There's no way this is a "V-shaped" recovery... right?

[bits4books]

The simple answer is that people just have too much money that doesn't cost anything. The over-inflated financial sector has cracked under its own weight due to a series of unrelated events, triggering another classic period of crisis. Because there will be a depression and then the rise will begin as it has already been and more than once.
Think of it as an emergency weight loss before the summer - you suffer for a long time and in many ways deny yourself, torment yourself. But then again, you can afford to drink beer in the morning and eat in restaurants for weeks. The economy NEEDS crisis. Not so often, of course. This is the l normal and natural course of things under capitalism and there is nothing super-scary about it. We have always risen and this time we will also rise and it will be better than it was.

[1713561730]

1713561730

[1713561730]

1713561730

[1713561730]

1713561730

[1713561730]

1713561730

[1713561730]

1713561730

[Gozie51]

The economy NEEDS crisis. Not so often, of course. This is the l normal and natural course of things under capitalism and there is nothing super-scary about it. We have always risen and this time we will also rise and it will be better than it was.

Capitalism is the system that ensures faster growth and that certain will make the economic hardship to be overcome. Production is the mark of economic growth and many are opening back for work. Soon we are going back to normal with bitcoin recovery.

[exstasie]

The simple answer is that people just have too much money that doesn't cost anything.

Here's a new twist on that idea: negative yielding bonds.

For the first time ever, the UK just sold government bonds with a negative (-0.003%) yield: https://www.theguardian.com/business/2020/may/20/uk-sells-government-bond-with-negative-yield-for-first-time-coronavirus

And the incredible thing? There is strong demand for them:

Despite concerns that the government would have to offer higher yields to investors to persuade them to finance the highest borrowing in peacetime, demand for gilts has been strong. According to the DMO, bids for the July 2023 gilt were worth £8.1bn – more than double the £3.75bn on offer.

That's amazing to me, and sort of scary. If bond rates keep dropping (2-year US bond rates hitting all time lows now too) and there is still strong demand, that suggests dark days ahead for equities. Stocks and bonds draw on the same pool of investors which is why the two generally have a strong negative correlation. If investors want to pay for the privilege of holding government bonds instead of holding equities, there must be some serious fear about the economic outlook for the next 2-3 years.

[mtwelve]

The simple answer is that people just have too much money that doesn't cost anything.

Here's a new twist on that idea: negative yielding bonds.

For the first time ever, the UK just sold government bonds with a negative (-0.003%) yield: https://www.theguardian.com/business/2020/may/20/uk-sells-government-bond-with-negative-yield-for-first-time-coronavirus

And the incredible thing? There is strong demand for them:

Despite concerns that the government would have to offer higher yields to investors to persuade them to finance the highest borrowing in peacetime, demand for gilts has been strong. According to the DMO, bids for the July 2023 gilt were worth £8.1bn – more than double the £3.75bn on offer.

That's amazing to me, and sort of scary. If bond rates keep dropping (2-year US bond rates hitting all time lows now too) and there is still strong demand, that suggests dark days ahead for equities. Stocks and bonds draw on the same pool of investors which is why the two generally have a strong negative correlation. If investors want to pay for the privilege of holding government bonds instead of holding equities, there must be some serious fear about the economic outlook for the next 2-3 years.

Wait if I'm thinking about this right... the attraction is that investors will ONLY lose a certain amount? So like if they only lose 1% but purchasing power goes down 3% they're out ahead?

That's actually insane.

[bits4books]

The economy NEEDS crisis. Not so often, of course. This is the l normal and natural course of things under capitalism and there is nothing super-scary about it. We have always risen and this time we will also rise and it will be better than it was.

Capitalism is the system that ensures faster growth and that certain will make the economic hardship to be overcome. Production is the mark of economic growth and many are opening back for work. Soon we are going back to normal with bitcoin recovery.

That's it. I can't understand people who in 2020 are shouting that "all this is the collapse of the system we will not survive the new crisis!!!"
What is in the minds of these people? Five minutes on Google is too hard for these people to understand that a crisis is as normal as running out of a can of soda? Yes, it's over, but if you get your ass off the couch and go to the store, you'll have a can of soda again - and this is the same as how the economy works (super-simple example, but still).

[exstasie]

That's amazing to me, and sort of scary. If bond rates keep dropping (2-year US bond rates hitting all time lows now too) and there is still strong demand, that suggests dark days ahead for equities. Stocks and bonds draw on the same pool of investors which is why the two generally have a strong negative correlation. If investors want to pay for the privilege of holding government bonds instead of holding equities, there must be some serious fear about the economic outlook for the next 2-3 years.

Wait if I'm thinking about this right... the attraction is that investors will ONLY lose a certain amount? So like if they only lose 1% but purchasing power goes down 3% they're out ahead?

That's actually insane.

Exactly. And this is in the context of unprecedented QE and rock bottom interest rates, even talk of negative interest rates. This situation is supposed to stimulate investment into any and all markets due to the terrible return on holding cash.

Which makes me ask, what the hell do the bond markets know that the equity markets don't?

The Fed, in the meantime—after saying in March it might purchase an unlimited amount of Treasurys—has slowed the tempo of its purchases to $6 billion a day from $75 billion a day.

Nonetheless, yields have barely budged, indicating that “globally, there’s great demand for that high-quality debt,” stated Colin Robertson, head of mounted revenue at Northern Belief Asset Administration.

Treasury yields which might be reliably this low have wide-ranging implications for markets and the financial system. For buyers, paltry yields may sign a dark future.

https://www.wsj.com/articles/behind-bond-markets-stall-investors-see-hard-times-ahead-11589967001

For how long can this continue? The Fed liquidity injections may be propping up equities temporarily as investors quietly exit away from risk assets and into the safety of low yield credit. As the Fed pulls the rug out, that may become more clear.

“Equities follow credit,” as one Wall Street adage has it. It can certainly seem at times that the bond market knows something the stock market doesn’t. And right now, it could be signaling that stocks are due for another downturn.

https://www.barrons.com/articles/stocks-have-rallied-as-bond-yields-have-slumped-that-could-signal-trouble-ahead-51588171032

[rick9327]

Of course, each of us wants cryptocurrencies to increase sharply in price, but let's be realistic, this may never happen. At the moment, I don't see any prerequisites for such a sharp growth.

[Keiser Soze]

There is also another view of not a V-shaped, but rather an L-shaped recovery: https://www.dlacalle.com/en/an-l-shaped-recovery-is-not-an-anomaly-it-is-the-norm/

Logic and arguments in the article all seem valid.

[abhiseshakana]

I think the shape is more like L or U with a wide or long base. Given the pinball effect of this pandemic, even though China, Taiwan, Vietnam, and some countries are already green, in many countries they are still endemic. The only vaccine solution that is not yet clear when it can be distributed. The longer the pandemic is tamed the greater the economic consequences that must be paid. The greater the budget deficit and the greater the debt that must be created as well as the smaller income due to various stimuli provided by the government. In addition, the recovery of double shock demand and supply will also be more severe.

When the economy in a country goes into a recession leading to depression, the first choice is tightening and protection. This condition is experienced by many countries which ultimately inhibits international trade. Imports will not be an option given the budget deficit and the depletion of foreign reserves and also the routine state expenditure.

The phenomenon of rising unemployment during a pandemic is unlikely to be resolved immediately after the pandemic ends, which means demand will be hit except for essential primary needs. I am pessimistic that the government can create labor-intensive employment projects but create high demand. which resulted in economic stagnation to break the chain effect of double shock demand and supply.

[mtwelve]

So let me pose this question:

A lot of what the economy is waiting for is a vaccine. We really can't get going until we have a vaccine.

What do we think about Faucci stating that there could be a vaccine by December?

Would it be-
1. A complete lie, just something to say to help bolster current stock market prices. Vaccines take years, right? Unless technology has really progressed that far.
2. True, but with asterisks. Production capacity makes it inaccessible, expensive, etc. Trump has shown he wants to take care of America first so would he hoard it among me and other fellow Americans?
3. Perfect world case scenario - it works, and we're able to produce at scale to vaccinate 95%+ of the world population in weeks to get the economy going again.

As for equity following credit, did we see similar moves at the beginning of this crisis? I don't remember - I do remember the 10-year yield hitting 0 and that was historic.

[exstasie]

So let me pose this question:

A lot of what the economy is waiting for is a vaccine. We really can't get going until we have a vaccine.

What do we think about Faucci stating that there could be a vaccine by December?

#3, best case scenario. In a perfect world (where the industry speeds up 4-5x beyond the fastest developed vaccines ever), we have a vaccine by December or January. I don't think it's realistic to produce at scale at that point unless governments start building the production capacity now.

Governments are beginning to curb stimulus spending and take the "wait and see" approach which makes all of these optimistic timelines all the more unlikely. For the 1-year timeline to work, basically every single phase in the process (from research phases to building/refabbing factories to produce at mass scale) need to be done almost exactly in parallel.

Most people in the industry think this is all highly unrealistic, although many also say it's worth a shot and maybe we'll get lucky.

As for equity following credit, did we see similar moves at the beginning of this crisis? I don't remember - I do remember the 10-year yield hitting 0 and that was historic.

Bond rates have been plummeting. That alone suggests a dreary outlook for economic growth. I don't think we can talk about similar moves yet since all we've seen so far in equities is an initial crash and potential bull trap. If/as bond rates go negative, and demand for bonds still remains strong, and equities begin to decline again, that will be a strong confirmation of the theory.

There is also another view of not a V-shaped, but rather an L-shaped recovery: https://www.dlacalle.com/en/an-l-shaped-recovery-is-not-an-anomaly-it-is-the-norm/

Logic and arguments in the article all seem valid.

That would be reasonable. A "lost decade" like Japan could be in the cards. After the 1980s asset bubble popped, they staved off a Great Depression by massively inflating public debt, but it destroyed long term growth.

[mtwelve]

Honestly with trump being present, a decade of staved off growth.

[Gyfts]

It does not matter how recovery will look like. Governments are printing money and increasing country's debts. Economy will recover. It will recover sooner or latter unless the debt bubble will burst. Debt bubble will definitely burst. Covid-19 lockout helped adding a lot more hot air in the balloon. But e have no ideas when the big bang will happen. It can happen this year it can happen next year or in 10 years time. Latter it will happen more ready Bitcoin will be.

This is pretty much the primary concern with governments essentially printing money and gambling on the fact the economy can recover in order to repay the debt. The U.S. economy will take a minimum of 5-10 years to recover and the unemployment rate will take years to fully recovery. I'm not sure how you can justify adding trillions to the national debt within a span of a year and actually want to prolong the lock down.

[Keiser Soze]

It does not matter how recovery will look like. Governments are printing money and increasing country's debts. Economy will recover. It will recover sooner or latter unless the debt bubble will burst. Debt bubble will definitely burst. Covid-19 lockout helped adding a lot more hot air in the balloon. But e have no ideas when the big bang will happen. It can happen this year it can happen next year or in 10 years time. Latter it will happen more ready Bitcoin will be.

This is pretty much the primary concern with governments essentially printing money and gambling on the fact the economy can recover in order to repay the debt. The U.S. economy will take a minimum of 5-10 years to recover and the unemployment rate will take years to fully recovery. I'm not sure how you can justify adding trillions to the national debt within a span of a year and actually want to prolong the lock down.

Do we really believe that the Americans people and politicians are willing to sacrifice and face hardships for a decade?

I strongly feel they will continue to print money to prop up this house of cards, and by the time it really starts to fall, the big guns will come out.

[Gyfts]

It does not matter how recovery will look like. Governments are printing money and increasing country's debts. Economy will recover. It will recover sooner or latter unless the debt bubble will burst. Debt bubble will definitely burst. Covid-19 lockout helped adding a lot more hot air in the balloon. But e have no ideas when the big bang will happen. It can happen this year it can happen next year or in 10 years time. Latter it will happen more ready Bitcoin will be.

This is the primary concern with governments essentially printing money and gambling on the fact the economy can recover in order to repay the debt. The U.S. economy will take a minimum of 5-10 years to recover and the unemployment rate will take years to fully recovery. I'm not sure how you can justify adding trillions to the national debt within a span of a year and actually want to prolong the lock down.

Do we really believe that the Americans people and politicians are willing to sacrifice and face hardships for a decade?

I strongly feel they will continue to print money to prop up this house of cards, and by the time it really starts to fall, the big guns will come out.

They have printed as much money as they can at this point with the Paycheck protection program (PPP) and the CARES act. Hundreds of billions of dollars spent giving out garbage loans to businesses that are already going to fail and handing out free checks worth 1,200 USD for any working citizen who makes less than a certain amount. You also got 500 USD per child under 17. I'm not necessarily oppose to some sort of relief to people that are suffering, but blowing open the debt is not something that I should have to pay the burden off because of irresponsible spending. The government bailing out small businesses that are bound to collapse and default on their loans is now something that every U.S. tax payer has to pay for now.

Beyond that, the US government is considering a second round of stimulus checks. This is in addition to unemployment which are making poorly run states bankrupt. The house of cards is going to fall at some point if they keep this up. It's really not a question about whether or not Americans are going to have to make sacrifices for the next few years, it's a guarantee at this point. The U.S. government is taking a gamble here and if they default on the debt they've generated, it's on them.

[exstasie]

Do we really believe that the Americans people and politicians are willing to sacrifice and face hardships for a decade?

I strongly feel they will continue to print money to prop up this house of cards, and by the time it really starts to fall, the big guns will come out.

Look at Japan. Worst debt to GDP ratio in the world. Their endless public spending and bailouts caused two decades of stagnation, contraction, and wage losses.

Lots of US businesses, no longer sustainable in a deflating economy, are being pumped full of debt through a combination of bailout loans and Fed junk bond buying. If this band-aid solution doesn't work and bad debt spills into a banking crisis, the situation begins to look a lot like Japan in the early 1990s:

The financial institutions were bailed out through capital infusions from the government, loans and cheap credit from the central bank, and the ability to postpone the recognition of losses, ultimately turning them into zombie banks. Yalman Onaran of Bloomberg News writing in Salon stated that the zombie banks were one of the reasons for the following long stagnation. Additionally Michael Schuman of Time magazine wrote that these banks kept injecting new funds into unprofitable "zombie firms" to keep them afloat, arguing that they were too big to fail. However, most of these companies were too debt-ridden to do much more than survive on bail-out funds.

In response to chronic deflation and low growth, Japan has attempted economic stimulus and thereby run a fiscal deficit since 1991. These economic stimuli have had at best nebulous effects on the Japanese economy and have contributed to the huge debt burden on the Japanese government. Expressed as a percentage of GDP, at ~240% Japan had the highest level of debt of any nation on earth as of 2013. While Japan's is a special case where the majority of public debt is held in the domestic market and by the Bank of Japan, the sheer size of the debt demands large service payments and is a worrying sign of the country's financial health.

https://en.wikipedia.org/wiki/Lost_Decade_(Japan)

What I'm saying is, maybe the house of cards won't fall. Maybe we'll just have a brutal decade of deflation, a shrinking economy, falling wages, tight credit, etc. and a ballooning public debt....... and life will go on. That's what happened in Japan anyway.

[Keiser Soze]

Do we really believe that the Americans people and politicians are willing to sacrifice and face hardships for a decade?

I strongly feel they will continue to print money to prop up this house of cards, and by the time it really starts to fall, the big guns will come out.

Look at Japan. Worst debt to GDP ratio in the world. Their endless public spending and bailouts caused two decades of stagnation, contraction, and wage losses.

Lots of US businesses, no longer sustainable in a deflating economy, are being pumped full of debt through a combination of bailout loans and Fed junk bond buying. If this band-aid solution doesn't work and bad debt spills into a banking crisis, the situation begins to look a lot like Japan in the early 1990s:

The financial institutions were bailed out through capital infusions from the government, loans and cheap credit from the central bank, and the ability to postpone the recognition of losses, ultimately turning them into zombie banks. Yalman Onaran of Bloomberg News writing in Salon stated that the zombie banks were one of the reasons for the following long stagnation. Additionally Michael Schuman of Time magazine wrote that these banks kept injecting new funds into unprofitable "zombie firms" to keep them afloat, arguing that they were too big to fail. However, most of these companies were too debt-ridden to do much more than survive on bail-out funds.

In response to chronic deflation and low growth, Japan has attempted economic stimulus and thereby run a fiscal deficit since 1991. These economic stimuli have had at best nebulous effects on the Japanese economy and have contributed to the huge debt burden on the Japanese government. Expressed as a percentage of GDP, at ~240% Japan had the highest level of debt of any nation on earth as of 2013. While Japan's is a special case where the majority of public debt is held in the domestic market and by the Bank of Japan, the sheer size of the debt demands large service payments and is a worrying sign of the country's financial health.

https://en.wikipedia.org/wiki/Lost_Decade_(Japan)

What I'm saying is, maybe the house of cards won't fall. Maybe we'll just have a brutal decade of deflation, a shrinking economy, falling wages, tight credit, etc. and a ballooning public debt....... and life will go on. That's what happened in Japan anyway.

And what I'm saying is that, the US government will never allow massive deflation such as Japan to occur. They don't need to, since they have the biggest gun in this movie. Who's gonna go and collect debt from an armed thug?  Imagine 1 Euro = 50$ US, or 100 YEN = 100$ US - can you? I surely can't. I'm quite sure they will try and invade a few more countries, try and siphon off Venezuela's oil, and keep trying to live on the same pattern of unsustainable consumption at other's expense that they have been used to for decades.

The rest of us are in for a decade of war rather than deflation.  Just my 2 cents.

[exstasie]

And what I'm saying is that, the US government will never allow massive deflation such as Japan to occur. They don't need to, since they have the biggest gun in this movie. Who's gonna go and collect debt from an armed thug?  Imagine 1 Euro = 50$ US, or 100 YEN = 100$ US - can you? I surely can't. I'm quite sure they will try and invade a few more countries, try and siphon off Venezuela's oil, and keep trying to live on the same pattern of unsustainable consumption at other's expense that they have been used to for decades.

The rest of us are in for a decade of war rather than deflation.  Just my 2 cents.

The US government and Fed would love to achieve positive inflation. In reality it may not be up to them. We will see what the markets do.

I don't see how invading small countries or "siphoning off" expensive oil (especially in this market) would stop a deflationary spiral. The US military has done some awful shit but isn't all that relevant here.

The experience of Japan is that no amount of public spending or QE was able to stave off deflation. The same may be true of the US.

[mtwelve]

Looks like we're steadily holding above $300 on SPY today. We saw a drop below to $296 low but it rebounded today and overall mostly flat today.

What do you guys think about the charts floating around showing that most of the gains are made overnight, in fututres? What does it say about the market?

Dark pool and market manipulation rampant? Or just the hedge funds are uncertain?

USA hit 100,000 deaths today as states reopen, considering buying some puts at the moment.... and BTC seems to be stuck in a 8.8 - 9.2k range.

It's like the whole market is holding it's breath and waiting for what's next.

The sentiment seems to be bearish. Was looking at contract prices yesterday and saw that ITM calls were like $.50 on SPY while ITM puts were $4.50 or something... interesting.

As for the comments on Japan, I don't think it'll get to that, at least under Trump. Doesn't Japan own something like 80% of the Nikkei 255? I think it'll be groundbreaking if the US government owns even just 1% of the SP500 or NASDAQ under Trumps administration this term or next one (it's safe to assume he'll get elected at this point).

[exstasie]

Looks like we're steadily holding above $300 on SPY today. We saw a drop below to $296 low but it rebounded today and overall mostly flat today.

What do you guys think about the charts floating around showing that most of the gains are made overnight, in fututres? What does it say about the market?

Dark pool and market manipulation rampant? Or just the hedge funds are uncertain?

I'm not buying the manipulation via index futures conspiracy theories. What really matters are individual stocks. There may be a positive feedback loop happening between futures and stocks but there isn't nearly enough liquidity in futures for it to be the primary driver. SPY volume alone is much higher than CME's ES1 futures or any other futures market I'm aware of, let alone the stock markets themselves.

I think they are both just riding the bull together.

USA hit 100,000 deaths today as states reopen, considering buying some puts at the moment....

Careful now. The market can stay irrational longer than you can stay solvent.

Lots of resistance between here and 314 but I'm cautious getting too bearish while the market has been grinding up (and now just closed above) the daily upper BB. This is exactly what BTC was doing in late April as the market broke above $8K.