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Economic implications of a SARS/Coronavirus outbreak

greggles

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Something tells me there's going to be a hard selloff tomorrow before the weekend.

We are definitely overdue for a market correction. All that saved lockdown money has been pumped into real estate, financial markets and crypto. The party had to end sooner or later. The markets have been disconnected from reality for some time, but now it looks like the smart money is getting out.

It all started last Friday, and ever since then any rise has been sold into hard. I think you're right about Friday night on US markets. I also suspect things are going to get very ugly.

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over9k

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We are definitely overdue for a market correction. All that saved lockdown money has been pumped into real estate, financial markets and crypto. The party had to end sooner or later. The markets have been disconnected from reality for some time, but now it looks like the smart money is getting out.

It all started last Friday, and ever since then any rise has been sold into hard. I think you're right about Friday night on US markets. I also suspect things are going to get very ugly.

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NDX closed down -1.83%. The smart money might have pre-empted things.

I agree about the correction, but the printers haven't stopped yet, all they're talking about is slowing them down and not even that has started yet.

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Up almost 2% at one point and then closed -1.2%.

A 3.2% swing on the day is absolutely ridiculous.
 

over9k

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Ok so here's one for the new guys/econ students out there:

There's been a lot of talk about how airlines, cruise ships and so on have a tremendous amount of pent up demand and are going to see a huge rebound post-pandemic. This is true.

What there isn't a lot of talk about is the inverse - what products/services are going to fall off a cliff?

One of them is peloton, the exercise bike manufacturer. It just missed estimates hugely and plummeted over 35% in a single day:

View attachment 132569


Think about this logically - a lot of these things were only bought because people couldn't go to the gym or for a real road cycle or what have you. We know this because sales pre-pandemic were nothing like once the pandemic started. People have only bought these things to ride indoors because they've had no other choice. Lift the lockdowns, and they can actually engage in their preference again.

In short, the pandemic has had a huge spike in substitute goods.

Ergo, whilst things like airlines or cruise ships shoot up once lockdowns are lifted, all the substitute goods like peloton fall off a cliff. We can see this in the sales numbers that have sent the stock plummeting.

I've mentioned quite a bit about how things like furniture will see a big drop on account of a couch being a very infrequent purchase, but couches aren't really a substitute good. Peloton IS.



So the challenge now is to try & think "What other substitute goods have shot up in sales through the pandemic but are going to plummet now on account of them being substitutes?".

For bonus points, try to think of something tangible (i.e a physical good) like peloton bikes that people simply will not use again once lockdowns are over. Why? Because if people are never going to use them again, they will sell them, so we are very likely to see a HUGE flood of second hand peloton bikes hit the market now, only exacerbating peloton's problem further - you'll have both a huge drop in demand for new ones on account of second hand models being so cheap (so we're talking a substitute of a substitute now) and whatever hugely reduced number of new models sold will have to be sold at a huge discount (so lower margin) in order to convince prospective buyers to actually buy a new one vs getting a second hand model dirt cheap.

This has already happened over here in australia with gym products (squat racks, barbells, weights and so on) where the massive amounts of gear bought to set up home/garage gyms flooded the market the second lockdowns were lifted, but there are undoubtedly going to be other examples.

If you can think of another one, then it's probably an excellent stock to bet against, especially considering the fact that nobody is talking about this ;)
Turns out it was apple:

425642576425745.jpg 2456245764.jpg

Seems iphones hit market saturation and now all the pumpkin spice latte sippers need a new model to come out to open their daddy's wallets again.
 

over9k

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I hope so - my system has put me two thirds in cash at the moment so either I've got it seriously wrong or there's a correction happening.

So I'm biased in hoping you're right otherwise I've stuffed up big time. :oops:
I'm surprised you trade systems smurf, you've always struck me as more of a qualitative guy?

I haven't even tried to run technicals and/or systems in this market. It's so far from typical we might as well be on another planet. Even today markets are going bonkers after russia broke opec's mandate and has opened its oil taps. Systems simply cannot predict that.


I showed a screencap before that a literal buy on red/sell on green days would have netted you 20% just in the last week. 40% if you'd gone total degen with inverse etf's on a rotation.

(this is not me trying to rub salt into the wound, it's a genuine question)
 
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I hope so - my system has put me two thirds in cash at the moment so either I've got it seriously wrong or there's a correction happening.

So I'm biased in hoping you're right otherwise I've stuffed up big time. :oops:
well a proper settling has been due since the floodgates opened on stimulus now some say that was the GFC , some September 2019 , others March 2020 ,

normal logic would suggest a retrace before Xmas ( a dip of less than 20% from the highs ) but when was the last time this market was normal

just in case remember the limitations of the Government deposit guarantee ( UP TO $250,000 per ADI NOT account or bank ) i would hate to see folks with stranded cash if things go badly pear-shaped

if it is any consolation it looks like i will have more cash reserves than i am comfortable with before Xmas also ( i prefer to nibble not move the market )

good luck
 
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The way I've looked at it is that if the currency of multiple countries is to be massively devalued then, short term movements aside, what ought to hold value by the time it's all done?

A flood of money is a claim on goods and the raw materials to make and run them, the supply of which isn't increasing anywhere near quickly enough with very long lead times involved to find minerals, develop mines and so on. So commodities of all kinds.

Any business that has real pricing power, either due to technology, resources or brand value, has an advantage over the rest who are competed down to the lowest survivable pricing. So monopolies or duopolies with high barriers to entry or things where the name alone drives sales.

Crypto seems to have been huge beneficiaries of inflation so far. Cryptos do have the problem from a long term investing perspective however that there's now more than 10,000 of them and if every other industry is any guide, most won't survive in the long term. There's a high risk of stuffing up the implementation, picking the wrong one, even if the underlying idea sees huge growth.

Real estate also a major beneficiary of inflation thus far but I do wonder about the impact of interest rates, the potential for government regulation, rising nationalist sentiment and so on going forward? Plus in the case of commercial, to what extent is demand for office and retail space going to permanently diminish and never come back to pre-pandemic levels?

Note that I'm raising the question, I'm not saying I'm right. I am however thinking of a long term perspective - own it for the 2020's and sell when it's on the front page of Time or The Economist, not own it until some daily chart says sell it sometime early next year etc.
Commodities diversified .i like s32 here, commodities etf
Silver,gold,copper.ideally mid tier not major miners of these
Agriculture land owning
Energy:coal or better oil outside West economies
Russia: as the some of the above and economic link to China.
Geographically
In my timeline:25 y, do not bother with europe africa or india ,
decreasing but not dead yet US.
If Biden side reelected,just forget it so soon decided.
China and SE Asia but hard and getting harder to tap.
Maximize OS exposuredo not expect a smooth ride.
Curently experiencing how hard it is to get out of Australia even before Taipei fall:2y and ticking, the option of pm coins,gun ammos and can of beans where i add permaculture and solar panels might be a good one.
 
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And look at this:
Just last month ,and against USD which is going with 10% yearly real inflation
Screenshot_20211203_051415.jpg
In the last month only,all your aud assets have fallen 4/74 or 5.5%.
Against a downward long trending currency i do not trust that much
 

over9k

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24567425724572457425.jpg

No correction today, in fact we've had a big rebound. Omicron was a storm in a teacup.

Gee, who would have thought?


Combine that with OPEC opening the taps and it's full steam ahead again.
 

over9k

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Turns out it was apple:

View attachment 133729 View attachment 133728

Seems iphones hit market saturation and now all the pumpkin spice latte sippers need a new model to come out to open their daddy's wallets again.
It wasn't apple. It was docusign. -29% afterhours on earnings and earnings forecast. Will obviously be a massacre on open tomorrow.

I've been running docusign since I first bought into zoom early in the pandemic. It's been a thorn in my side the entire time.
 

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And here's the massive friday selloff I predicted and there's still 5hrs to the close:

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We've seen a good 2-3% move every single day this week giving a ~25% return with leveraged etf's simply buying on red days and selling on green.

Amazing.
 

over9k

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And here's the massive friday selloff I predicted and there's still 5hrs to the close:

View attachment 133782

We've seen a good 2-3% move every single day this week giving a ~25% return with leveraged etf's simply buying on red days and selling on green.

Amazing.
Still plummeting:

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I've bought a bit here, got another buy order in at the -3% mark too.

This has been an amazing week.
 

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It wasn't apple. It was docusign. -29% afterhours on earnings and earnings forecast. Will obviously be a massacre on open tomorrow.

I've been running docusign since I first bought into zoom early in the pandemic. It's been a thorn in my side the entire time.
-40%:

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over9k

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Oh in case anyone's wondering why today's such a massacre, it's a combination of chinese tech crackdown and the jobs numbers coming in at 210k vs an estimated 550k, so missing massively.
 
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I'm surprised you trade systems smurf, you've always struck me as more of a qualitative guy?
As a general rule you'd be spot on, that's exactly my approach. :xyxthumbs

As with anything in life though, having a look over the other side of the fence to see what's there is worth a go and so I'm giving it a go.

I should clarify that the % in cash I referred to is for the system trading account only, not for the rest. :2twocents
 

over9k

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As a general rule you'd be spot on, that's exactly my approach. :xyxthumbs

As with anything in life though, having a look over the other side of the fence to see what's there is worth a go and so I'm giving it a go.

I should clarify that the % in cash I referred to is for the system trading account only, not for the rest. :2twocents
Ahh, yeah that's different then.

You had me quite worried.
 
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Ahh, yeah that's different then.

You had me quite worried.
My error there, I should have been more specific in the original post....

Off that subject though and looking at economic effects more broadly, the latest one seems to be concern about running short of urea.

Urea being used as an agricultural input as fertilizer plus along with demineralised water it's used as diesel exhaust fluid (DEF, more commonly known by the brand name AdBlue). Now the problem there is that whilst the purpose of DEF is to reduce exhaust emissions of NOx, machinery is programmed so that it can't be used without it. No DEF and the engine goes into limp mode.

Now it seems that there's a shortage of urea so that's going to further add to the supply chain woes if it means trucks stop running, farm machinery stops and so on. Plenty about it in the media and elsewhere at the moment.


 
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