Will this health crisis turn into a full blown financial crisis?

[saengd]

Sorry to break up the doom fest but some good news has arisen:

 

"Signs of China recovery gives Europe some hope of recovery. Proxy indicators tracking the world’s second-largest economy point to a sharp improvement from last month’s nadir, with steel demand and coal consumption recovering back towards normal levels".

 

https://www.telegraph.co.uk/business/2020/03/23/markets-live-latest-news-pound-euro-ftse-100-latest-updates/

 

 

[placnx]

9 hours ago, Brunolem said:

The last numbers I had were about 250 billion dollars.

 

Mostly all in junk bonds that nobody wants now.

 

It will be difficult to bail out the shale industry because its needs are constant, since it is a money losing business, even at 60 dollars a barrel.

 

Thus if the government hand them a hundred billions today, they will need more next week, and more and more...

 

Until now it has worked because investors in search of return were willing to inject money in these money losing companies, but these investors won't return anytime soon.

 

The only way for the government to maintain this industry long term would be to nationalize it...which could well happen now that the US has become a full blown socialist paradise...

 

Maybe break even is under USD 50 per barrel. The way this works is that companies go bankrupt and others buy the assets such as leases. This worked previously in 2016, but of course it depends on an improving economic outlook and an oil price over the cost of production. So there might be few bidders in a bankruptcy auction these days. Liquidation is the next step down. 

[saengd]

Bloomberg is reporting that 92% of businesses in Beijing and Shanghai are back to normal and Hong Kong is also beginning to get back to work.

 

Separately, tourist numbers for February were at their lowest level since 2015 which I think was 30 million.

Edited March 23, 2020 by saengd

[Airalee]

2 hours ago, saengd said:

Bloomberg is reporting that 92% of businesses in Beijing and Shanghai are back to normal

Nice selective statistics you took from that article.

 

“As of mid-March, more than 92% of the city’s office buildings had reopened, with about 38% of people back to work, according to the official Beijing Daily.”

 

https://www.bloomberg.com/amp/news/articles/2020-03-21/as-wall-street-empties-asia-s-bankers-slowly-head-back-to-work

[Logosone]

19 hours ago, Brunolem said:

One could wonder what the oil price should be for the US to balance its budget...

 

Balancing the budget is a notion that applies only to other nations...and the US may well run a budget deficit of 3 trillion dollars, or more, this year...the sky's the limit...

Exactly right, the US is the world's least concerned country regarding the budget deficit. The US could effectively raise tax and erase the budget deficit quite easily.

[mshs]

On 3/21/2020 at 2:33 AM, Logosone said:

During the Great Depression of 1929 the Dow Jones fell 89.2% in less than 3 years.

And in the 3 years preceding the Great Depression, the Dow Jones rose 265% 

[scubascuba3]

Trump won't allow a total lockdown, he's realised that this is throwing all the businesses under a bus, which obviously leads to massive job losses which leads to more deaths. I just heard a guy i know in the UK has killed himself over Corona

[Brunolem]

5 hours ago, mshs said:

And in the 3 years preceding the Great Depression, the Dow Jones rose 265% 

As you know, percentages up and down are not the same.

 

There is no limit up, but at 100% down you hit rock bottom...

 

[Cashboy]

"Growth"for the last 40 years has been basically driven by the increase in debt.

The question is; is the available debt coming to an end?

 

 

[Brunolem]

19 minutes ago, Cashboy said:

"Growth"for the last 40 years has been basically driven by the increase in debt.

The question is; is the available debt coming to an end?

 

 

Or rather: how much debt can the economy carry, and still be able to move on? 

 

And the answer is: we are already past this point. 

 

Before this crisis, countries like the US already needed 3 to 4 dollars of new debt to create 1 extra dollar of GDP... how far can you go like that? 

[mshs]

On 3/24/2020 at 7:07 PM, Brunolem said:

As you know, percentages up and down are not the same.

 

There is no limit up, but at 100% down you hit rock bottom...

 

And as you may not know, if what goes up, must come down were true, you'd be at 0.

 

Also did you know that you can have your cake and eat it too.  You don't just have to be peddling doom-and-gloom?  You can short the market and win!