Dalio: Corporate profits virus losses to hit $21 trillion…ASX surges

Via CNBC:

Meanwhile, ASX soars 4% at the open:

Buy the dip! Lol.

David Llewellyn-Smith
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Comments

  1. This whole COVID-19 episode feels surreal. I can see what is unfolding but just can’t believe it. Clearly humanity will survive – and very easily at that – but life will not be the same. I was just about to retire and now working P/t. My personal portfolio has taken a huge hit from stocks I thought were defensive. Haha. Looks like I will go back full time. Lucky Scrotovirus is my employer.

  2. Bear market rallies are hardly an unusual phenomenon. They result in much larger one day gains than rallies in bull markets.

    • darklydrawlMEMBER

      Potentially a good opportunity to grab some BBOZ – cause whilst I can see the rallies happening, the overall long term trend is still down to the gutter. I feel this has a long way to fall yet.

      • BBOZ..yes, I might dip my toe in again with some spare change for some spare change gains, too…I can’t bring myself to commit much though – too scary

        • darklydrawlMEMBER

          I’m with you BurbWatcher. It’s a no brainer too, but I am too chicken and light-weight when it comes to risk- Happy to go in, but I cannot bring myself to go ‘all in’ and make some serious money. I supsect I would likely make a crap F1 driver or fighter pilot.

      • I agree with these sentiments based on what has been forecast. It’s worth little, but I recall similar rallies on recovery plans were noted in past events, followed by declines when reality set in again.

        • run to the hillsMEMBER

          Have invested 100k in BBOZ for two 24 hour periods in the past week, timed it well and up 33k so far, just about covers the losses on my gold and small cap stocks which I’ve now sold. If ASX looks like closing the week up a few percent this arvo I may load up on the BBOZ just on the close as the bad news will keep piling up over the weekend no doubt. I’m no trader and just relying on luck, no better than gambling though I’m reasonably confident the ASX will bottom somewhere near GFC lows.

          • C.M.BurnsMEMBER

            damn. well played but with that kind of movement, what happens if you don’t time it well ?

          • darklydrawlMEMBER

            OOO would be interesting, but I think it’s way too early yet. Will consider in 6 months, although probably worth keeping feeler on the overall vibe.

          • darklydrawlMEMBER

            Gutsy play RunToTheHills. Well done on timing that well. Watch the swings on BBOZ though. BBUS might also be worth a play too.

  3. We’re in that monetary/fiscal stimulus will save us stage, where the bottom must be in, cuz:
    – I am so far down it hurts, but *phew* now I am glad I held on
    – returns of a lifetime bottom picking, as short covering takes place

    After a couple of months, the recessionary data starts piling on and we start to see defaults/mass unemployment/earnings crush.

    At this point we see the long, hard leg down, as both of the previous crowd lose all hope and liquidate.

    Picking the bottom is for mugs. Especially those trying to time markets before we’ve even seen the real economic impact.

    • BoomToBustMEMBER

      So far its sell on fear. Buy for a day or 2 on gov policy. Wont last though. The real economic impact is yet to be felt.

  4. Surely markets are forward looking

    Profits will be 0 this quarter, but the coronavirus hysteria will pass and then profits will be astronomical for any companies that survive given the amount of money that’s going to be created by governments and the low interest rates created by central banks

    It’s going to be an epic reflation

    • BTFDepression!

      Yeah, it’ll bounce right back without a care, all that unpaid and unpayable debt will just evaporate, cremated with all the bodies

      • I’m actually pretty sure it will because governments And central banks will absorb it and as we have seen with japan their balance sheets are limitless

        • What happened when an overleveraged corporate (and legacy high HH debt) toppled the economy (and Nikkei) in the 90s? Despite Japanese government and central bank efforts, they spent the next 30 years in limbo as assets never really recovered.

          Not a good analogy to be making imo.

          • Nikkei was trading on a PE of 60 with bond rates of 7-8%

            Now THAT was a bubble

            Even with interest rates around 0, the SP500 PE was 20-25ish prior to this crash

            Interest rates are not going above 0

            Yes there will be no earnings for the next quarter or two, but after that they are going to explode with pent up demand and capacity
            The central banks will buy up the debt, the government helicopter money will get people spending

            Huge amount of new money is going to be entering the system through fiscal deficits

          • No mention of huge, systemic buybacks distorting PE?

            Corporate debt levels to GDP are off the chart, which is what drives the end of cycle unwind > recession > earnings crash (PE goes up, unless price falls match the earnings fall).

            Again, you’re just listing the Japanese playbook, which saw multi-decade stagnation

          • I think the rise in PE was more a result of permanent zero or negative rates

            as I said the Japanese were coming off an absurdly High peak

            The last US sharemarket peak was perfectly rational given the low yield environment (until covid impositions destroyed earnings)

    • BoomToBustMEMBER

      maybe, depends how long it goes on for and how many businesses survive.. Will it be a V shaped recovery, U shaped recovery or flat for a while. But I do 100% agree for those businesses that survive when business starts to fire profits will be good. Personally i’ve based my IT business model around knowing we have GFC 2.0 coming (pun intended) and ensuring no matter what I still have cash flow through steady Gov contracts. So far things are working our 95% as intended, although I never predicted Covid-19 so that had me a little concerned, but all has worked well so far, briefings have gone out, money has been secured and new opportunities are already presenting.

      • Nice,work.

        I, too, with my engineering business, have focused more on councils and infrastructure materials businesses over the last 12 months, in anticipation that ‘something’ would happen, and it has largely worked.

        However, not being able to meet basically anyone at the moment, due to social distancing, is putting a massive dent in my ability to pick up new work – honestly, my income is cratering.

        • BoomToBustMEMBER

          thats not great for your business. Everything is going online these day, meetings included via video chat. I suggest you use tech to get around this issue. We have been granted permission to not attend sites and work remotely providing we put in place certain provisions to support our clients, and best effort only.

      • Maybe you’re missing the point

        The whole 21 trillion will be absorbed by the central banks and government

        • Ronin8317MEMBER

          If you use the Japanese model, then the central bank will become the major shareholder of.. EVERYTHING.

          • yes

            so you’ve got a buyer with bottomless pockets, don’t you think its worth scooping up stuff to sell them later?

    • darklydrawlMEMBER

      In my experience, economic theory is wrong about markets being rational. History suggests that markets are rarely rational or forward thinking (hey, if they were, they would have seen this shtshow coming back in Nov 2019 rather than rising to record highs). To be successful in the markets I would suggest pychology is a much better domain to study. People are ‘herd’ creatures, despite us pretending otherwise.

      • bolstroodMEMBER

        So we built an economic system on the Rationality of Markets …
        and are surprised when this stuff happens.
        You make a good and interesting point.

      • Exactly DD.

        Rational market theory proposes that markets can’t get things wrong or horribly misprice them.

        Which is self evidently bullsh!t if you look at how markets react in a crisis. And this is blindingly obvious to anyone who knows people.

    • I called it perfect, here’s our 1st candidate for the:

      – I am so far down it hurts, but *phew* now I am glad I held on

      • Are you talking about me?

        Full disclosure: I own my own house, and in January I was otherwise 80% cash, 15% gold and gold miners and 5% random asx shares I never got around to selling

        I have been buying on down days since the falls started and am now down to about 60% cash because
        A) coronavirus is slightly overblown at this point
        B) I have seen enough of these false raptures on MacroBusiness to know that the governments and CBs do whatever it takes to reinflate asset prices
        They have no other option other than to let the whole system collapse
        They won’t allow it , and they have the power to stop it

        • Ah, so you’re the premature bottom picking type.

          This isn’t a MB thing. Look around, the signs are everywhere.

          Base case recession is simple pragmatism and sound risk management. Recessions happen, best not to assume otherwise. Especially after the amount of CB stimulus that has gone on over this very long cycle; ie a lot to unwind. Also, as I’ve previously told you, the CB Put always fails at the end of the cycle, hence why we have an end of cycle, not just a permanent mid cycle; remember the YC inversion and repopocalypse (why did that happen again?), which was followed by an unsuccessful “mid-cycle” adjustment. This phenomenon dates back to Greenspan, a period over which we have seen many nasty recessions. I reiterate, best not to assume central bank omnipotence at the end of cycle.

          • How can you say the CB put fails?

            It just came late and in drips in 2008, and got us all the way to 2020

            Now we are openly talking about helicopter money, and no one even bats an eyelid at central banks buying up trillions of debt
            This time it will be swift and relentless

          • Exactly the same scenario. They go adjustment > emergency inter-meeting 0.50 cut > panic monetary itnerventions

            It always fails.

    • For some companies, you are probably right.

      For me, I’m too much of a pleb, and probably wouldn’t be able to commit the time and mind power to figuring it out (I guess that’s what the MB Fund et al are for :P)

  5. So, more coronavirus deaths in Italy than in the whole of China that has more than 10 times as large population? How come?

    Let’s wait for reusa’s comment about Chinese supremacy.

    • C.M.BurnsMEMBER

      chinese numbers are massaged (just like how Reusa likes it); but also, the chinese are nearly singularly able to implement a completely draconian isolation policy necessary to let WuFlu burn out and the R0 number to fall below 1.

      Italy and every other western country won’t be able to do the same.

    • Ronin8317MEMBER

      Look at Wuhan: the numbers are comparable to Italy and Iran. The rest of China didn’t get the same level of infection because all business activities was shutdown for a month.

      Wuhan’s number only started to go down when martial law was imposed, nobody is allowed outside, and everyone have to subsist on a diet of vegetables delivered by the government.

  6. Is this the usual Friday bounce for the ASX to give everyone confidence to buy a house on the weekend ….. hahahahaha

      • darklydrawlMEMBER

        Purely my vibe only on housing:
        There maybe a small impact at this stage. Like last week, both sellers and serious buyers will be too far down the hole in sunk time and costs to not proceed with a sale. Buyers would have already have approvals in place, building inspections paid for and already a place or two they are committed to buy. Clearance rates will be similar to last week – albeit it likely off slightly.

        A few of the buyers will likely drop out and take the loss on the sunk time and money, but I suspect for the next week or two it will be pretty much BAU as these people wash thru the process. Naturally this will be taken as absolute proof positive that real men and women invest in property which will never go down and only patsies put their money in that crazy stock market (“loosers!” tm).

        However, give it 2 to 3 weeks and property sales will virtually cease as there will be no new potential buyers already in the ‘pipeline’ and no-one will be doing inspections or auctions anyway. Then it gets interesting.