Global financial system implosion begins

[kabbes]

Who says that prices are higher than they should be, though? Pick a share and explain what its price should be and we can explore why its actually price is different. Otherwise, it’s just theorycrafting.

 

[discokermit]

Who says that prices are higher than they should be, though? Pick a share and explain what its price should be and we can explore why its actually price is different. Otherwise, it’s just theorycrafting.

hertz. should be zero.

 

[kabbes]

hertz. should be zero.

Wry.

Hertz is trading at about 1/20 of its pre-Covid value. I guess someone might take a punt on rescuing it — it has assets, it has brand recognition, it has structure. It might be worth a 20:1 bet. Worse things have paid off.

Other than companies that are already actually in the shitter, though?

 

[discokermit]

Wry.

Hertz is trading at about 1/20 of its pre-Covid value. I guess someone might take a punt on rescuing it — it has assets, it has brand recognition, it has structure. It might be worth a 20:1 bet. Worse things have paid off.

Other than companies that are already actually in the shitter, though?

they've sold all their cars! lol!

ok not that one, i meant another one. hahaha.

 

[kabbes]

they've sold all their cars! lol!

ok not that one, i meant another one. hahaha.

Sold them off to reduce their debt. They still have a brand and an infrastructure, though. It wouldn’t be the biggest surprise in the world for some vulture capital funds to decide that has value. I wouldn’t take the punt myself but it’s not ridiculous.

Is Hertz it for you, then? Because I can’t myself see it as being representative of systematic underpricing in the market, being as how it’s a rather particular case. Maybe you could explain that logic?

 

[not-bono-ever]

There is a model out there that will back up whatever perspective you decide to take. With real numbers as proof. That’s the beauty of economics

 

[kabbes]

There is a model out there that will back up whatever perspective you decide to take. With real numbers as proof. That’s the beauty of economics

That’s true but it doesn’t mean all models are equal.
Take GSK as an example. It made a profit last year of £6.2bn. Its current market value is £84bn. Buying it at that price would pay for itself in 14 years if it never increased its profit. That’s a very simple model for its value — how long until it pays for itself — that is grounded in something tangible. It looks perfectly reasonable too as a price. GSK is a solid company doing real things in a competitive but nonetheless growing industry. In what way is it obviously overvalued, is what I want to know? I’m not saying it’s a bargain or clearly worth buying, but equally it isn’t obvious to me that the market has bid it up to unsustainable levels. The price just looks kind of... sensible.

 

[discokermit]

say astrazeneca again. thats my fave.

 

[Idaho]

I get that, in which case shouldn't everyone be selling as stock prices are higher than they should be?

They are selling. Someone has to sell for someone to buy.

 

[kabbes]

say astrazeneca again. thats my fave.

Oh yeah. You were the one who thought it was all overvalued even before it all went up by 25-40%. No wonder you’re cynical about it now. Doubling down.

 

[Flavour]

the big five tech stocks are certainly overvalued - that's partly because of their perceived stability and profitability being less impacted by covid (which isn't really true of course) and people flock to them just 'cos they seem low-risk and this pushes the price up and so on. simple. but there's no denying that the stock price of Google is overvalued -- their profits rely on advertising revenue. and if the real economy is tits up, then who's paying for advertising on google? that doesn't stop people believing in the long term viability of google as a business, i mean, it's pretty easy with companies that have become verbs in a fairly short space of time.

on the other hand, there are plenty of other companies whose stock has been particularly badly hit by covid (cruise lines, for example, and other tourism sector companies) who are still trading way way below what they were in february -- but the market is skeptical of their ability to bounce back. but if you compare the current stock price of these companies to their past performance and think about how capable they are of weathering the current storm and returning to profitability within a year or two... i'd say they're undervalued.

 

[Smangus]

the big five tech stocks are certainly overvalued - that's partly because of their perceived stability and profitability being less impacted by covid (which isn't really true of course) and people flock to them just 'cos they seem low-risk and this pushes the price up and so on. simple. but there's no denying that the stock price of Google is overvalued -- their profits rely on advertising revenue. and if the real economy is tits up, then who's paying for advertising on google? that doesn't stop people believing in the long term viability of google as a business, i mean, it's pretty easy with companies that have become verbs in a fairly short space of time.

on the other hand, there are plenty of other companies whose stock has been particularly badly hit by covid (cruise lines, for example, and other tourism sector companies) who are still trading way way below what they were in february -- but the market is skeptical of their ability to bounce back. but if you compare the current stock price of these companies to their past performance and think about how capable they are of weathering the current storm and returning to profitability within a year or two... i'd say they're undervalued.

I'm no expert at all in this but I think you may be underestimating the underlying value of all the data they (Google etc) harvest and can process and sell to interested parties. If not there already I think this has potential to be worth over and above the the more obvious "traditional" services like marketing and suchlike.

 

[ringo]

the big five tech stocks are certainly overvalued - that's partly because of their perceived stability and profitability being less impacted by covid (which isn't really true of course) and people flock to them just 'cos they seem low-risk and this pushes the price up and so on. simple. but there's no denying that the stock price of Google is overvalued -- their profits rely on advertising revenue. and if the real economy is tits up, then who's paying for advertising on google? that doesn't stop people believing in the long term viability of google as a business, i mean, it's pretty easy with companies that have become verbs in a fairly short space of time.

Google don't just make their money from advertising, they are and will be increasingly more important in the development of future technologies which are going to become extremely widely used. And profitable. Like Amazon, they are major players in cloud services and storage and as with NVIDIA they are going to be even bigger in AI development. In ten years time Google will be driving us home from the boozer in a driverless, electric (hover) car.

 

[yield]

Federal Reserve's $3 trillion virus rescue inflates market bubbles. Outline - Read & annotate without distractions
Kate Duguid July 13, 2020

(Reuters) - The Federal Reserve’s $3 trillion bid to stave off an economic crisis in the wake of the coronavirus outbreak is fuelling excesses across U.S. capital markets.

The U.S. central bank has pledged unlimited financial asset purchases to sustain market liquidity, increasing its balance sheet from $4.2 trillion in February to $7 trillion today.

While the vast majority of these purchases have been limited to U.S. Treasuries and mortgage-backed securities, the Fed’s pledge to bolster the corporate bond market has been enough to spur a frenzy among investors for bonds and stocks.

“COVID-19 is now inversely related to the markets. The worse that COVID-19 gets, the better the markets do because the Fed will bring in stimulus. That is what has been driving markets,” said Andrew Brenner, head of international fixed income at NatAlliance.

Most hedge funds to be allowed to keep equity holdings secret
FT. July 10, 2020

Most hedge funds will be allowed to keep their equity holdings secret under a new plan by the US Securities and Exchange Commission.

Late on Friday, the SEC proposed to sweep away the requirement for investment managers to publish stock positions quarterly, for all but 10 per cent of the largest managers.

If adopted, only groups with assets of more than $3.5bn will have to submit so-called 13F filings with the regulator — one of the few ways of tracking which stocks hedge funds are buying and selling. The current threshold is just $100m.

“Today’s proposal will update, for the first time in over 40 years, the 13F reporting threshold to a level that furthers the statutory goal of enabling the SEC to monitor holdings of larger investment managers while reducing unnecessary burdens on smaller managers,” said Jay Clayton, SEC chairman, in a statement.

The plan sparked immediate controversy, however. Allison Herren Lee, the SEC’s lone Democratic commissioner, said the proposal lacked “a sufficient analysis of the costs and benefits” and reduced transparency.

“This proposal joins a long list of recent actions that decrease transparency and reduce both the commission’s and the public’s access to information about our markets,” she said in a statement.

The quarterly 13F filings are closely followed by investors as a rare, albeit imperfect, insight into how private investment groups are positioned. Some asset managers have created funds that invest in the stocks popular among hedge funds, as revealed in the filings.

Even companies themselves sometimes rely on 13Fs to find out who their shareholders are.

What about "efficient markets" and "price discovery"? "Even companies themselves sometimes rely on 13Fs to find out who their shareholders are."

 

[Idaho]

Bizarre decision. Other than saving hedge funds some admin, what's the advantage?

 

[kabbes]

Makes me wonder who is trying to hide what in terms of their ownership within funds

 

[yield]

Greatest Increase Ever in U.S. Wages Is Actually Horrible News
17 July 2020

The median weekly earnings of full-time workers in America jumped more than 10% in second quarter from a year earlier, the U.S. Bureau of Labor Statistics reported today.

The data marks the largest increase in the four decades that the agency has tracked it but is skewed by a more sobering reality: massive job losses among lower-wage workers.

 

[yield]

Stockmarket v economy: the impact of covid-19 | The Economist
24 Jul 2020

American stockmarkets have enjoyed a record-breaking streak, even though the country’s economy faces the deepest recession in living memory. Why is stockmarket performance so seemingly cut off from current events, and what does this tell us about how the economy works?

Spoiler: YouTube

Jack Ma's Ant Group chooses China for its IPO
Hong Kong (CNN Business). July 23, 2020

One of China's biggest tech firms has chosen to stay home for its blockbuster IPO, shunning Wall Street where Chinese companies are facing heightened scrutiny because of rising geopolitical tensions.

Ant Group announced on Monday that it is planning "a concurrent initial public offering" in Hong Kong and on Shanghai's Star Market, China's answer to the Nasdaq.

Ant is affiliated with e-commerce giant Alibaba (BABA), which raised a record $25 billion when it debuted on Wall Street in 2014 — still the world's second largest IPO to date. Ant owns Alipay, one of the most popular payment apps in China, and also offers online financial services such as loans, investments and credit scoring systems. The Hangzhou-based company is worth some $150 billion, according to CB Insights.

 

[not-bono-ever]

not sure if anyone ever came across this programme/ site - warren buffet teaches kids about business and capitalism in cartoon format for 4 years and up.

 

[gosub]

Italy warns of autumn funding crisis as EU summit claims unravel

The EU Recovery Fund was not designed for immediate liquidity problems

www.telegraph.co.uk

 

[yield]

fancy buying shares in a bankrupt company? Bankrupt Hertz to seize on speculation frenzy with $1 billion stock sale

Which Part Of “You Get Nothing” Isn’t Clear?
Bloomberg law. July 28, 2020

The warning to shareholders of newly bankrupt Ascena Retail Group Inc. could hardly have been more direct. There it is, in black-and-white, on page 5 of the court declaration filed by Ascena’s most senior official just hours into the case:

“Existing common equity in Ascena will be canceled.” Full stop. Creditors will take ownership of the retail chain, which Ascena also made plain.

So how did stock investors respond? By bidding up the shares just shy of 120%, on off-the-charts volume.

It was a similar story for bankrupt Global Eagle Entertainment Inc. The airborne Wi-Fi service jumped more than 50% on July 24 after its court filing, despite warning shareholders earlier in July that they stood to lose everythingto creditors in a Chapter 11 case. And it hearkens back to Hertz Global Holdings Inc., whose stock became Example A of post-bankruptcy rallies.

The persistent mania for busted companies baffles financial advisers. “What’s going on here? I really couldn’t tell you; it’s not something I would ever recommend to anyone,” said George Gagliardi at Coromandel Wealth Management in Lexington, Massachusetts.

“People have too much money to play with,” said Dennis Nolte, an adviser at Florida’s Seacoast Investment Services.

“Most of these traders won’t be around when the bankruptcy proceedings are complete. Just turn the light off when you leave the room, if the lights aren’t turned off by the utility company because there’s no money to pay the bill.”

 

[not-bono-ever]

look at non residential asset prices-classic cars/ rolex/ art- going through the roof- lots of cash slopping about + covid- those still working are firmly caught in the bubble and spunking cash on playthings

 

[yield]

US companies cling to share buybacks despite collapse in profits Outline - Read & annotate without distractions
FT. July 31, 2020

Corporate America is finding it hard to kick the share buyback habit, even after the US slipped into its worst recession in decades.

Total buybacks are expected to drop this year as the downturn caused by coronavirus saps corporate profits, prompting many US blue-chips to suspend or cut back share repurchases. Yet companies in the S&P 500 that have reported second-quarter earnings so far have reduced the number of their outstanding shares by an average of 0.3 per cent from the previous quarter, according to calculations from Credit Suisse.

Updates showed that some of the largest US multinationals continued to buy back their own stock or even accelerated stock repurchases.

Google’s parent company Alphabet spent $6.9bn on buybacks for the quarter, up 92 per cent from a year prior, the company revealed in its earnings results on Thursday.

As extra jobless benefits end, millions of Americans struggle to afford food
CBS. July 30, 2020

With emergency unemployment aid set to expire this week, a growing number of Americans are struggling to put food on the table. Nearly 30 million people were sometimes or often unable to get enough to eat last week, according to a Census Bureau survey.

Such "food insecurity," which shot up 24% last month, from about 23 million people, could become even more prevalent throughout the U.S. when the extra $600 in weekly jobless benefits the federal government provided to out-of-work adults, under the Coronavirus Aid, Relief and Economic Security Act, lapses on Friday. That means about 25 million people could see a sharp drop in their income, as the nation grapples with the highest jobless rate since World War II.

One worker facing that drop in unemployment benefits is Lindsay Reynolds, 27, who was furloughed from her events and marketing job at an Orlando, Florida, theme park in April. She said her weekly jobless aid will drop to $247 a week, from almost $800 a week, when the enhanced benefits come to an end.

 

[yield]

Global Remittances May Fall by $109 Billion, ADB Economists Say Outline - Read & annotate without distractions
August 03, 2020

Global remittances could fall by as much as $108.6 billion in 2020 if it takes a year to contain the coronavirus pandemic and reopen economies, according to Asian Development Bank economists.

“Migrant workers are among the hardest hit groups, with many facing scant job security and limited access to social assistances,” ADB economists James Villafuerte and Aiko Kikkawa Takenaka wrote in a blog posted on the Manila-based lender’s website.

Large-scale unemployment and wage reduction among migrant workers threaten households in Asia-Pacific, where remittance receipts may be cut by $54.3 billion this year, according to the authors. South Asia could be hardest hit, with remittances falling by a quarter from their 2018 level, while they could decline 19% in Southeast Asia, the authors wrote.

Remittances to Asia Pacific, which amounted to $315 billion in 2019, are an important source of income for families and help boost recipient nations’ external financing. Governments in the region could help manage the impact by extending temporary social services and providing income support to poor recipient families, among other policies, the authors wrote.

Fed's Kashkari suggests 4-6 week shutdown; says U.S. Congress can spend big on coronavirus relief Outline - Read & annotate without distractions
August 02, 2020

WASHINGTON (Reuters) - The U.S. economy could benefit if the nation were to “lock down really hard” for four to six weeks, a top Federal Reserve official said on Sunday, adding that Congress can well afford large sums for coronavirus relief efforts.

The economy, which in the second quarter suffered its biggest blow since the Great Depression, would be able to mount a robust recovery, but only if the virus were brought under control, Neel Kashkari, president of the Minneapolis Federal Reserve Bank, told CBS’ “Face the Nation.”

“If we don’t do that and we just have this raging virus spreading throughout the country with flare-ups and local lockdowns for the next year or two, which is entirely possible, we’re going to see many, many more business bankruptcies,” Kashkari said.

“That’s going to be a much slower recovery for all of us.”

He said Congress is positioned to spend big on coronavirus relief efforts because the nation’s budget gap can be financed without relying on foreign borrowing, given how much Americans are saving.

“Those of us who are fortunate enough to still have our jobs, we’re saving a lot more money because we’re not going to restaurants or movie theaters or vacations,” Kashkari said.

“That actually means that we have a lot more resources as a country to support those who have been laid off,” he said.

 

[yield]

Covid-19: UK economy plunges into deepest recession since records began
Wed 12 Aug 2020
GDP falls 20.4% – the worst of any G7 nation in the three months to June

Confirming the onset of the deepest recession since records began, the ONS said the decline in the second quarter was widespread, with a dramatic plunge in output across the services, production and construction industries. Reflecting the public health restrictions and forms of voluntary physical distancing in response to Covid-19, it said the pandemic had erased 17 years of economic growth in only two quarters – taking the level of GDP back to the equivalent position in June 2003.

 

[yield]

Japan’s economy shrinks at record rate, slammed by pandemic
17/08/20

TOKYO (AP) — Japan’s economy shrank at annual rate of 27.8% in April-June, the worst contraction on record, as the coronavirus pandemic slammed consumption and trade, according to government data released Monday.

The Cabinet Office reported that Japan’s preliminary seasonally adjusted real gross domestic product, or GDP, the sum of a nation’s goods and services, fell 7.8% quarter on quarter.

The annual rate shows what the number would have been if continued for a year.

Japanese media reported the latest drop was the worst since World War II. But the Cabinet Office said comparable records began in 1980. The previous worst contraction, a 17.8% drop, was in the first quarter of 2009, during the global financial crisis.

The world’s third largest economy was already limping along when the virus outbreak struck in China late last year. It has weakened as the pandemic gained ground, leading to social distancing restrictions and prompting many people to stay home when they can.

“In April, May, a state of emergency was issued, it was a situation where the economy was artificially stopped so to speak, and the impact was severe,” said Yasutoshi Nishimura, minister Economic and Fiscal Policy.

“These are tough numbers but they bottomed out in April and May, we would like to put all our efforts into returning to a growth trajectory,” Nishimura told reporters.

The economy shrank 0.6% in the January-March period, and contracted 1.8% in the October-December period last year, meaning that Japan slipped into recession in the first quarter of this year. Recession is generally defined as two consecutive quarters of contraction.

By comparison, the U.S. economy contracted at a rate of nearly 33% in the last quarter, while that in the UK skidded 20.4%.

 

[Marty1]

Seen a few headlines about the housing market doing well at the moment - seems counterintuitive but I’ve noticed a lot of SOLD signs in my area recently

 

[Idaho]

Seen a few headlines about the housing market doing well at the moment - seems counterintuitive but I’ve noticed a lot of SOLD signs in my area recently

The UK essentially lost its job in march, but has been maintaining the same lifestyle on the credit card ever since. And that credit card company has been lending to everyone, and we've underwritten that debt ourselves - which should be fine as we have a good job.

 

[yield]

Seen a few headlines about the housing market doing well at the moment - seems counterintuitive but I’ve noticed a lot of SOLD signs in my area recently

There's a lot of pent up demand as the housing market froze with the lockdown.

Unfortunately when the government furlough scheme ends, hundreds of thousands of people will lose their jobs.

A clearer picture will emerge in the next few months.

The UK essentially lost its job in march, but has been maintaining the same lifestyle on the credit card ever since. And that credit card company has been lending to everyone, and we've underwritten that debt ourselves - which should be fine as we have a good job.

As you know, there are problems with comparing a nation's finances with a credit card. Anyway roll on the debt jubilee.

 

[Idaho]

As you know, there are problems with comparing a nation's finances with a credit card. Anyway roll on the debt jubilee.

Problems that I never expected to even hint at with a two sentence, semi jokey post