Posted on 04/03/2020 9:43:25 AM PDT by Kaslin
We have few material numbers yet from companies or economies on the actual, bottom-line business impact of the coronavirus pandemic. The repeatedly adjusted economic contraction estimates and revisions to guidance for companies - both always to the negative - results in, essentially, almost all predictions before actual numbers post being guesswork at best for these unprecedented circumstances. CARTOONS | Michael Ramirez View Cartoon
The Thursday unemployment numbers reflect this stark reality well. The prior week's new seasonally adjusted unemployment claims, for the week ending on March 21, posted at 3.28 million and coming in at the higher end of the 1-4 million generally estimated. This week's however were a bombshell as there were generally expectations for about 3.76 million and yet the actual numbers posted at a mind-boggling 6.648 million. The prior week's numbers were even adjusted up to 3.307 million. The S&P 500's 2.28% gain in the wake of such news was just about as senseless as it having continued to rally and reach new highs from late January to early February as the coronavirus began to slowly seep into just about every nation in the world.
The fact is that we are seeing the actual numbers post as being often much worse than even the most sophisticated analysts' consensus and now seemingly even sometimes well outside of even a generally expected range. In just two weeks the newly unemployed are now more numerous than all the new jobless claims from 2008 to 2010 during the entire Great Recession. As with seemingly everything in this coronavirus market the worst seems still to come however as the Federal Reserve Bank of St. Louis estimates unemployment could soon enough reach a historic, unprecedented 32.1%.
There is a reason the unemployment numbers are of particular concern amid all the various corporate guidance and economic numbers being thrown out. That the American consumer is the heart of the country's economic engine is not only a great feel-good slogan but also is a stark reality. When consumers stop spending or, in this case, can't spend due to lack of jobs and income then the financial contagion quickly spreads to everything from mortgages to consumer debt, from student loans to entertainment/leisure, from demand for new iPhones to even how often one keeps the lights on.
In many ways the 2008 financial crisis began when the consumer's pocketbooks began drying up (whether for many subprime mortgages there ever was the actual pocketbook to begin with is a whole other question) and thus mortgages began defaulting, associated mortgage-related products began defaulting, financial companies with exposure to those assets began defaulting, companies with exposure to those companies the same, and so on and so forth.
In 2020 we now face a similar situation. Even in just the first few weeks of this downturn we see how business and residential rents are already in severe default territory. It is easy to imagine how landlords, who rightly state they have their own obligations in the forms of mortgages and other costs, will soon default or need relief on said costs and debts and add to the lost revenues of other companies and further workers out on the street.
This is not a avalanche, it is a star collapsing into a financial black hole. Even the historic $2 trillion stimulus package passed and signed into law a few days ago already is old news as discussions for more stimulus is already taking place. The United States posted a 2019 Gross Domestic Product of $21.44 trillion - it is easy to see how with the overwhelming bulk of the population carrying on a trickle of their prior economic activity how filling that gap may soon begin accumulating a startling bill.
The Great Recession saw the major indices plummet by 45-50% from their highs in 2007 over the course of about one and a half years. The Great Depression saw the Dow drop over 90% from its September 1929 high over the course of two and a half years before finally finding its bottom in July 1932. If the current lockdowns and disruptions continue for much longer it is much likely we are facing the latter as a simple "un-pause" becomes increasingly difficult amid a sea of defaults and dried-up spending. By contrast, the highest unemployment rate during the Great Depression came in at 24.9% in 1933.
Nowadays we have much more financial controls and cushions in place than the "wild west" of markets in the early Great Depression era where financial institutions invested in securities with bank deposits and the U.S. Securities and Exchange Commission did not come into existence until 1934. The SEC also may delay our full understanding of the impact of coronavirus on companies as it has permitted a 45-day extension of various filings otherwise due March 1 to July 1. It remains clear nonetheless however that we are at perhaps less the the bottom of the valley than at the edge of a precipice - if things continue to crumble too far it will escalate in asset-destroying financial contagion for far longer before it gets better.
Democrats celebrate
BARF!! A complete overreaction. I blocked this turd on Facebook.
Unemployment rate is officially 4.4 percent. Roughly a THIRD LESS than the median unemployment rate under Obama. Yet it is somehow “historic”.
sigh
Risks? RISKS?
We’re like a guy that just got his jugular cut. Sure, he’s standing upright. For now.
The damage has already been done. Prepare accordingly.
There is a poster here who mentioned something quite astute in a number of threads. Apparently their grandparents went through the 1918 Flu epidemic. And, of course, they went through the Great Depression. The poster said that these people just never talked about the 1918 flu epidemic. It came. It went. Life went on. But the Great Depression — that was big. That was life changing. They had stories about the Great Depression!
I am in the camp of people who believe our “cure” is worse than the disease. If we had done nothing — if 2 million Americans died — and if we kept businesses afloat as best we could — I think this would have been less destructive. But we wanted Safety and not Freedom. So we’ve trashed our economy and done very serious damage to the nation. How many people feel Safe today? And I’m not talking about the virus.
I think we would have been better off with 2 million dead. And, yes, I would feel that way if my family were in the ICU today. It’s not about me. It’s about the country. And I think we may have killed the country.
FUD bullbleep. This is TEMPORARY. Yes, some folks will suffer worse than other...that is just the nature of the “freedom” beast. The alternative is Venezuela.
I disagree. What is Italy's level of "economic disruption"?
After this is all over we need to elect an entirely new government and then force out everybody in the bureaucracy who had a hand in this tragic farce.
{{{I think we would have been better off with 2 million dead.}}}
I see what you are trying to say however, those deaths wouldn’t happen in a vacuum and would affect the economy and the general mentality of the populace incredibly in and of itself. Let alone the amount of all cases in total.
And listen, I’m not a fan of this total lockdown either.
Sorry but you are dead wrong. What if yourself and all of your family would be among the dead?
I covered that in my original comment. It’s not about me and my family.
I’m saying a hard thing and of course many people will strongly disagree with my opinion.
I think death comes to us all. Infectious disease has ravaged societies for millennia. We get through it. Even the Black Death wasn’t the end of the world. But the United States is a special country built on freedom of the individual and limits to the government. The world has never seen that before, and if it passes away, the world may never see it again.
Killing 2 million people is bad.
Killing our free society is worse.
In a war, people lay down their lives for a cause. I recognize that this thing could kill me and my family. But I think the cause is of greater importance.
Just my opinion.
The Spanish Flu came on the heels of the Great War.
Many of its victims were already weak and incapacitated as a result of that war. So it was just another of a long line of miseries that the populace had endured. And it burnt itself out within a relatively few months.
Whereas the Great Depression brought an abrupt end to the most prosperous time,to that point, in American history. It wiped out the wealth of countless households and ruined millions of lives. And it went on for over a decade.
Soldiers also ate a poor diet that left their immune systems highly vulnerable.
Easy to say but if you cannot include you and your family, everything you have to say is invalid.
And also that the Depression was made up of a number of things that took place during Hoover’s and Roosevelt’s administrations. I seem to recall reading Milton Friedman’s account of things and that there seemed to be a mild recovery taking place in 1931 and on into 1932, but the Federal Reserve caused a shortage of cash supply, which created even more bank failures in 1933 and that brought the worst of those years. And also that the NRA (National Recovery Administration) in it’s heavy handed way also added to the trouble.
Yet Kroger and Walmart are having record sales, other businesses are crying for employees
But we're NOT "killing our free society".
This is TEMPORARY, and, as global events go, of short duration. Is there "economic disruption"...absolutely.....but you would have "economic disruption" if 2 million Americans die. Quite possibly as bad or even worse.
The country was destroying itself before the virus, by focusing on the trivial and forgetting about the essentials.
This won’t be a depression, because the financial sector is extremely strong with healthy capital reserves. Some of them got exposed during the panic of 2007-2009, they now hold much stronger positions.
If we had a knucklehead like Elizabeth Warren as President, we’d be in big trouble. She’d chop our banking sector into a bunch of “little dominoes”, my 4 year old son could knock over.Plus she’d tax and over regulate agriculture and manufacturing producers, to the detriment of our society.
President Trump is an entertainer and a showman,but he’s also a strong leader who doesn’t let ideology get in the way of results.
No, shutting down the country is a complete overreaction. The economic risks are not insignificant, even if still less than 50%.
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