I think it's not hard to point at what most financial pitch men are missing...
Or, most people... with "most people" in context meaning "market focused" people...
What I see a lot of is "talking heads"... talking. What I don't see is much application of reason.
Most of the "projections" are, literally, projection... ?
"The event"... is not a market event, primarily... it just happens to be occurring at a time when the market, already being hyper-inflated on purpose as an object of government(s) policy, was also already long overdue for a > 50% correction... for no more substantive reason than it being that badly over-priced, while public policy has been economically destabilizing... fostering significantly greater market brittleness. This event is one in which "recovery" will not be measured in prices as much as in "correction" in the normal meaning.
At the same time the markets have been purposefully over-inflated, they've been deliberate in using them in generating a false market price approval of glaringly deficient public policies, including that in a global "Free Trade" policy that is the opposite, the title "Free Trade" being used to describe the opposite in the mercantalist policy we have had imposed on us, makes that use a farcical, cynical fraud...
That's being made glaringly apparent now... as the ridiculously over-extended supply chains we've created are snapping under the stresses. The folly is being proven to those Americans who didn't get it before now, in real risk to their lives, as they are not getting critically needed products from China... with the obvious in implication elsewhere also still being widely ignored. As the impact is made apparent, narrowly, in the product markets: so it MUST ALSO force huge and sudden corrections in mis-allocations in the capital flows that created the problem. Those flows will be forced into reverse with some violence... while many still assume that cannot happen, or cannot happen quickly ?
And, the market pricing context ? Late last week... we finally reached the point where market prices came back in line with "fair value" based on the LAGGING earnings from a fully functioning economy... so the "Crash" thus far has prices back where they should have been already based on earnings BEFORE the event... But, now, prices are still lagging market reality based on forward earnings ?
How many companies can give accurate estimates of forward earnings now ? Not just a rhetorical question. Some businesses are doing OK. A few will be doing better. And those few sustaining greater predictability will outperform from here, only because they retain that greater measure of predictability ?
As always in dire economic circumstances: SCI, STON... ? Or, are we not there yet ? So few market participants alive now have ever seen a real bear market... that they probably are unaware of that "play" as a traditional companion to hard times ?
Don't see many of the "talking heads" selling their new "how to survive the bear market" books, yet ? So, can't be close to the bottom, yet...
The one common theme considering both coronavirus and market pricing functions now... is how remarkably incapable most people seem to be in properly considering lagging functions, and exponential functions... never mind combinations of lagging functions with exponential functions... that being a necessary capability in considering both market functions and the epidemiology of viruses, an ability required of people in making usefully rational predictions based on mathematical facts... and predictable behaviors.
So, in considering this first not as a market function but as a "fundamental" event... and looking at what you might assume are similar instances in prior extremes in market declines and bear markets ?
"The event" is not unprecedented... We survived the Spanish Flu of 1917-1918... but, back then we didn't do the kinds of things we are doing now in trying to prevent the virus killing the numbers of people that it might ? The response being mounted to try to prevent the coronavirus spreading too quickly... is what's unprecedented... even if fully justified... as likely making the difference between killing "only" 1% of the population... if we do it well... and killing 14% or more if we do not?
Just ask yourself...
The last time we had a market event "like this" (ie., never)... what percentage of the world's economy was shuttered in at the time... not as the end result of the market carnage... but as the precursor, before the crash, and as the driver of it ?
What percentage of the world's economy was shut down, FIRST, and for how long, in 2008 ? In 1929 ?
What's the short term... much less the long term impact... of having that happen ? Will companies be able to survive it ? Clearly not all will. Which ones will ? Too soon to tell ? How should that be priced ?
Then, with that understanding in hand as an entering argument, and only then, ALSO consider the history looking at the future impacts that followed in the wake of the historical market events. What impact did the historical crash itself... have on the subsequent economic recoveries ? The event of the crash itself... imposes significant subsequent limits on the recovery that follows ? Some of that happens directly, as a function of capital destruction... and some of it indirectly, as a function of changes in people's perceptions of risk, as risk is realized, it changes willingness to take risks... more after suffering significant losses ?
Is there another event in economic history... delivering a similar impact in the two-fer... destruction first, and crash in the wake ? Maybe in some of the prior events with plagues... centuries back ? Maybe in the aftermath, in the wake of a war, with the physical and societal destruction imposing limits ? But, still nothing with the complexity of the modern economy and its dependence on hugely complex supply chains, just in time delivery, and global markets for goods and services ? Obvious, already, that this event will be precipitating significant changes... accelerations... in new technologies that obviate some of the risks ? Telemedicine ? Robotics ? The food delivery services. And, in parallel, likely to see big deceleration in some traditional businesses... Airlines ? Cruise ships ? Public gatherings for sports and entertainment events ? Public theaters might not survive... not just as businesses, but as "a thing" ?
Boeing might survive... by sheer luck... in large part because they were already struggling and had throttled everything back... the timing likely working out well for them in relation to the likely timing of the virus as a driver resolving... the pandemic mostly blunting the advantage they would have lost to their competitors otherwise ? They clearly haven't "earned" that "win" by having brilliant managers making good choices ?
I've essentially been a bystander in the markets since 2008... because of recognizing price discovery as broken... and not finding it useful to participate in a broken market... the functions of which were not predictable, as they should be in large part, because they were divorced from fundamentals, and were made deliberately capricious... as a part of deliberately inflating the bubble as the object of public policy.
Now, however... in spite of "them"... price discovery is working better than it has in a generation... and it seems to be working better and better over time ? They're still TRYING to prevent market functions from working... trying to sustain artificial valuations... it's only that none of what they're trying to do in manipulating markets is working for them now... as the market is, correctly, largely ignoring them as irrelevant ?
And that will continue... because just throwing more and more money vapor at the market... no amount of money... will make the virus stop... or make people forget that they're not getting paid for work they're not doing ?
The market... is tied to the fundamentals again... as it should be. To stop the crash... stop the virus... and/or give people good reason to alter their expectations of what happens AFTER... along with VALID predictions on the timelines on which the events can be expected to unfold...
Without that assurance of predictability... from people proving they can be trusted as "having it right" because they were right before when others were wrong... without that, "they" are howling at the moon....
That public officials are also still ignoring, and making it clear that they are ignoring, that "the market" isn't SUPPOSED to be a function that operates independently from... reality... and instead responds slavishly only to their "steering" inputs ? Have they gone away yet ? No ? Then its probably not a bottom.
I agree with Trump... in that I don't think this is inherently or necessarily a very long lived event. But, the less well you do in making the effort to manage it... (Spring Break in Florida... probably both expanding it significantly and extending it by a month)... the LONGER it will take to resolve... the more it will cost, directly, and in decay with time.... the more people will lose faith in the ability to "put it back together again"...
Fundamentals first ! But, for now... that means everything is a trade... three or four days is a lifetime... "trends" play out in less than five, and then reverse... It's not time to "buy stocks" yet.... |
