Economic Update and the Stock Market

[Aseahawkfan]

Well, I liquidated a position in big oil as the dividend cuts stating rolling out. This company in particular hadn't cut it's dividend since World War 2 and it cut its dividend.

After reviewing the financial information, I now recommend you hold on to cash until there is more certainty. Right now the number of supply and demand shocks occurring in the world economy are too numerous and varied to account for. Suffice it to say we are looking royally screwed economically.

Unemployment claims are about 30 million. Which puts us at about 19.2% unemployment. The second highest in history behind The Great Depression.

We have multiple supply shocks in our food supply with meat processors shutting. A never been seen before supply shock in big oil that has sent oil demand to historical lows. Multiple supply chains disrupted due to shut down in global supply chains, the most concerning being PPE and drug production which we source either the item itself or materials for the item outside the nation. Supply shock in the airline industry from airlines to production never before seen. Restaurants haven't reported earnings, so not sure how terribly the big chains have been hit, but we all know small businesses are going bankrupt or just closing by the day. Even surprisingly Google laid off part of their marketing department and is preparing for a downturn in online ad revenue.

The main companies doing well at the moment are mostly gig economy companies like Amazon, Facebook, and Google (for now) and maybe grocery stores.

The expected GDP contraction for the first quarter is 4.8%.

This is with about one month of lock down and about 2 weeks of the unemployment included in the numbers. That small amount included in the first quarter caused a 4.8% contraction. The second quarter will include the month of April lock down and the extension of the lock down into May. So depending on what happens with re-opening, the second quarter will be the hardest hit by the coronavirus. That is when we'll see the downturn in demand from a 19% unemployment rate and all the supply and demand shocks. We'll have more info on this as we get into June. I'd be real surprised if we didn't contract by over 10%.

Suffice it say we are screwed. The stock market is reacting slowly as some people think now is a great time to jump in and it isn't. This is like what happened before the 2001 Tech Crash and the 2008 Mortgage crash. The surge before the true crash comes when the really bad news starts to hit during the second quarter earnings season. We have real bad news coming. You should tread carefully with your money.

[Hawktawk]

My wife and I bought a brand new full hookup RV lot with a beautiful view on a golf course in a remote part of grant Co. I worry the whole thing is going to go up in flames economically but if it comes out the other side i think fresh air and separation and recreation are going to be attractive to those who can afford it.

ASEA I consider you an expert on finances. As you know i've worried about an overcooked economy for a while and I've been terrified lately as we dump ten trillion down a rabbit hole . This is just further confirmation. Not good

[Aseahawkfan]

On a side note, these poor millenials. These poor bastards happened to grow up in historically bad economic times. Man. if you were born in the 90s, you are really having a miserable time of it as you hit adulthood. Just as things are starting to get going economically, this hits hammering the economy for the second time in their short lifetimes. Hopefully that 90s and early 2000s generation can learn to survive in hard times like the previous generation. Sheesh.

[Aseahawkfan]

My wife and I bought a brand new full hookup RV lot with a beautiful view on a golf course in a remote part of grant Co. I worry the whole thing is going to go up in flames economically but if it comes out the other side i think fresh air and separation and recreation are going to be attractive to those who can afford it.

ASEA I consider you an expert on finances. As you know i've worried about an overcooked economy for a while and I've been terrified lately as we dump ten trillion down a rabbit hole . This is just further confirmation. Not good

Honestly, last time we talked about this I did not think the politicians of this country would commit economic suicide to lower the death rate. I guess kudos to them for looking to save lives, but damn, we are going to get hammered like I've never seen in my life. This is likely to make 2008 look like a walk in the park. I can't even begin to predict the economic fallout from a domestic lock down combined with a global lock down combined with an oil supply shock with no end in sight as these governors extend lock down orders and D.C. prints money that might devalue the dollar causing an return to economic normalcy combined with a huge amount of inflation with a dollar devaluation all combining for very rough economic times. Let's hope these folks in D.C. and local government are way smarter than they look and we are able to make a comeback that doesn't benefit only the top of the food chain who had the cash and income to gain from a rise in the stock market and business and property investment.

The little guy with minimal savings and no income he can control in the form of a government check might not benefit much from a return to normalcy other than perhaps getting a job at possibly reduced wages due to an oversupply of labor looking for the same job in a glutted labor market.

Man, this is going to be terrible.