I was younger (but invested) in 08/09. Things were crazy. Not the same kind of crazy, but still pretty wild. Watching big banks teeter on the brink (you know, those institutions that hold all the money) was just kind of eye-popping. There was a sense that capitalism itself was under threat.Hogan773 wrote: ↑Fri Mar 27, 2020 7:44 amWhy "permanent"?Noobvestor wrote: ↑Thu Mar 26, 2020 10:14 pmOK, replace weeks with months. Shut down non-essential business for 6 months. Let's say half the economy. Worldwide. And Corona persists, ebbs and flows. Terrible for earnings, but life goes on. I'm wondering how that translates into a permanent global loss on the scale being suggested.potatopancake wrote: ↑Thu Mar 26, 2020 10:10 pmThis post was perfectly timed. This is exactly why the market has yet to bottom out. There is no way, absolutely no way that we will be returning to normal in a few weeks. Italy started a national lockdown 17 days ago and their death/day has not peaked. The USA has no national lockdown. We are nowhere near the peak. And, life will not return to normal with the snap of a finger. We will re-integrate slowly. Or we will integrate partway while waiting for a vaccine. Given our understanding of covid-19 R0, 50% of population needs immunity to reach herd immunity. That means that > 300 million people get sick or get the vaccine (or some combination of the two). This is not a three week event. The market, as I said above, has not priced that hurt in.Noobvestor wrote: ↑Thu Mar 26, 2020 10:06 pmNow assume that what you saw turns out to be temporary - like the tourist town in the off season, or shutting down to go on vacation together for a few weeks. Would that change your view at all? I'm playing Devil's advocate here, but I'm still unable to reconcile 'shutting down for a while' with '2/3 of business value wiped out around the entire world' (which would seem to align with your estimation of a 60%+ level crash).
If it were permanent then I would think the market losses would be even worse than a down 50pct scenario
I am also in the camp that it is hard to believe that a 20pct down is all that is needed for this shock. You could use the same analogy for prior shocks...it was only some bad mortgage loans and credit default swaps and once we get through that quickly then no reason we won't go higher
Now, things are crazy in a different way - yes, we've never seen this level of (self-)quarantine before, and yes a lot of small businesses are under threat, and sectors/segments like the hospitality industry, but it seems clear the government is going to prop things up, come what may.
I'm just an observer here, and was in a different life phase at the time, so take it all for what you will, but to me, so far at least, even with the most dire prognostications, I don't see the same challenges this time around. As things get threatened, money gets printed.
Also, for clarity: we went down (I believe it was around) 30% so far to hit the latest (perhaps first of multiple) bottom, not 20%.