Do you think this will be worst than the Great Recession?

[Castanza]

I am sure I am a product of living in NYC for last 40 years, but I expect New Yorkers to embrace the return of eating out, spending more for the latest thing (so as to tell best friend of purchase if for no other reason) etc.  I think social patterns are difficult to change, and I see no reason why New Yorkers, those hardest hit by covid, would not return to prior spending patterns with a passion

 

Relying on habit is a slippery slope since it only takes 21 days to 1 year to break or rather change a habit into something else. For most people, it's already 30 days since the lockdown. People have been changed imho.

 

And they can't change back?

 

Not the point. I didn't say spending will end, I said it may be a possibility for it to dry up for the mid-to-long term. If that's the case, it will have tangible effects.

 

EDIT: So even if they can change back, it does not invalidate my argument.

 

Some things never change on a longterm context.

 

1.) People want to own homes

2.) People want families

3.) People want to be rich

4.) People want nice things

 

Those four things will never change. Why? Because humanity is hardwired to overcome, innovate, and push forward. Those 4 things have survived hundreds of wars, natural disasters, diseases, and thousands of years. Covid-19 isn’t going to change that. If anything on a historical scale humanity has learned to recover and adapt faster and faster from “events”.

 

 

[Viking]

I am sure I am a product of living in NYC for last 40 years, but I expect New Yorkers to embrace the return of eating out, spending more for the latest thing (so as to tell best friend of purchase if for no other reason) etc.  I think social patterns are difficult to change, and I see no reason why New Yorkers, those hardest hit by covid, would not return to prior spending patterns with a passion

 

Relying on habit is a slippery slope since it only takes 21 days to 1 year to break or rather change a habit into something else. For most people, it's already 30 days since the lockdown. People have been changed imho.

 

I disagree and think once lockdown is lifted we may see a 1-2 week period of "tentative" behavior but will revert rather quickly afterwards, as people are quite frustrated with sitting home all day and night.

 

My guess is older and people with underlying conditions will dramatically change behavior until vaccine is available. This is a substantial number of people. Also, people who are unemployed will have muted spending. Tough to buy a house or car when you do not have a job. Even employed people will likely have big bills to pay (back rent/mortgage, higher credit card balances etc). Tough to buy a house or car if you think your job is at risk.

 

Who is going to book an overseas trip any time soon? Who is going to book a big event (wedding etc) any time soon? Movie anyone? Sporting events? Restaurant meal while socially distancing? Yes, a small subset of the population will be wanting to party on the beaches of Florida. My guess is economic activity will be muted initially and will come back slowly.

 

How fast it comes back will depend greatly on all the ‘re-open’ plans. If they are not national, coordinated, well thought out, executed well and effective then economic activity is likely to remain low.

 

Lots we still do not understand. This uncertainty will not be good for the economy.

[LC]

That’s a fair point Viking re the most vulnerable groups

[Viking]

I am sure I am a product of living in NYC for last 40 years, but I expect New Yorkers to embrace the return of eating out, spending more for the latest thing (so as to tell best friend of purchase if for no other reason) etc.  I think social patterns are difficult to change, and I see no reason why New Yorkers, those hardest hit by covid, would not return to prior spending patterns with a passion

 

Relying on habit is a slippery slope since it only takes 21 days to 1 year to break or rather change a habit into something else. For most people, it's already 30 days since the lockdown. People have been changed imho.

 

And they can't change back?

 

Not the point. I didn't say spending will end, I said it may be a possibility for it to dry up for the mid-to-long term. If that's the case, it will have tangible effects.

 

EDIT: So even if they can change back, it does not invalidate my argument.

 

Some things never change on a longterm context.

 

1.) People want to own homes

2.) People want families

3.) People want to be rich

4.) People want nice things

 

Those four things will never change. Why? Because humanity is hardwired to overcome, innovate, and push forward. Those 4 things have survived hundreds of wars, natural disasters, diseases, and thousands of years. Covid-19 isn’t going to change that. If anything on a historical scale humanity has learned to recover and adapt faster and faster from “events”.

 

The beauty of the US model is it will adjust and move forward for all the seasons you state. The Great Recession of 2008 is the most recent example. A huge swath of the population lost everything. But over a 5 year period the US slowly got through the recession. Most importantly if fixed the big banks. And as of 2 months ago it would have received my vote for best positioned economy in the world.

 

So i am optimistic the US will get through the current situation. Just not sure of the duration/severity/timing (this is true for every country). I am less optimistic about other economies (like Italy and even Canada, to a lesser extent). Their economies are not as adaptive structurally.

[matjone]

It's way worse in severity.  The duration is the big question and there are too many unknowns to estimate that with any useful degree of accuracy.  My thinking is that this could have been much less severe if our leaders had acted promptly when they were briefed on it but they didn't (except for dumping their stocks on the public LOL).  They continue to do little to give me much confidence in them so that is why I am pretty pessimistic about how this plays out over the next several months.

 

Of course the main reason to ask this question is cause we're trying to figure out how to position ourselves.  If I put on my long term investor hat, I have to say that if they were closing the market for 10 years I'd probably be mostly allocated to stocks.  But if I put on my trader hat, the likelihood of a long recession seems high and stocks usually don't sell at 20x peak earnings during bad recessions.

[LC]

An article on the generational economic impact of coronavirus:

 

https://www.theatlantic.com/ideas/archive/2020/04/millennials-are-new-lost-generation/609832/

 

The Millennials entered the workforce during the worst downturn since the Great Depression. Saddled with debt, unable to accumulate wealth, and stuck in low-benefit, dead-end jobs, they never gained the financial security that their parents, grandparents, or even older siblings enjoyed. They are now entering their peak earning years in the midst of an economic cataclysm more severe than the Great Recession, near guaranteeing that they will be the first generation in modern American history to end up poorer than their parents.

 

[TorontoRaptorsFan]

People have short term memories. A year from now everyone will be back to their same old routine...

[fareastwarriors]

An article on the generational economic impact of coronavirus:

 

https://www.theatlantic.com/ideas/archive/2020/04/millennials-are-new-lost-generation/609832/

 

The Millennials entered the workforce during the worst downturn since the Great Depression. Saddled with debt, unable to accumulate wealth, and stuck in low-benefit, dead-end jobs, they never gained the financial security that their parents, grandparents, or even older siblings enjoyed. They are now entering their peak earning years in the midst of an economic cataclysm more severe than the Great Recession, near guaranteeing that they will be the first generation in modern American history to end up poorer than their parents.

 

Hope those parents/grandparents have a big inheritance for us!

[bookie71]

I have been rereading The Great Crash 1929.  It has been many years since it was written but it is really scaring me.  I don't think we are anywhere near he end of this recession.

I worry about run away inflation with the printing presses running full time.

 

 

[valueinvestor]

I have been rereading The Great Crash 1929.  It has been many years since it was written but it is really scaring me.  I don't think we are anywhere near he end of this recession.

I worry about run away inflation with the printing presses running full time.

 

Not that I disagree but infection rates are slowing, which brings a semblance of good news however reopening may bring about new cases, as being experienced in China. However, I do not know how the market will react to this considering that the whole point of the reopening is not to eliminate infection rates, but to slow it down in a dance between either slowing the economy or infection rates.

 

Secondly, if the printing press went too far, the US Government has the ability to QT (quantitative tightening).

 

Just to put it out there to encourage more discussion on the topic, so we can all come to a decision on our own.

[Gamecock-YT]

Depends if the Fed will be giving bridge loans to cover people's mortgages, car loans, and credit card debt.

[fareastwarriors]

Depends if the Fed will be giving bridge loans to cover people's mortgages, car loans, and credit card debt.

 

State Unemployment Benefit + $600 Federal Pandemic Assistance (7/31) = bigger than regular paycheck for most lower income people

 

If have you a mortgage, you request forbearance upto a year... Some lenders will want to pay lump sum at end of forbearance period but most will work on payment plan or some even extend the life of the loan. 

 

 

Wells Fargo is moving unpaid payments to the end of the loan.

 

https://imgur.com/a/q0KpBdC

[Spekulatius]

Depends if the Fed will be giving bridge loans to cover people's mortgages, car loans, and credit card debt.

 

“We don’t believe in loans we believe in grants”. It will be interesting to see what they come up for the airlines.

[Jurgis]

An article on the generational economic impact of coronavirus:

 

https://www.theatlantic.com/ideas/archive/2020/04/millennials-are-new-lost-generation/609832/

 

The Millennials entered the workforce during the worst downturn since the Great Depression. Saddled with debt, unable to accumulate wealth, and stuck in low-benefit, dead-end jobs, they never gained the financial security that their parents, grandparents, or even older siblings enjoyed. They are now entering their peak earning years in the midst of an economic cataclysm more severe than the Great Recession, near guaranteeing that they will be the first generation in modern American history to end up poorer than their parents.

 

It's more that low income people are f&*cked ... again.

 

John Oliver Coronavirus IV

[bookie71]

Supply chain being disrupted (e.g. closing of pork plant in Dakotas) crops being plowed under etc - more $ chasing fewer goods

 

[BG2008]

An article on the generational economic impact of coronavirus:

 

https://www.theatlantic.com/ideas/archive/2020/04/millennials-are-new-lost-generation/609832/

 

The Millennials entered the workforce during the worst downturn since the Great Depression. Saddled with debt, unable to accumulate wealth, and stuck in low-benefit, dead-end jobs, they never gained the financial security that their parents, grandparents, or even older siblings enjoyed. They are now entering their peak earning years in the midst of an economic cataclysm more severe than the Great Recession, near guaranteeing that they will be the first generation in modern American history to end up poorer than their parents.

 

It's more that low income people are f&*cked ... again.

 

John Oliver Coronavirus IV

 

Haven't watched this yet.  As I get older, I get more cynical and realize that people can make careers out of telling people that they are the oppressed.  I wonder what these celebrities are like in person.  The question is "Do the guy broadcasting to millions about structural unfairness eat caviar?"

[Jurgis]

An article on the generational economic impact of coronavirus:

 

https://www.theatlantic.com/ideas/archive/2020/04/millennials-are-new-lost-generation/609832/

 

The Millennials entered the workforce during the worst downturn since the Great Depression. Saddled with debt, unable to accumulate wealth, and stuck in low-benefit, dead-end jobs, they never gained the financial security that their parents, grandparents, or even older siblings enjoyed. They are now entering their peak earning years in the midst of an economic cataclysm more severe than the Great Recession, near guaranteeing that they will be the first generation in modern American history to end up poorer than their parents.

 

It's more that low income people are f&*cked ... again.

 

John Oliver Coronavirus IV

 

Haven't watched this yet.  As I get older, I get more cynical and realize that people can make careers out of telling people that they are the oppressed.  I wonder what these celebrities are like in person.  The question is "Do the guy broadcasting to millions about structural unfairness eat caviar?"

 

So in your opinion the fact that a guy on TV (or a person on CoBF) is rich means that they cannot talk about the issues faced by poor people?

 

You realize that this would remove yet another way for poor people issues to be heard? Let's sweep them under the rug, yeah?

 

You already sit here in the CoBF echo chamber of rich and entitled self-made people who mostly assume that being poor comes from being dumb or making bad choices and "everyone could be rich if they only applied themselves".

 

Perhaps it's not such a bad thing that there are people who show the real situation.

[Jurgis]

On the side of "pent up demand and V-shape recovery", what I hear from Germany and Austria people are going out a lot and not taking the social isolation precautions very seriously. This might be true in other locations too. So perhaps even without vaccine/treatment there will be a (large?) proportion of the population who will go out shopping/travelling/eating-out once forceful restrictions are lifted. Although there still remains the question whether this will lead to big reinfection flare-ups.

 

Personally, I don't plan to go out much even if restrictions are lifted if treatment/vaccine is not available. OTOH, I am currently going out more than a bunch of US people, who only go out to grocery store once a month. So clearly it's all very anecdotal. 

[matts]

I'll add my comments about the situation in poland because i see the opposite.

 

Poland has strict lockdown rules. Only leave the house for work (if you have to), groceries, pharmacy. Fines are fairly large but the police don't seem to fine for minor infractions unless you are doing something stupid or were under a quarantine order.

 

Almost everyone is practicing social distancing. Shops have a maximum number of patrons at a time. I believe it's 3 per cash register. Many people are wearing masks now even though it has not even been suggested by the government, nevermind required.

 

The social distancing is working, the curve is flattening. As of today, there are 7,200 confirmed cases in a population of 38 million living right next to German and with (previously) open borders to the rest of the EU. 363 Dead.

 

I believe in a few weeks, the lockdown will be eased in small steps. I think masks will be mandatory for indoor establishments and I think there is large pent up demand for in-person interactions

[jeffsreng]

FYI:

 

https://www.bloomberg.com/news/articles/2020-04-14/imf-says-great-lockdown-recession-likely-worst-since-depression

[Jurgis]

I'll add my comments about the situation in poland because i see the opposite.

 

Poland has strict lockdown rules. Only leave the house for work (if you have to), groceries, pharmacy. Fines are fairly large but the police don't seem to fine for minor infractions unless you are doing something stupid or were under a quarantine order.

 

Almost everyone is practicing social distancing. Shops have a maximum number of patrons at a time. I believe it's 3 per cash register. Many people are wearing masks now even though it has not even been suggested by the government, nevermind required.

 

The social distancing is working, the curve is flattening. As of today, there are 7,200 confirmed cases in a population of 38 million living right next to German and with (previously) open borders to the rest of the EU. 363 Dead.

 

I believe in a few weeks, the lockdown will be eased in small steps. I think masks will be mandatory for indoor establishments and I think there is large pent up demand for in-person interactions

 

Thanks. I guess people reactions and behavior vary by country/location a lot. E.g. what I hear from Lithuania is closer to what you wrote about Poland vs what I hear from Germany and Austria.

[jeffsreng]

"We've printed $186 trillion worth of money over the past 20 years [quantitative easing] to generate only $46 trillion of GDP growth.." Jeff Booth "Debt is being created that can never be repaid."

 

https://www.amazon.com/gp/product/B08334WFSQ/

[valueinvestor]

"We've printed $186 trillion worth of money over the past 20 years [quantitative easing] to generate only $46 trillion of GDP growth.." Jeff Booth "Debt is being created that can never be repaid."

 

https://www.amazon.com/gp/product/B08334WFSQ/

 

I don’t know if that’s a bad thing without more context, but it could be construed as we generated a 30% cumulative ROI from printing money. We’ll get a pay back in 90 years for the initial investment, but this also excluded possible losses of principal from purchasing bad assets.

[TwoCitiesCapital]

"We've printed $186 trillion worth of money over the past 20 years [quantitative easing] to generate only $46 trillion of GDP growth.." Jeff Booth "Debt is being created that can never be repaid."

 

https://www.amazon.com/gp/product/B08334WFSQ/

 

I don’t know if that’s a bad thing without more context, but it could be construed as we generated a 30% cumulative ROI from printing money. We’ll get a pay back in 90 years for the initial investment, but this also excluded possible losses of principal from purchasing bad assets.

 

30% is generous. It assumes that that no future debt is necessary to generate the subsequent return on/of capital.

 

But cut off all new issuance of debt and watch what happens to GDP growth which is needed to pay back the remaining 70% of that capital with a 0 return assumption.

[valueinvestor]

"We've printed $186 trillion worth of money over the past 20 years [quantitative easing] to generate only $46 trillion of GDP growth.." Jeff Booth "Debt is being created that can never be repaid."

 

https://www.amazon.com/gp/product/B08334WFSQ/

 

I don’t know if that’s a bad thing without more context, but it could be construed as we generated a 30% cumulative ROI from printing money. We’ll get a pay back in 90 years for the initial investment, but this also excluded possible losses of principal from purchasing bad assets.

 

30% is generous. It assumes that that no future debt is necessary to generate the subsequent return on/of capital.

 

But cut off all new issuance of debt and watch what happens to GDP growth which is needed to pay back the remaining 70% of that capital with a 0 return assumption.

 

It's what I was trying to say - you can't make a decision unless you have more information.