Spekulatius Posted March 8, 2020 Posted March 8, 2020 That statement works simply because it’s so broad. How far can you take that? Should every state have a few hospitals with 10k beds laying in wait for the next pandemic? Preparedness is different when it’s funded with tax dollars. To me, that statement only applies to things that are statistically common and have a reasonable chance of happening. Pandemics aren’t common by any means. Should we all start building bomb shelters in our back yards? I mean it could happen! Did you even read what he wrote? Where does it say anything about spending money? Taxpayer money? Isn’t it assumed? Maybe I read it wrong, but isn’t he saying govt SHOULD take precaution? I mean govt effort or lack of efforts seems to be the core theme in this thread. I meant nothing in this post about government at all, and I don't believe that this thread is or should be about politics. Nor do I believe that arguing about domestic politics has that been the motivation of most people here. Personally, I was thinking of Taleb's comments with respect to reducing health risk for individuals and with respect to portfolio management. If there are those who would like to argue about the government response, and argue in a non-productive way as we have seen before on CoB&F, I would suggest this topic has become large enough to create a separate thread within the Politics section and potentially another thread within investment strategies to discuss portfolio management in the context of COVID-19. Ultimately we are all here as investors, but let's not forget that some of us have already lost friends or family to this epidemic and more certainly will. I have many close friends on this board who I value immensely. Many of them are older and some are older with health issues that could put them right in the cross hairs of this virus. I worry for them and selfishly I fear for my loss were there something to happen to them. I just found the original context of Nassim's comments, and I have to admit I don't fully understand the context, especially the disagreement: I especially don't understand his spat with Tetlock: Taleb's deragotory comments addressed at Tetlock seem unnecessary and I think engaging with a variety of viewpoints would be valuable in this situation. I think this board would similarly benefit from a variety of viewpoints and we could all be more welcoming by focusing on the ideas and not attacking individuals, but focusing on the specifics of an argument and responding with an argument that is even more well reasoned. From watching the interactions of several others on this board in the past couple of days I think the discussions would have been better if everyone could have refrained from the use of "you" and tried to refrain from making assumptions or at least questioned their assumptions about other people's motivations. @Read the footnotes - thank you for the well reasoned post. While I think this developing epidemic will become a political issue during the election, I think it is a good idea to stay clear of political bias in his thread. I am merely trying to get to the investing ramification of this epidemic and I think the closest we had in the past is a demand shock similar to 9/11. Similar to the current situation, it hit travel related industries too, but we also had a similar setup in terms of a richly valued market and perhaps a Venture capital and tech bubble. To push this analogy even further, I think we have reoccurrence of lax accounting ( a recent MF industry focus podcast is a good background on this). https://podcasts.apple.com/us/podcast/industry-focus/id717428711?i=1000467575729 As some of this unraveled, we had major accounting frauds discovered in Global Crossing, Worldcom, Enron, as well as a lot independence power producers l as well as rampaged stock option compensation (today’s SAAS companies may take notice). I don’t think we are quite in same situation, but we certainly have some ingredients for this (rampant use of Non GAAP metrics, increased debt levels etc). So I think that’s another risk factor that I don’t think is adequately acknowledged. If we keep with the 9/11 analogy, while travel was hit hard, the economy and the stock market really didn’t find a bottom until mid 2002 (almost 9 month after the incident) and then scraped along the bottom for almost another year until 2003. Similarly, this epidemic plays out, I don’t think the effects will be over very quickly either and we I don’t think we get and V- shaped recovery. on another train of though, I was listening to an interview from a fellow from the Robert Koch institute in Germany (leading virology Institute in Germany) who also think the government should do everything possible to slow down the disease, and if indeed the disease dies down during spring/ summer we would need to batten down the hatches during summer to prepare for a renewed onset during fall (the next flu season) as to prevent a disaster like during the Spanish flu epidemic in 1918/19 (it was a second wave that was the killer back then). What this means is that this epidemic is most likely a prolonged affair, both in terms of epidemical outcome but even more so in terms of economic consequences. Another somewhat related issue thwt hasn’t gotten much attention is what appears to be a significant meltdown in the energy markets. Not only has the epidemic hit the demand quite substantially, but now it seems that both Russia and Saudi Arabia go on an all out war for market share, prices be damned. What this means is hard to predict, but it seems to me that energy prices stay lower for longer and it pretty much makes any shale player or even deep water development economical and will inflict substantial pain on shale, oil sands and even the oil majors and related industries (LNG infrastructure,refineries ). Anyways, the above are just thought pieces that may or may not fit together. I don’t claim to know the future. Much less predict the stock market reaction to it, but I think we are likely in for an extended slowdown and quite possibly a recession. I would not be too surprised to see the late 2018 Lows either. I do think thwt the much lower interest rates will spur demand for real estate, in particular residential real estate, as 30 mortgage rates drop possibly as low as the low 2%. That is unless we see a substantial increase in unemployment, which I think can be avoided, because companies will be very reluctant to lay off people (especially skilled labor) because there is very little slack. I would probably stay clear of banking and long tail insurance (as I have noted before) and certainly of energy and consider even midstream as very vulnerable (I sold off my midstream as well a few weeks ago). BRK/Buffet will probably have opportunities to deploy is ~$125B in short order in very favorable terms in distressed industry’s (his preferred stock/ warrant ploy) or outright equity purchase or buying entire businesses, when private equity competition diminishes. I also think they the FANG stocks like FB and GOOG will be money good. There will be great opportunities in Europe to buy stocks really cheap as well. As always, it is important to keep an open mind, as nothing is guaranteed, but I expect for sure to there will be many opportunities will present themselves that weren’t considered likely before.
Gregmal Posted March 8, 2020 Posted March 8, 2020 Spek are you sure you're not Ray Dalio? Thats more or less what he said... of course, most people just saw the "once in 100 year" headline and proceeded to shit their pants before logging into RobinHood and hitting the bid.
SharperDingaan Posted March 8, 2020 Posted March 8, 2020 How many sellers do you know, who can actually pay for their goods. AT THE TIME THEY BUY THEM? Virtually no one can. They need 5, 10, 30, 60, 90 days etc. to re-sell the goods and raise the cash to pay for the purchase. If you cant sell, or sell enough (mass/individual quarantines) during the credit period; you cant pay, and bankrupt. If you survive the first shock, you credit is severely restricted, and you can only reorder in small quantities that turn over rapidly. If/when life returns to normal, you can then only slowly order more as you progressively profit from every inventory turn. A credit crunch, ending hundreds of thousands of little businesses, world wide. All a monetary authority can do is target the big suppliers, and inject enough liquidity into them to fund a minimal additional 30 days of credit sales. Inclusive of the payroll of those workers whom you told to stay home, and quarantine. China didn't just pull the size of the 174B, post lunar new year injection, out of its ass. Each of Europe, the US, and SA, are going to have to do something similar. The mystery is if/when the US goes to negative rates, how the world reacts to that, and if it occurs within months of a US election. Europe is closer to zero, a lot sicker than the US, and they are going to have to at least match/exceed US rate cuts. We're having the 1,000 point sell offs for a reason. Hence our comment that the most coronavirus-resistant investment is cash. Alternatively gold or platinum, but it's heavy and comes with a commission cost ;) SD
Viking Posted March 8, 2020 Posted March 8, 2020 Spek, thanks for sharing. Do you have a perspective of what is going on in the bond market? Specifically US government bonds? Yields are at historic lows and could possibly move into negative territory. Is it a panic overreation by this group? Stocks meanwhile have sold off a little and are trading at levels last seen 4.5 months ago in October 2019. I am trying to square what the US bond market is saying (recession is coming) with what the stock market is saying (slowdown coming with v-shaped recovery). Or am i way off base?
Viking Posted March 8, 2020 Posted March 8, 2020 How many sellers do you know, who can actually pay for their goods. AT THE TIME THEY BUY THEM? Virtually no one can. They need 5, 10, 30, 60, 90 days etc. to re-sell the goods and raise the cash to pay for the purchase. If you cant sell, or sell enough (mass/individual quarantines) during the credit period; you cant pay, and bankrupt. If you survive the first shock, you credit is severely restricted, and you can only reorder in small quantities that turn over rapidly. If/when life returns to normal, you can then only slowly order more as you progressively profit from every inventory turn. A credit crunch, ending hundreds of thousands little businesses, world wide. All a monetary authority can do is target the big suppliers, and inject enough liquidity into them to fund a minimal additional 30 days of credit sales. Inclusive of the payroll of those workers whom you told to stay home, and quarantine. China didn't just pull the size of the 174B, post lunar new year injection, out of its ass. Each of Europe, the US, and SA, are going to have to do something similar. The mystery is if/when the US goes to negative rates, how the world reacts to that, and if it occurs within months of a US election. Europe is closer to zero, a lot sicker than the US, and they are going to have to at least match/exceed US rate cuts. We're having the 1,000 point sell offs for a reason. Hence our comment that the most coronavirus-resistant investment is cash. Alternatively gold or platinum, but it's heavy and comes with a commission cost ;) SD It is very difficult to understand the economic impact to a region when it goes to lock down. Especially the small businesses. Yes, cash flow will be key. Another good reason do everything you can to not have to do that (lockdown).
A Dhandho Investor Posted March 8, 2020 Posted March 8, 2020 That statement works simply because it’s so broad. How far can you take that? Should every state have a few hospitals with 10k beds laying in wait for the next pandemic? Preparedness is different when it’s funded with tax dollars. To me, that statement only applies to things that are statistically common and have a reasonable chance of happening. Pandemics aren’t common by any means. Should we all start building bomb shelters in our back yards? I mean it could happen! Did you even read what he wrote? Where does it say anything about spending money? Taxpayer money? Isn’t it assumed? Maybe I read it wrong, but isn’t he saying govt SHOULD take precaution? I mean govt effort or lack of efforts seems to be the core theme in this thread. I meant nothing in this post about government at all, and I don't believe that this thread is or should be about politics. Nor do I believe that arguing about domestic politics has that been the motivation of most people here. Personally, I was thinking of Taleb's comments with respect to reducing health risk for individuals and with respect to portfolio management. If there are those who would like to argue about the government response, and argue in a non-productive way as we have seen before on CoB&F, I would suggest this topic has become large enough to create a separate thread within the Politics section and potentially another thread within investment strategies to discuss portfolio management in the context of COVID-19. Ultimately we are all here as investors, but let's not forget that some of us have already lost friends or family to this epidemic and more certainly will. I have many close friends on this board who I value immensely. Many of them are older and some are older with health issues that could put them right in the cross hairs of this virus. I worry for them and selfishly I fear for my loss were there something to happen to them. I just found the original context of Nassim's comments, and I have to admit I don't fully understand the context, especially the disagreement: I especially don't understand his spat with Tetlock: Taleb's deragotory comments addressed at Tetlock seem unnecessary and I think engaging with a variety of viewpoints would be valuable in this situation. I think this board would similarly benefit from a variety of viewpoints and we could all be more welcoming by focusing on the ideas and not attacking individuals, but focusing on the specifics of an argument and responding with an argument that is even more well reasoned. From watching the interactions of several others on this board in the past couple of days I think the discussions would have been better if everyone could have refrained from the use of "you" and tried to refrain from making assumptions or at least questioned their assumptions about other people's motivations. The Taleb statement I referred to was a statement he made as a response to Elon Musk's "panicking about the Coronavirus is dumb", where Taleb replied to Elon that "it is dumb to say that panicking about the Coronavirus is dumb". According to Taleb, individual precaution does not scale to collective precaution and one must "panic" individually in order to avoid systemic problems. This is because the risk for an individual to catch the virus is low and while it seems irrational to panic, if you do not panic and react in a conservative manner, the virus will spread and become a severe source of risk. In any case, I'm not panicking about the virus, because I'm in my 30's and in good health, so the chance for me from dying from this is close to 0. At the same time, I don't want my relatives (e.g. grand parents) to catch the virus, so Friday I cancelled a standup comedian his show in order to avoid a large crowd and have a smaller probability of catching the virus. If everyone just continues leading their lives as if there was no virus (assuming there is no quarantine, etc), you can bet that 80% of the population will catch the virus eventually.
Guest cherzeca Posted March 8, 2020 Posted March 8, 2020 I find the analogy to 9/11 instructive, but my take is that 9/11 was a bigger and longer shock. it caused a major change to air travel protocol, and the fear of terrorism seems to me to be deeper and longer lasting, or at least harder to wear off, than this virus, which will be in the rear view mirror by summer imo.
Guest cherzeca Posted March 8, 2020 Posted March 8, 2020 taleb often uses his "scaling" analysis to great effect. this time imo not so much. certain actions that work well on a personal level dont scale well at a societal level (treating your neighbor well at a personal level doesnt make socialism at a societal level preferable). his point this time around is a little different, that it is impossible to avoid a panic on a societal level because precaution at a personal level (purrell, hand washing etc) doesnt scale effectively, and so societal precaution (quarantines, travel bans etc) are necessary. I dont buy it, simply because we go through a flu season every year with personal level precaution. with covid19 it is all a media induced fear narrative.
Gregmal Posted March 8, 2020 Posted March 8, 2020 taleb often uses his "scaling" analysis to great effect. this time imo not so much. certain actions that work well on a personal level dont scale well at a societal level (treating your neighbor well at a personal level doesnt make socialism at a societal level preferable). his point this time around is a little different, that it is impossible to avoid a panic on a societal level because precaution at a personal level (purrell, hand washing etc) doesnt scale effectively, and so societal precaution (quarantines, travel bans etc) are necessary. I dont buy it, simply because we go through a flu season every year with personal level precaution. with covid19 it is all a media induced fear narrative. While some get flu shots, the reality is that most people do very little to actually mitigate risk of getting the flu every year. Taleb is popular right now for the same reasons Nouriel Rhoubini and Marc Faber are. Especially in the case of Taleb, its like boner inducing literature for financial geeks with a penchant to worry, with all the buzz words. Exponential growth, tail risk, second/third order effect, supply chain disruption, liquidity events.... a little bit of a flair for the dramatic.
SnarkyPuppy Posted March 8, 2020 Posted March 8, 2020 taleb often uses his "scaling" analysis to great effect. this time imo not so much. certain actions that work well on a personal level dont scale well at a societal level (treating your neighbor well at a personal level doesnt make socialism at a societal level preferable). his point this time around is a little different, that it is impossible to avoid a panic on a societal level because precaution at a personal level (purrell, hand washing etc) doesnt scale effectively, and so societal precaution (quarantines, travel bans etc) are necessary. I dont buy it, simply because we go through a flu season every year with personal level precaution. with covid19 it is all a media induced fear narrative. What specifically would cause you to change your mind that this is something more than, as you call it, a "media induced fear narrative"
Viking Posted March 8, 2020 Posted March 8, 2020 Is this where the world is headed? Countries ban their people from leaving their country so they don’t spread the virus? China does not want the virus to be brought back into the country by visitors... look at what they are doing. Look at what nations are doing to Iran travellers (they are revoking Iranian planes landing rights). If you want to understand what will be happening in the US in the coming weeks look at the rest of the world for insight. Remember they are a few weeks ahead. You can predict (with a little haziness) the unknowable future if you look hard enough. As Wayne Gretzky famously said, skate to where the puck is going not where it has been. Czech Prime Minister says Italy should bar its citizens from traveling in Europe - https://www.washingtonpost.com/world/2020/03/08/coronavirus-live-updates/ LONDON — The prime minister of the Czech Republic Sunday said Italy should bar all its citizens from traveling to other countries in Europe to contain the coronavirus. “Italy should ban all its citizens from traveling to Europe, because we are not able to order such a thing within Schengen,” Czech Prime Minister Andrej Babis told Czech Television Sunday. “Schengen” is shorthand for the 26 countries in Europe where 420 million citizens of the member-states can travel freely across each other’s borders without passport control. Most Schengen countries are members of the European Union, but the free travel area also includes non-EU members Iceland, Norway and Switzerland.
griezeman23 Posted March 8, 2020 Posted March 8, 2020 Anyone have data (or know) what occupancy rates declined to in the months after 9/11? Thanks. I am seeing some hotels have occupancy sub-50% already in SFO, but am curious what a reasonable WCS is so I can model liquidity situations.
Gregmal Posted March 8, 2020 Posted March 8, 2020 https://www.facebook.com/adina.garbuz/posts/10218749730509115
rb Posted March 8, 2020 Posted March 8, 2020 Spek, thanks for sharing. Do you have a perspective of what is going on in the bond market? Specifically US government bonds? Yields are at historic lows and could possibly move into negative territory. Is it a panic overreation by this group? Stocks meanwhile have sold off a little and are trading at levels last seen 4.5 months ago in October 2019. I am trying to square what the US bond market is saying (recession is coming) with what the stock market is saying (slowdown coming with v-shaped recovery). Or am i way off base? I'm not spek, but here are my thoughts. I don't think that the bond market has much to do with with whats going on. But current events have certainly pushed it into overdrive. Here's the chart for the 10 year: https://fred.stlouisfed.org/series/DGS10 The 10 year yield has been coming down HARD since the end on 2018. Basically the bond market has been quietly flashing red for a while now. But nobody was paying any attention to it until now. They were too busy coming up with arguments about why elevated P/Es are just fine.
Spekulatius Posted March 8, 2020 Posted March 8, 2020 Spek, thanks for sharing. Do you have a perspective of what is going on in the bond market? Specifically US government bonds? Yields are at historic lows and could possibly move into negative territory. Is it a panic overreation by this group? Stocks meanwhile have sold off a little and are trading at levels last seen 4.5 months ago in October 2019. I am trying to square what the US bond market is saying (recession is coming) with what the stock market is saying (slowdown coming with v-shaped recovery). Or am i way off base? I don’t really have a clue as far as the bond market is concerned, the reaction in bond yield is way larger than what I would have expected. It’s is a huge market, so it’s. It just a few players panicking, it’s a lot of players basically predicting deflation. Even if it is an overreaction, think the political pressure to reduce interest rates is immense and I suspect we will see more cuts before the election. As far as comparing this to 9/11, it is the closest analogy I can come up with in recent times, but of course it isn’t perfect. I don’t agree that 9/11 was a bigger event. In a way, it was a singular event that occurred within a few hours and then was basically over, as it turned out. What wasn’t over was of course the change in mind set, the security protocols and the reluctance of people to fly. This event is more protracted and most likely will play out over many month. So the reaction is less direct and it is more like a slow motion version of 9/11. Then of course there is the event itself an the reaction to it, which are two different things. It’s difficult to know how people will react, but again, I can see this occurring on the same scale than 9/11. As far as Ray Dahlio, no I am not really a macro guy, but I think these folks had a pretty sad decade and may have more opportunities to outperform in the next few years than in the last. I can also see they index investors are going to see pretty lousy performance while active investors have more opportunities to shine.
Guest cherzeca Posted March 8, 2020 Posted March 8, 2020 Spek, thanks for sharing. Do you have a perspective of what is going on in the bond market? Specifically US government bonds? Yields are at historic lows and could possibly move into negative territory. Is it a panic overreation by this group? Stocks meanwhile have sold off a little and are trading at levels last seen 4.5 months ago in October 2019. I am trying to square what the US bond market is saying (recession is coming) with what the stock market is saying (slowdown coming with v-shaped recovery). Or am i way off base? I don’t really have a clue as far as the bond market is concerned, the reaction in bond yield is way larger than what I would have expected. It’s is a huge market, so it’s. It just a few players panicking, it’s a lot of players basically predicting deflation. Even if it is an overreaction, think the political pressure to reduce interest rates is immense and I suspect we will see more cuts before the election. As far as comparing this to 9/11, it is the closest analogy I can come up with in recent times, but of course it isn’t perfect. I don’t agree that 9/11 was a bigger event. In a way, it was a singular event that occurred within a few hours and then was basically over, as it turned out. What wasn’t over was of course the change in mind set, the security protocols and the reluctance of people to fly. This event is more protracted and most likely will play out over many month. So the reaction is less direct and it is more like a slow motion version of 9/11. Then of course there is the event itself an the reaction to it, which are two different things. It’s difficult to know how people will react, but again, I can see this occurring on the same scale than 9/11. As far as Ray Dahlio, no I am not really a macro guy, but I think these folks had a pretty sad decade and may have more opportunities to outperform in the next few years than in the last. I can also see they index investors are going to see pretty lousy performance while active investors have more opportunities to shine. I guess this would be my 9/11 comp response. once covid19 dissipates (I say 3 months), I believe people will fly and take trains etc without compunction. 9/11 had a far more lasting effect...first, as a NYCer, we were all waiting for the next shoes to drop, so it was not a singular event. then you had the stupid shoe bomber, with wires hanging outside his shoes. and so on and so forth. what the UN/world community should insist on is third world countries and china (unless I repeat myself) adhering to sanitary conditions/protocols. china cant even raise pork in sanitary conditions!
rb Posted March 8, 2020 Posted March 8, 2020 I don’t really have a clue as far as the bond market is concerned, the reaction in bond yield is way larger than what I would have expected. It’s is a huge market, so it’s. It just a few players panicking, it’s a lot of players basically predicting deflation. Even if it is an overreaction, think the political pressure to reduce interest rates is immense and I suspect we will see more cuts before the election. It's definitely not predicting deflation. I find it useful to use both of charts below when thinking about the bond market. The second one is probably more important. https://fred.stlouisfed.org/series/DGS10 https://fred.stlouisfed.org/series/DFII10 What it is saying though is that the stock market guys were way too enthusiastic especially in 2019. It's also saying that the economy is not that great. It's also saying that things in the labour market are not as they seem. I just didn't figure out what exactly. All of this probably has a lot to do with income inequality and a lot of other stuff like that though, not just a prediction of the next quarter GDP print.
mcliu Posted March 8, 2020 Posted March 8, 2020 I don’t really have a clue as far as the bond market is concerned, the reaction in bond yield is way larger than what I would have expected. It’s is a huge market, so it’s. It just a few players panicking, it’s a lot of players basically predicting deflation. Even if it is an overreaction, think the political pressure to reduce interest rates is immense and I suspect we will see more cuts before the election. It's definitely not predicting deflation. I find it useful to use both of charts below when thinking about the bond market. The second one is probably more important. https://fred.stlouisfed.org/series/DGS10 https://fred.stlouisfed.org/series/DFII10 What it is saying though is that the stock market guys were way too enthusiastic especially in 2019. It's also saying that the economy is not that great. It's also saying that things in the labour market are not as they seem. I just didn't figure out what exactly. All of this probably has a lot to do with income inequality and a lot of other stuff like that though, not just a prediction of the next quarter GDP print. Don't you have to factor in the trillions of $ of negative yielding debt which is pushing many Japanese/European investors to US treasuries. https://fred.stlouisfed.org/graph/fredgraph.png?g=qj1l
Cigarbutt Posted March 8, 2020 Posted March 8, 2020 I don’t really have a clue as far as the bond market is concerned, the reaction in bond yield is way larger than what I would have expected. It’s is a huge market, so it’s. It just a few players panicking, it’s a lot of players basically predicting deflation. Even if it is an overreaction, think the political pressure to reduce interest rates is immense and I suspect we will see more cuts before the election. It's definitely not predicting deflation. I find it useful to use both of charts below when thinking about the bond market. The second one is probably more important. https://fred.stlouisfed.org/series/DGS10 https://fred.stlouisfed.org/series/DFII10 What it is saying though is that the stock market guys were way too enthusiastic especially in 2019. It's also saying that the economy is not that great. It's also saying that things in the labour market are not as they seem. I just didn't figure out what exactly. All of this probably has a lot to do with income inequality and a lot of other stuff like that though, not just a prediction of the next quarter GDP print. Don't you have to factor in the trillions of $ of negative yielding debt which is pushing many Japanese/European investors to US treasuries. https://fred.stlouisfed.org/graph/fredgraph.png?g=qj1l I'm just a noob for this macro stuff and would appreciate if rb elaborates but this may be interesting as I noticed that Fairfax still has some deflation protection obtained under a different regime. If the Coronavirus has an economic effect (extent of which is being defined), it seems that the effect should be more cyclical (if I read Irving Fisher correctly) and should influence more the inflation expectations component. But, it does not appear to be the case (at least up to now). What has recently dived are the real rates but this is really nothing new as this has been a long term secular trend that obviously has no viral origin (not a viral organism type at least). What's new is that real rates are now negative and who knows what that really means? @mcliu I think you have to factor in hedging costs which have gone up over time and which have a tendency to go up during times of volatility. I understand that this has meant often a negative net rate for international investors unless one decides to go "naked". @Castanza The last time I used public transportation in Milan was in June and July of 2009 and I must say that the atmosphere was much more hectic then. The topic of the day was that Micheal Jackson had died. I suspect though that the crowded and rowdy conditions were not related to the news of the day. I guess it was more fundamental.
merkhet Posted March 8, 2020 Posted March 8, 2020 Gates-funded program will soon offer home-testing kits for new coronavirus https://www.seattletimes.com/seattle-news/health/gates-funded-program-will-soon-offer-home-testing-kits-for-new-coronavirus/
rb Posted March 8, 2020 Posted March 8, 2020 Don't you have to factor in the trillions of $ of negative yielding debt which is pushing many Japanese/European investors to US treasuries. https://fred.stlouisfed.org/graph/fredgraph.png?g=qj1l It just doesn't work like that.
mcliu Posted March 9, 2020 Posted March 9, 2020 @mcliu I think you have to factor in hedging costs which have gone up over time and which have a tendency to go up during times of volatility. I understand that this has meant often a negative net rate for international investors unless one decides to go "naked". I don’t know for sure, but I watched a doubleline presentations where he says clients are going unhedged, rather take the fx risk (potential upside) and get some yield..
Guest Schwab711 Posted March 9, 2020 Posted March 9, 2020 I don’t really have a clue as far as the bond market is concerned, the reaction in bond yield is way larger than what I would have expected. It’s is a huge market, so it’s. It just a few players panicking, it’s a lot of players basically predicting deflation. Even if it is an overreaction, think the political pressure to reduce interest rates is immense and I suspect we will see more cuts before the election. It's definitely not predicting deflation. I find it useful to use both of charts below when thinking about the bond market. The second one is probably more important. https://fred.stlouisfed.org/series/DGS10 https://fred.stlouisfed.org/series/DFII10 What it is saying though is that the stock market guys were way too enthusiastic especially in 2019. It's also saying that the economy is not that great. It's also saying that things in the labour market are not as they seem. I just didn't figure out what exactly. All of this probably has a lot to do with income inequality and a lot of other stuff like that though, not just a prediction of the next quarter GDP print. CPI is currently 2.5%. I don't think the market is telling us it's healthy, though you are right it's not necessarily deflation yet (though it could be). It's at least declining inflation.
ValuePadawan Posted March 9, 2020 Posted March 9, 2020 Another update by Prof. Salathé on the current knowledge of the disease.
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