in Washington state. - There is probably low thousands of cases currently in this country  Thanks for sharing Viking. From a physician standpoint, I agree with all that they are saying. May I add, hospitals are running out of N95 respirators, and have an additional disincentive to testing. If they suspect someone, they need to initiate high level precautions and dedicate resources and staff until the results are back. Outside the hospital, stores are already out of hand sanitizer and disinfectant solutions and wipes. The way the US agencies are responding is baffling in terms of the message of treating this as business as usual, and the barriers in testing. They have not understood the concept of "margin of safety" in preventing transmission of this infection. All you need to do is look at what happened between Christmas, when Wuhan had a handful cases, and three weeks later when they did nothing to prevent the chain of transmission. Another helpful link is the WHO briefing given by one of the members of the team visiting China. It is long, but well worth it - if you listen to the first 40 minutes or so you get the message that a new mindset is needed. It has 3 sections: what did China do, what impact did it have, and what it means for the rest of the world: https://www.cnbc.com/2020/02/25/watch-world-health-organization-holds-press-conference-on-the-coronavirus-outbreak.html
shhughes1116 Posted March 3, 2020 Posted March 3, 2020 I am shocked that people do not understand the absolute importance of doing everything possible to slow this virus in the very early stages. And every stage after that. Sounds like people still do not understand this virus and its potential to cause a severe human and economic tragedy. +1 In most instances, it is impossible to prevent the spread of a pathogen like this. So, you do what you can to slow the rate of infection. (1) Implement social distancing early on; (2) Implement widespread testing to find, isolate, and treat patients; (3) begin development of a therapeutic; and (4) Begin development of a vaccine. This is basic epidemiology 101, but the people that coordinate this work for the Federal Govt are gone, moved along/out due to the current administration. In the United States, we have the ability to do #3 and #4 quickly (relatively speaking). I'll bet there is a vaccine available in early 2021. The problem, in the meantime, is what the morbidity and mortality rates will look like in the meantime, and the extent to which our hospital system is overwhelmed by people seeking treatment. If we (US society) were intelligent, we would bite the bullet now, and: 1. Close schools for 3 weeks; 2. Close daycares for 3 weeks; 3. Close gov offices for 3 weeks; 4. Direct gov employees and private sector employees to stay home and telework for the next 3 weeks. 5. Roll-out diagnostic testing to anyone who thinks they may be sick, or have been in contact with infected individuals. 6. Cover the cost of #5 so that people are not discouraged from seeking out testing. Unfortunately, we have a president that is 100% concerned about re-election. And as a result, none of this will happen until it is to late.
DocSnowball Posted March 3, 2020 Posted March 3, 2020 I am shocked that people do not understand the absolute importance of doing everything possible to slow this virus in the very early stages. And every stage after that. Sounds like people still do not understand this virus and its potential to cause a severe human and economic tragedy. +1 In most instances, it is impossible to prevent the spread of a pathogen like this. So, you do what you can to slow the rate of infection. (1) Implement social distancing early on; (2) Implement widespread testing to find, isolate, and treat patients; (3) begin development of a therapeutic; and (4) Begin development of a vaccine. This is basic epidemiology 101, but the people that coordinate this work for the Federal Govt are gone, moved along/out due to the current administration. In the United States, we have the ability to do #3 and #4 quickly (relatively speaking). I'll bet there is a vaccine available in early 2021. The problem, in the meantime, is what the morbidity and mortality rates will look like in the meantime, and the extent to which our hospital system is overwhelmed by people seeking treatment. If we (US society) were intelligent, we would bite the bullet now, and: 1. Close schools for 3 weeks; 2. Close daycares for 3 weeks; 3. Close gov offices for 3 weeks; 4. Direct gov employees and private sector employees to stay home and telework for the next 3 weeks. 5. Roll-out diagnostic testing to anyone who thinks they may be sick, or have been in contact with infected individuals. 6. Cover the cost of #5 so that people are not discouraged from seeking out testing. Unfortunately, we have a president that is 100% concerned about re-election. And as a result, none of this will happen until it is to late. A lot of what's on this list will need to happen. It may happen one region or one state at a time. Once the playbook is created, the rest of the regions or state will iterate and improve it further, but are unlikely to do less than that. The best mindset to have is to believe it will show up in our community tonight or tomorrow, and to prepare accordingly. If it ends up being anything less than that and in a few months we are still here discussing missing out on 10% stock gains, wouldn't that be a great outcome to have.
CorpRaider Posted March 3, 2020 Posted March 3, 2020 Since no one is getting tested it is hard to decide whether to wait until there is a positive in your state/region before pulling your kid from daycare. For all I know we already had it. We have had like 4 mystery viruses that sound like they could be the mild version of this one over the course of the fall and winter.
Viking Posted March 3, 2020 Posted March 3, 2020 I am shocked that people do not understand the absolute importance of doing everything possible to slow this virus in the very early stages. And every stage after that. Sounds like people still do not understand this virus and its potential to cause a severe human and economic tragedy. +1 In most instances, it is impossible to prevent the spread of a pathogen like this. So, you do what you can to slow the rate of infection. (1) Implement social distancing early on; (2) Implement widespread testing to find, isolate, and treat patients; (3) begin development of a therapeutic; and (4) Begin development of a vaccine. This is basic epidemiology 101, but the people that coordinate this work for the Federal Govt are gone, moved along/out due to the current administration. In the United States, we have the ability to do #3 and #4 quickly (relatively speaking). I'll bet there is a vaccine available in early 2021. The problem, in the meantime, is what the morbidity and mortality rates will look like in the meantime, and the extent to which our hospital system is overwhelmed by people seeking treatment. If we (US society) were intelligent, we would bite the bullet now, and: 1. Close schools for 3 weeks; 2. Close daycares for 3 weeks; 3. Close gov offices for 3 weeks; 4. Direct gov employees and private sector employees to stay home and telework for the next 3 weeks. 5. Roll-out diagnostic testing to anyone who thinks they may be sick, or have been in contact with infected individuals. 6. Cover the cost of #5 so that people are not discouraged from seeking out testing. Unfortunately, we have a president that is 100% concerned about re-election. And as a result, none of this will happen until it is to late. A lot of what's on this list will need to happen. It may happen one region or one state at a time. Once the playbook is created, the rest of the regions or state will iterate and improve it further, but are unlikely to do less than that. The best mindset to have is to believe it will show up in our community tonight or tomorrow, and to prepare accordingly. If it ends up being anything less than that and in a few months we are still here discussing missing out on 10% stock gains, wouldn't that be a great outcome to have. +1 Watching business TV today is painful. They are trying to predict what is going to happen in the next month or three. There is no discussion on what the root issue is: the response of the government and health care system right now to this virus. Your assessment of the effectiveness of the response today is what will inform your perspective of what the economy will look like in the future. My guess is there are very good reasons it is not being actively debated/discussed.
Gregmal Posted March 3, 2020 Posted March 3, 2020 In two days nothing in terms of the prognosis and transmission numbers has really deviated from what everyone already assumed. The only thing that has really changed is now we have a 50 point cut. Which on one hand, many said "do right away". On the other, it certainly feeds into the narrative that things are dire. One of those damned if you do, damned if you dont scenarios. Better safe than sorry I guess was the thought process.
Viking Posted March 3, 2020 Posted March 3, 2020 In two days nothing in terms of the prognosis and transmission numbers has really deviated from what everyone already assumed. The only thing that has really changed is now we have a 50 point cut. Which on one hand, many said "do right away". On the other, it certainly feeds into the narrative that things are dire. One of those damned if you do, damned if you dont scenarios. Better safe than sorry I guess was the thought process. Greg, i think it was a ‘cover your ass’ cut. On a daily basis Trump has been hammering away at the Fed to do a 50 point cut. The ball is now back in the President’s court. The big news to me is the 10 year treasury. It is in freefall and went below 1%.
Jurgis Posted March 3, 2020 Posted March 3, 2020 https://brooklyninvestor.blogspot.com/2020/03/who-cares-what-mr-market-thinks.html This is probably wrong thread for this, but anyways... I ran the BrooklynInvestor DCF on SP500 and the issue is not Covid, the issue is valuation. Starting with 133.53 SP500 earnings ( from here https://www.multpl.com/s-p-500-earnings/table/by-year , I did not double check ), 0% growth this year, 3% growth rate from here to year 10, 5% discount rate, terminal PE 15, SP500 value would be ~2700. Using 5% growth rate, SP500 value would be 3179. Now, this assumes 5% discount rate, which is basically expected return. If investor wanted more than 5% return, the numbers are way worse. (No, I don't think 25x terminal PE or 4% discount rate make sense. I don't think growth rates above 5% make sense either. Yes, I know that risk free rates are close to zero. I'm not gonna use risk free rates for DCF. But, yeah, that's likely why SP500 is where it is.) ::)
Guest Schwab711 Posted March 3, 2020 Posted March 3, 2020 https://brooklyninvestor.blogspot.com/2020/03/who-cares-what-mr-market-thinks.html This is probably wrong thread for this, but anyways... I ran the BrooklynInvestor DCF on SP500 and the issue is not Covid, the issue is valuation. Starting with 133.53 SP500 earnings ( from here https://www.multpl.com/s-p-500-earnings/table/by-year , I did not double check ), 0% growth this year, 3% growth rate from here to year 10, 5% discount rate, terminal PE 15, SP500 value would be ~2700. Using 5% growth rate, SP500 value would be 3179. Now, this assumes 5% discount rate, which is basically expected return. If investor wanted more than 5% return, the numbers are way worse. (No, I don't think 25x terminal PE or 4% discount rate make sense. I don't think growth rates above 5% make sense either. Yes, I know that risk free rates are close to zero. I'm not gonna use risk free rates for DCF. But, yeah, that's likely why SP500 is where it is.) ::) TL;DR: If you assume a 25x multiple at exit and unchanged long-term earnings potential then nothing matters.
Jurgis Posted March 3, 2020 Posted March 3, 2020 https://brooklyninvestor.blogspot.com/2020/03/who-cares-what-mr-market-thinks.html This is probably wrong thread for this, but anyways... I ran the BrooklynInvestor DCF on SP500 and the issue is not Covid, the issue is valuation. Starting with 133.53 SP500 earnings ( from here https://www.multpl.com/s-p-500-earnings/table/by-year , I did not double check ), 0% growth this year, 3% growth rate from here to year 10, 5% discount rate, terminal PE 15, SP500 value would be ~2700. Using 5% growth rate, SP500 value would be 3179. Now, this assumes 5% discount rate, which is basically expected return. If investor wanted more than 5% return, the numbers are way worse. (No, I don't think 25x terminal PE or 4% discount rate make sense. I don't think growth rates above 5% make sense either. Yes, I know that risk free rates are close to zero. I'm not gonna use risk free rates for DCF. But, yeah, that's likely why SP500 is where it is.) ::) TL;DR: If you assume a 25x multiple at exit and unchanged long-term earnings potential then nothing matters. I should just remove my post and leave your TL;DR. 8)
Guest Schwab711 Posted March 3, 2020 Posted March 3, 2020 https://brooklyninvestor.blogspot.com/2020/03/who-cares-what-mr-market-thinks.html This is probably wrong thread for this, but anyways... I ran the BrooklynInvestor DCF on SP500 and the issue is not Covid, the issue is valuation. Starting with 133.53 SP500 earnings ( from here https://www.multpl.com/s-p-500-earnings/table/by-year , I did not double check ), 0% growth this year, 3% growth rate from here to year 10, 5% discount rate, terminal PE 15, SP500 value would be ~2700. Using 5% growth rate, SP500 value would be 3179. Now, this assumes 5% discount rate, which is basically expected return. If investor wanted more than 5% return, the numbers are way worse. (No, I don't think 25x terminal PE or 4% discount rate make sense. I don't think growth rates above 5% make sense either. Yes, I know that risk free rates are close to zero. I'm not gonna use risk free rates for DCF. But, yeah, that's likely why SP500 is where it is.) ::) TL;DR: If you assume a 25x multiple at exit and unchanged long-term earnings potential then nothing matters. I should just remove my post and leave your TL;DR. 8) Nothing matters so you're good 8)
Gregmal Posted March 3, 2020 Posted March 3, 2020 In two days nothing in terms of the prognosis and transmission numbers has really deviated from what everyone already assumed. The only thing that has really changed is now we have a 50 point cut. Which on one hand, many said "do right away". On the other, it certainly feeds into the narrative that things are dire. One of those damned if you do, damned if you dont scenarios. Better safe than sorry I guess was the thought process. Greg, i think it was a ‘cover your ass’ cut. On a daily basis Trump has been hammering away at the Fed to do a 50 point cut. The ball is now back in the President’s court. The big news to me is the 10 year treasury. It is in freefall and went below 1%. Indeed, the manipulative power of Twitter and a big mouth. I think he just donated his $100k salary to the cause, so pretty sure he thinks the balls back out of his court lol.
rb Posted March 3, 2020 Posted March 3, 2020 In two days nothing in terms of the prognosis and transmission numbers has really deviated from what everyone already assumed. The only thing that has really changed is now we have a 50 point cut. Which on one hand, many said "do right away". On the other, it certainly feeds into the narrative that things are dire. One of those damned if you do, damned if you dont scenarios. Better safe than sorry I guess was the thought process. Greg, i think it was a ‘cover your ass’ cut. On a daily basis Trump has been hammering away at the Fed to do a 50 point cut. The ball is now back in the President’s court. The big news to me is the 10 year treasury. It is in freefall and went below 1%. The 10-year treasury scares the shit outta me. And it was scaring the hell outta me before I ever heard the words corona virus. Now the alert level got upgraded.
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