The looming unemployment crisis

[reader]

From The Nation

Some 5 million Gen Y, Z employees staring at possible job losses

Approximately 5 million Generation Y and Z employees face economic uncertainty as they risk being laid off because they do not have enough working experience, and their salaries were between Bt10,000 and Bt20,000, the University of the Thai Chamber of Commerce pointed out.

Thanavath Phonvichai, the university president and adviser to the Centre for Economic and Business Forecasting, said that the Bank of Thailand also had concerns about this issue.

"If these employees are laid off, they would face difficulties in their daily lives because they have a lot of debt and they do not save money," he said.

"These employees may borrow from loan sharks that charge extremely high rates of interests, so we would like to urge related authorities to supervise their spending."

He said the government's fifth phase of lockdown easing would help stimulate the economy and maintain employment because this move would encourage people to spend up to Bt9 billion per day or Bt250 billion per month which means Gen Y and Z employees who work at entertainment venues can return to work.

"However, the value of domestic spending this year is expected to be at Bt20 billion per day. If the government wants to maintain the money circulation as in the previous year, they will have to allow foreign tourists to travel to Thailand because foreign tourists spend approximately Bt8 billion per day, more than Thai tourists who spend Bt3 billion to Bt4 billion per day," he said.

He added that if people in the country do not travel across provinces due to uncertainty following the Covid-19 pandemic, the government should instruct government authorities to hold seminars and activities to gain the confidence of people and maintain tourism.

"Many parties are worried about the global economy as the Covid-19 fallout has forced employers to close businesses, lay off employees, and cut employees' salaries," he added. "If many countries worldwide cannot prevent the second coronavirus wave and maintain their economy, the virus crisis may turn into a financial crisis in the future."

[PeterRS]

Can anyone explain to me why in these desperate economic times, way worse than the financial crisis of 2008, the Dow Jones index is close to its record high?

[vinapu]

34 minutes ago, PeterRS said:

Can anyone explain to me why in these desperate economic times, way worse than the financial crisis of 2008, the Dow Jones index is close to its record high?

irrational exuberance like Allan Greenspan once said ?

[PeterRS]

6 minutes ago, vinapu said:

irrational exuberance like Allan Greenspan once said ?

Didnt he say that during the dot.com bubble when the US economy was really booming? It is now tanking big time.

[spoon]

1 hour ago, PeterRS said:

Can anyone explain to me why in these desperate economic times, way worse than the financial crisis of 2008, the Dow Jones index is close to its record high?

Stock market index can be easily manipulated by the few rich brats. I still recall George Soros being the single person tied to the worst asia recession in 1998. 

[TotallyOz]

4 hours ago, PeterRS said:

Can anyone explain to me why in these desperate economic times, way worse than the financial crisis of 2008, the Dow Jones index is close to its record high?

Sure. As the stocks dipped to low levels, I put in 10x what I once invested in the stock market. I chose carefully and am in for the long haul. There are many stocks that will rebound after the recovery and for anyone in for the long run, you aren't going to loose your money. I hope.

Also, many stocks are doing better in Covid19.

[PeterRS]

2 hours ago, spoon said:

Stock market index can be easily manipulated by the few rich brats. I still recall George Soros being the single person tied to the worst asia recession in 1998. 

Sorry Spoon. Soros may have had a hand in the recession but only a small one. By the mid 1990s several Asian countries were vastly overleveraged. Thailand had maintained its currency at the rate of US$1=25 baht for many years. To maintain the rate, it was increasingly forced to raise interest rates. This made borrowings in overseas currencies far more attractive to Thai businesses since they would pay a lot less in interest. The same was true of businesses in other countries, including Malaysia

Further north, Japanese banks were in serious long term trouble, a result of their stock market rout in the early part of the decade. From a high of almost 39,000 in January 1990 it had collapsed to 15,000 by July 1995 and was still on the way down. To help their balance sheets, they began withdrawing funds from all over South East Asia by mid-decade. Sensing blood, hedge funds, including one run by Soros, saw the opportunity, moved in and attacked the baht which they perceived to be the weakest currency. The Thai government was able to fend off the first attack. In doing so though it had to spend all its foreign exchange reserves. By the time the hedge funds had regrouped and mounted the second attack on July 1stThailand had no choice but to float the baht. Within one day it fell from 25 to 30 to the US$. It then collapsed. Many businesses with overseas borrowings simply could not repay them and went belly up. The house of Asian cards then came tumbling down.

On the other hand, Soros did single-handedly bet against sterling by short selling the currency in the early 1990s and ending up with a £1 billion profits

[PeterRS]

21 minutes ago, Michael said:

Sure. As the stocks dipped to low levels, I put in 10x what I once invested in the stock market. I chose carefully and am in for the long haul. There are many stocks that will rebound after the recovery and for anyone in for the long run, you aren't going to loose your money. I hope.

Also, many stocks are doing better in Covid19.

I recall how low stocks fell dramatically by almost 40% a few months back. But they have since recovered a lot of their value. The drop in late 2007 was nearly 50% and it took the market 6 years to recover. We are told that the present economic state of the world is a great deal worse than 2007/8 and we have to look to 1929 for a comparison. So I still cannot understand. If investors are similar to you and putting in only 10% of what they used to invest, who is putting in the rest of the cash to keep the DJ so high? And does not the lesson of history dictate that the market has to collapse very dramatically very soon?s

[spoon]

28 minutes ago, PeterRS said:

Sorry Spoon. Soros may have had a hand in the recession but only a small one. By the mid 1990s several Asian countries were vastly overleveraged. Thailand had maintained its currency at the rate of US$1=25 baht for many years. To maintain the rate, it was increasingly forced to raise interest rates. This made borrowings in overseas currencies far more attractive to Thai businesses since they would pay a lot less in interest. The same was true of businesses in other countries, including Malaysia

Further north, Japanese banks were in serious long term trouble, a result of their stock market rout in the early part of the decade. From a high of almost 39,000 in January 1990 it had collapsed to 15,000 by July 1995 and was still on the way down. To help their balance sheets, they began withdrawing funds from all over South East Asia by mid-decade. Sensing blood, hedge funds, including one run by Soros, saw the opportunity, moved in and attacked the baht which they perceived to be the weakest currency. The Thai government was able to fend off the first attack. In doing so though it had to spend all its foreign exchange reserves. By the time the hedge funds had regrouped and mounted the second attack on July 1stThailand had no choice but to float the baht. Within one day it fell from 25 to 30 to the US$. It then collapsed. Many businesses with overseas borrowings simply could not repay them and went belly up. The house of Asian cards then came tumbling down.

On the other hand, Soros did single-handedly bet against sterling by short selling the currency in the early 1990s and ending up with a £1 billion profits

No need to say sorry. I am well aware of the intricate issues looming in many asia countries. Although id like to point out malaysia did the exact opposite of thailand during that period. Our currency was floating before the financial crisis 98, but our gov at that time did made few foreign investment mistakes here and there hence were implicated by similar events too. But the gov decided to tie the Ringgit to US at 1 USD = RM 3.8, right up to the 2009 US property bubble crisis, where tieing our currency to US doesnt make sense anymore. But it is much simpler and easier to blame it on one person and many here believed george soros is the culprit lol. Regardless, my initial point still holds, that the stock market and other type of speculative investment are easily manipulated by the rich, so that might be the plausible case in the US now. I might be wrong though.

[spoon]

19 minutes ago, PeterRS said:

I recall how low stocks fell dramatically by almost 40% a few months back. But they have since recovered a lot of their value. The drop in late 2007 was nearly 50% and it took the market 6 years to recover. We are told that the present economic state of the world is a great deal worse than 2007/8 and we have to look to 1929 for a comparison. So I still cannot understand. If investors are similar to you and putting in only 10% of what they used to invest, who is putting in the rest of the cash to keep the DJ so high? And does not the lesson of history dictate that the market has to collapse very dramatically very soon?s

I believed michael is saying he is putting 10x and not 10%. Thats 1000% more during low levels

[TotallyOz]

1 hour ago, PeterRS said:

And does not the lesson of history dictate that the market has to collapse very dramatically very soon?

I don't see a collapse. I don't think the government will allow that to happen. At least before the election.

39 minutes ago, spoon said:

I believed michael is saying he is putting 10x and not 10%. Thats 1000% more during low levels

Yes, I put 10 times more than I had. But, I put them in companies that I believe will do well in the next year like pharmacy, health, energy.

[PeterRS]

1 hour ago, Michael said:

I don't see a collapse. I don't think the government will allow that to happen. At least before the election.

Yes, I put 10 times more than I had. But, I put them in companies that I believe will do well in the next year like pharmacy, health, energy.

I misread your original post. The market being propped up prior to next US election certainly makes a lot of sense. But what happens after that? Countries have thrown trillions at countering the effects of covid19. Many businesses will take years to recover and the numbers who remain out of work will surely be massive in comparison to last year. I just assumed history would provide an example of what is likely to happen. Seems not.

[TotallyOz]

2 hours ago, PeterRS said:

I misread your original post. The market being propped up prior to next US election certainly makes a lot of sense. But what happens after that? Countries have thrown trillions at countering the effects of covid19. Many businesses will take years to recover and the numbers who remain out of work will surely be massive in comparison to last year. I just assumed history would provide an example of what is likely to happen. Seems not.

You have companies like Netflix who are going to do great. Amazon has been great. The world is right now a digital world and tech stocks will be OK. Brick and Mortar stores are going to suffer and I see so many closing. It has already started happening in the USA.  Friends from NYC are saying so many business are going out of business.But, they are Mom and Pop stores. You know what happens when they go out, bigger ones come in and take over. I am not good with these things, but I see a switch in the base and not a depleted base.

[anddy]

the key to the incredible stock market performance (which I agree makes no economic sense at all) is twofold:

1. governments throwing unprecedented amounts of money at the economy via stimulus and rescue packages (though that doesn't make the situation less serious for many companies in my opinion)

2. Central banks throwing unlimited amounts of money at the markets.

Thus, you even get a perverted stock market logic: bad virus news = bad economic news (in principle bad for stocks) => will lead to more stimulus => stocks go up. 

It may  have to come to it's senses at some point, but then it doesn't have to. With the Fed buying corporate bonds even in the high yield sector, that market has the best cushion ever. That spills over to the stock market. 

[CurtisD]

14 hours ago, anddy said:

2. Central banks throwing unlimited amounts of money at the markets.

Exactly.  

The attached (I hope) chart of US Base Money would show, if I had the full time series, that:

(i) Due to QE in response to the 2008/2009 financial crisis the US stock of Base Money was already at its highest level since the end of WWII pre Covid. 

(ii) The Fed had begun to slowly unwind this prior to Covid.

(iii) Since Covid the Fed has pumped in the cash so that Base Money is now in orbit.

The PE ratio of the S&P is now 22.5x compared to a long term average of around 16x which, give the uncertain state of the World, is simply nuts. 

Its floating on a flood of Fed liquidity which is a very unstable base. 

As the saying goes, when the tide goes out those not wearing swimsuits are exposed and, as they are not from Issan, it is ugly.

[CurtisD]

PS.  The factors which underwrote the PE multiples breakout from the long term ranges over the late 1990s through early 2000s no longer exist.

Productivity growth which had surged above the long term growth trend fell back to historical levels in the mid 2000s.

The macro reforms in emerging markets in the 1990s which drove hundreds of millions into the middle classes had tapered off, although not reversed, by the mid 2000s.  

Globalization, which greatly stimulated growth, is in retreat. 

We are now back to something like the long term history pre the mid 1990s during which the PE multiple was rarely above 20, with a very uncertain outlook.

[Guest]

I tend to agree with most of the previous comments.   

Now the first of the following charts is from Starcapital.de is from 28-Feb.  

A lot has happened since then, but the S&P500 is above the levels on 28-Feb, so I shall use it.   By these measures, the US market was expensive relative to other markets at the time.  Since I very much doubt earnings & book values have gone up much since then, if at all, the US remains expensive relative to some other markets.

I then got carried in adding a few other US graphs, all from within the last month or so, which you might find interesting.     I presume the forecast in last chart by Topdown Charts is based on some kind of valuation mean reversion theory, as typically used by the likes of Research Affiliates.  

Rightly or wrongly, I view the US market as expensive.    

I added slightly to UK & Asian holdings in March, but sadly with nowhere near the decisiveness that Michael has shown.   I've trimmed back holdings, including my very small US positions in June & have increased the proportion in gold slightly.

Trump's definitely going to keep pushing the fed to create more dollars.  We see the same in Japan & the UK, with perhaps more restraint from the ECB.    They cannot print gold (although it seems the Chinese fake it).

 

What have you been buying Michael ?    Tesla ?

 

[ggobkk]

I don't disagree with any of the above as the markets are ready targets for interpretation.

My take is that many of the folks who were addicted to on-line gaming shifted over to the markets via things like robinhood.  For them it's all short term - as opposed to Michael who is taking a long term view.  I'm a Michael marketeer...except at the end of February I sold everything and moved them to bonds...so my "portfolio has grown about 2% in the past quarter.  US companies that haven't filed for bankruptcy will soon be issuing quarterly reports.  If they are bleak, then I might begin to move my funds back into the market.

Maybe...