willthrill81 wrote: ↑
Wed May 27, 2020 9:08 am
Iridium wrote: ↑
Wed May 27, 2020 1:27 am
Issues 1,2,8, and 10 may well be real. They are also things that have been well known for years, so presumably are already priced in.
After seeing the market continue to go up in February when the second largest economy in the world was experiencing an outbreak of a novel virus that was forcing them to shut down their economy, I'm even less convinced by the 'already priced in' argument than I was before.
It's not outside the realm of possibility that a global depression will arise. It's happened before, and it can happen again. Predicting when one would happen with enough accuracy to be actionable is the problem.
In late February, the virus was thought to spread mostly from symptomatic people, such that temperature checks and washing hands would be enough to control the spread, it was only known to be widespread in the country best equipped to deal with it, the most highly impacted democracy was controlling things with tests rather than shutdowns, articles repeatedly noted that democracies would never put up with a China style lockdown, and the CDC had so many test kits available, it had announced plans to work with its influenza monitoring network to proactively check negative flu samples.
In March, the vast majority of virus spread was via asymptomatic or presymptomatic carriers, the virus was endemic is virtually every country, China was hoarding PPE, the US and Europe were in heavy lockdown, the CDC test kits turned out to be contaminated, and it looked like doctors would have to choose who gets a ventilator.
"Priced in" means that the prices reflect available information. The extent of asymptomatic transfer was a HUGE finding, and given that the CDC was advising in February that this mode of transfer was unlikely to be significant, it caught the market by surprise. I don't think it was irrational for the market to expect this virus to go the way of SARS, which was contained to Asia and did limited general damage to the economy. If you read back through the threads and news in February, virtually all the concern was about China and supply lines that relied on them. The fact that the market shrugged off that news turns out to have been the right call: China's manufacturing recovered quickly and, other than PPE, I have not heard of any supply line difficulties. That this became a global pandemic was always possible, but wasn't particularly likely until we learned what we found out in March. After all, other severe coronaviruses such as SARS and MERS also looked like they were going to cause enormous issues, until humanity geared up and controlled them, and in February, we were using new technologies to gear up faster against 'Novel Coronavirus' than any prior outbreak.
COVID is a completely different situation from, say, population loss. There is pretty much uniform agreement among demographers that population growth will radically slow down over the coming decades, and in their biannual updates, the predictions change, but not radically, especially not out 40 years (predicting the population in 2100 is just guessing, but it is also not particularly relevant to my investing time horizon). Compare that to the multitude of COVID death models that are off by an order of magnitude from each other making predictions less than a year out. While all the impacts of population growth slowdown are unknown, and we could see a secular shift on expected rates of return (could demographics be one of the reasons why interest rates have been on a decades long decline?), it seems unlikely that the market will wake up one day and decide to go into a tail spin because of it.
Yes, a global depression is possible. However, I do not believe that the author has made a convincing argument that it is any more likely in the next decade than at any other time past or future, or that if it happens, it will be for one of the reasons he identified.
magicrat wrote: ↑
Wed May 27, 2020 8:58 am
Iridium wrote: ↑
Wed May 27, 2020 1:27 am
Issue 7: What backlash against democracy? Rather, I see people using their right to vote to support populist candidates, whom the author evidently doesn't support. I won't comment on the impact of populist politicians on the economy. However, this represents an enthusiastic embrace of the democratic right to vote, not a backlash against it.
The right to vote is not the only hallmark of democracy
If only the author had been specific, it would be possible to evaluate whether the issue is likely to cause an economic impact and whether such backlash is actually a mainstream part of the populist platform at risk of gaining steam or whether it reflects a particularly loud but tiny minority that is unlikely to have much real world effect. On the other hand, I suppose if he had been more specific, it might be against forum rules to discuss it (for the very good reason that talking possibilities in politics is a fools errand likely to lead you astray).