Are you a little befuddled that with every record-breaking unemployment claim, the S&P 500 surges higher? After 6.6 million jobless claims on April 9, 2020 and even more the first week of May, the total number of jobless claims in 2020 stands at roughly 30 million or almost 20 percent of the working population.
Even in 2021, unemployment levels are highly elevated given the pandemic is not under control. It will likely take until 2022 until we reach herd immunity.
With a once working American population of ~158 million, I'm now wondering how many Americans will have to file for unemployment before stocks stop rallying.
Is the inflection point at 50 million unemployed? Or how about 100 million unemployed? Whatever the case may be, the stock market continues to perform well into the unemployment crisis, the lockdowns, and the global pandemic.
Nobody knows for sure, but what we do know is that stocks rally after dismal unemployment figures because investors expect the Fed and the Government will provide even more monetary and fiscal stimulus. The worse the numbers, up to a certain point, the more monetary and fiscal stimulus.
Given I've got plenty of extra time to think and write during the lockdown, I thought it might be interesting to see what life would be like under maximum unemployment of 70%. 30% of the American working population still needs to work in order to run the government, provide food, shelter, clothing, energy, and technology. So let's just agree that 70% or 110 million people is the maximum unemployment level.
Given we already have 17 million registered for unemployment, at a rate of 6 million unemployment claims a week on average, we will get to 110 million unemployed in 16 weeks, or by July 30, 2020.
Similar to Governor Gavin Newsom's bold proclamation on March 18, 2020, that 25.5 million Californians will get coronavirus by May 14, 2020, I will make the assumption that by July 30, 2020, 110 million Americans will find themselves unemployed if lockdowns extend until then. This is a possibility since the decision of how long we should shutdown is being made entirely by extremely wealthy people who are getting paid either way.
For those wondering, as of April 9, roughly 19,131 Californians or 0.07% of the Governor’s estimate have gotten the coronavirus. So with only 25.49 million more people to go, I guess presidential hopeful Gavin still could be right just like how I still have a shot at making the NBA.
Maximum Unemployment For Maximum Returns
As an investor and an 8+-year unemployed veteran, I am qualified to take on this subject.
When you've been unemployed for as long as I have, staying unemployed no longer scares you. When you're at rock bottom, there's nowhere to go but up! In fact, I start to think about the positives for all the newly unemployed:
- $600 more a week of unemployment benefits
- Leaving a crappy job that sucked your soul every day
- Receiving a severance package on top of unemployment benefits if you negotiate properly
- Time to rest and relax
- Time to go back to school
- Time to travel
- Time to spend more time with family
- Time to finally start something entrepreneurial
- Time to finally start a website
- Time to look for a new line of work
- Time to heal your mind
- Time to get in shape
- Time to live life on your own terms
Since my unemployment began in 2012, the stock market has provided a positive return except in 2018 and now in 2020. Overall, it's been a good experience not working a day job while also seeing my investments grow.
As more people lose their jobs due to our aggressive countrywide lockdowns, there will most certainly be some short-term suffering. But in the medium-to-long run, maximum unemployment could be an incredible thing.
My hope is that the more people who leave work, the more people will decide to live a better lifestyle that's more true to themselves. Only until you experience extended unemployment will you get comfortable making money in different ways.
If unemployment claims rise to 110 million, the government should provide maximum unemployment benefits for probably at least a couple of years if not much longer. They've already promised that they will do anything and everything possible to take care of citizens most affected by the pandemic.
With the government already providing $600 more in unemployment benefits a week and the PPP paying for 2.5 months of payroll, there's a high chance the unemployed in a maximum unemployment scenario should be able to make close to 100% or more of his or her income.
In California, an unemployed person can now receive a maximum of $1,050 a week, or $4,200 a month. That's not bad. What's more, the coronavirus relief bill offers an additional 13 weeks of benefits, up to a maximum of 39 weeks. 10 months is surely enough time to find a job if we see a recovery by the end of 2020.
Prior to the economic crisis caused by COVID-19, the average worker collected unemployment benefits for about 15 weeks, according to Labor Department data.
If you are making close to 100% of your income, it is rational to assume the majority of the unemployed will prefer to take a break from the grind. After all, plenty of surveys have shown that most Americans are disengaged at work anyway.
During the 2008 – 2009 financial crisis, the government instituted 99-weeks of unemployment benefits. This was a time for millions of Americans to finally get away from the hustle and bustle.
In 2020, the unemployment benefits, although not 99-weeks, pay much more. Further, if we get to the point where 110 million are unemployed, the government will likely provide even more than 99-weeks of extra unemployment benefits.
Now let's look at a maximum unemployment scenario from the investor's point of view. The more people who file for unemployment, the more the S&P 500 goes up. By the time we have 110 million unemployed, there's a chance the S&P 500 could be at all-time highs! Ludicrous you say!
But here's why there is a chance: productivity and efficiency gains.
During the lockdown period, companies will have discovered they didn't need as many employees and as many office buildings to create the same amount of product. I know this because I've been writing at home for years. It takes about 3 hours of work from home hours to complete about 9 hours of work from office hours.
As a result of this efficiency gain, company profitability goes way up. Companies with higher operating profit margins get revalued higher, thereby creating a lift to the overall market.
Think about it, if every company had the 85%+ operating profit margin of a magnificent personal finance blog that was growing in the double digits every year, the S&P 500 could zoom to 10,000, greatly surpassing our 3,386 highs!
Thanks to the Fed's ability to print endless amounts of money and buy an endless amount of assets, investors have the greatest safety net of all.
We now have a scenario where 110 million people not only don't have to work at their crappy jobs but also still receive healthy pay. Meanwhile, investors are getting to earn incredible returns. Further, there's no reason why an unemployed person can't also be an investor and receive the best of both worlds.
At the end of the day, we could face a world where everybody wins. The main fear is that the government gets too powerful and America turns into a socialist country.
Let's Face Reality
Of course, there is only a small chance of my positive scenario coming true. But so long as there is even a 1% chance, there's still a chance.
Unfortunately or fortunately, the breaking point for when the S&P 500 starts to plummet is likely well before 110 million Americans become unemployed. Such high unemployment will probably cause crime to skyrocket and the S&P 500 to crash to 0 as the government takes over all publicly listed companies.
Intelligent people don't believe Governor Newsom's 25.5 million coronavirus prediction in California or the federal government's projections of 240,000 coronavirus deaths in America. But they are thrown out there to shock us into conformity. No other time has the U.S. government been more powerful than right now.
This thought exercise helps explain why the stock market is curiously booming with record-high unemployment. It also helps you see the good in a terrible situation. Most of all, I want this thought exercise to help you assess the importance of your job, your money, and your freedom.
For me, freedom is everything. To ensure my freedom, I've got to protect my money, which is one of the reasons why I think and write so much. Learn to think for yourself and don't trust everything you hear or read.
For those buying the big bounce please be careful. The market is already celebrating a victory with three quarters left to play!
Personally, I'm bullish on stocks and real estate in 2021 and beyond. Let's see what the future holds!
Recommendation: If you're looking to get laid off or are afraid a layoff is an inevitability, I suggest buying my book, How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye. The book is a severance negotiate strategy book so you can walk away with money in your pocket. I walked away with more than five years of living expenses in 2012 and couldn't be happier.
Related:
How To Predict A Stock Market Bottom Like Nostradamus
4 million people filed for unemployment today, pushing the total to 26 million. Stocks are up 1% on the day. What the hell is going on?
I thought this post addresses exactly this?
We will be close to 50 million unemployed by July if lockdowns continue.
But at least unemployment benefits are solid now.
https://www.financialsamurai.com/states-with-the-highest-and-lowest-unemployment-benefits/
Why are investors not pricing in the sustained economic depression and rebound of coronavirus we are almost sure to experience in the latter half of 2020? The Fed can only prop up asset markets for so long before turning their attention to the massive amount of unemployed people that the nation will need to keep happy and fed. Maybe I’m just crazy but anyone with any foresight could have seen what coronavirus did to China/Italy and known for a fact that it will happen here. I fully expect that we will see a rebound in the fall given we have no vaccine and aren’t taking efforts to fully eradicate the virus seriously.
The governors prediction didnt come true because he acted. He declared a stay at home order while President Trump did….bla bla nothing to worry about bla, this is a hoax, theres only one case of coronavirus, ONE CASE!
Between the conservative takeover of the financial system (RE: FED) and essentially Republicans controlling the federal government for the last 40-years we are now at an endgame. An endgame where ownership is relegated to the few with assets. And working for money is a fools game.
I expect by the end of this cycle bread will cost a penny, the working man will earn a $30 an hour wage, and a house will cost $30-million dollars.
We’ll have a world where 99% work at a job and rent everything from the 1% who own everything.
Sam – do you think the market will return to valuing based on fundamentals during Q2 and Q3? The SP 500 is currently trading on 23x earnings if you take Yardeni’s end of year forecast for 120 in earnings. Consensus view from analysis is like 158-160 which seems wildly optimistic. Is one of the risks the fact that analysis haven’t really downgraded enough yet ?
As a long-time stock market bear, I actually shifted 5% of my TSP from the G fund to the L2040 fund on 19 March. After a sizable gain, I went back to 100% G on Thursday. After a 20% gain in a couple of weeks, I figured I might as well lock that money in.
The announcement that the Federal Reserve will essentially buy anything and everything (aside from individual stocks, at this point) is a gross violation of its mandate and illegal. But nobody cares so long as the stock market goes up. But, for all of the stock bugs out there, let me ask you:
What happens to the prospective returns when a risk asset (e.g. stocks) becomes a risk-free asset (e.g. Treasuries)? Look at Japan and their experience buying equities the last two decades…and yet their Nikkei is still less than half of what it was at the 1990 top. Stock bugs need to be careful what they wish for with the nationalization of companies. Welcome to the United Socialist States of America–it would make the Soviet Union proud.
How long have you been a bear? I’ve been cautious since 2007 after writing this post: https://www.financialsamurai.com/feels-lot-like-2007-again/
I doubt the US will turn out like Japan. We are too money-hungry and motivated to compete!
Really, since about 2005. After having bought my house in the California Central Valley in 2002 and watched is value almost TRIPLE in three years, I sold and rented. Eventually I bought a house again, in the Heartland, but not until 2011. So I basically timed both the top and the bottom of the housing market perfectly.
It was surreal watching builders hold lotteries for the opportunity to buy a house I California from 2003-2006…people who generally had no skin in the game, and as we would later find out, would default on the purchase once the prices started dropping. Recall the California Association of Realtors and the National Association of Realtors told us, confidently, that “home prices could never go down.” And Ben Bernanke famously said, after the damage was already very evident in the coastal housing markets, that “subprime was contained.” Only to see the bottom fall out mere months later. So, I’ve learned to be a contrarian with what “experts” tell us.
The stock market since 2009 has been incredibly peculiar…the longest Bull phase and second largest magnitude of gains in history, yet backed up by only 2-3% real GDP growth per annum. The gains have been largely propelled by speculation, stock buybacks, and financial/accounting wizardry (suspension of mark to market, for instance, and banning short sales of financial entities). Look at the market leaders last year: Apple’s stock went up a whopping 84% on 2% year-over-year profit growth; Tesla, which has earned had an annual profit (but two quarterly profits) and makes fewer than 400,000 cars a year, was for a time worth more than Volkswagen and all their conglomerates (Audi), which produces over 10M cars a year with a very solid history! I’ve certainly missed out on a lot of potential gains over that time, but even through very conservative investing and a modest (“upper-middle” class) income, and no inheritances, joined the millionaire ranks in my late 30s.
We tell households to be financially responsible and save. Why shouldn’t businesses be held to the same standard. For 10 years, we’ve heard about how great the economy is, but these companies spent their money buying back their stock and goosing valuations, yet, after an economic shock lasting a few weeks, these same businesses are already at the public trough demanding bailouts. So privatize profits and socialize losses. Unfortunately, 2007-09 experience with bailouts created a huge moral hazard and we are seeing that play out on a much larger scale now.
So, I prefer EE bonds for their 3.5% yield, like a mini-annuity, various Treasuries and emerging market bonds, and precious metals. I’ll either keep waiting to buy the dip or if that is prevented from naturally happening through the interference of the Federal Reserve, will look at international markets whose valuations are much better than those in the USA.
Gotcha. It’s been a bumpy ride since 2005. But overall, I’m happy things turned out the way they have.
Without the bull market, I don’t think I would have left work and had the guts to stay out of work since 2012.
Great article. I think the stock market was very oversold in terms of time (debatable in terms of price); therefore, a bounce was inevitable no matter the news flow. On top of that, government intervention did provide some fuel because it smoothed out distressed markets (like muni and junk bonds) and will probably save some businesses that were headed for bankruptcy (at least for now) as well as individuals who were unlucky.
The real question now is the duration of the economic slowdown. Stocks are starting to discount the rosy scenario and are ignoring the fact that they were already overvalued before the crisis. Some would argue that where we are today (April 11) is “fair value” in a world without a virus.
From an investment standpoint, stocks were less risky 2 weeks ago in late March (one had a better opportunity to make money) and are much more risky now (one has a greater probability of losing money). Stocks were actually very risky in February when there was almost no volatility, because of valuations. Risk and volatility are not the same thing of course.
I’m a better seller at 2,800, especially with the stock I purchased at lower levels.
We will rebound, but not completely. Maybe only 60%-70% of employees let go will get their jobs back by end of the year as firms remain cautious and do more with less.
I was reading a competing Fire blog (that you’ve mentioned before) and I was surprised at how fearful the readers seemed to be – at least the ones who wrote comments. I surmised from perusing them that older investors (somewhat ironically) seem to be less afraid of the current market. We’ve been here before and generally things turn out ok in the long run. It continues to fascinate me that younger investors who should seek risk instead seem to crave stability. The more experienced investors seem to walk more in the direction of disasters understanding that opportunity lies within.
As far as living on unemployment for long periods of time, I did that as a kid in the entertainment biz and found it soul crushing. Some people can and will create new ideas and companies while on unemployment, however I’m afraid a larger number will sit around the house eating Cheetos/Fritos and watching reruns of Perry Mason, Twilight Zone and Gunsmoke. Not that there’s anything wrong w that…but should this go on for too long we could expect (soon to be invented) robot overlords to take over all the fun jobs!
Oh yeah? Which site was that?
I think bc I’ve been cautious since end of 2017, and we have an older and wealthier demographic, there is relatively less consternation here.
Gotta say an interesting read…1% probability sounds about right.
I suspect the reality will be as we eventually get the virus under control, most companies will slowly bring back their most valued employees. It will take time to rebuild economic prosperity. Lots of workers will remain on UI until it runs out. The new normal will be vastly different.
So what to do if you might be one of them? This is the perfect time to educate yourself and consider new opportunities. Find something you enjoy and invigorates you. Not much to lose and everything to gain!
“Similar to Governor Gavin Newsom’s bold proclamation on March 18, 2020, that 25.5 million Californians will get coronavirus by May 14, 2020, I will make the assumption that by July 30, 2020, 110 million Americans will find themselves unemployed if lockdowns extend until then. This is a possibility since the decision of how long we should shutdown is being made entirely by extremely wealthy people who are getting paid either way.”
That number (25.5M Californians) came in a letter from Newsom to Trump, as a way of seeking more federal aid from a President who often didn’t seem take take COVID-19 too seriously. Is it your opinion that the California shelter-in place edict was placed to early? What would you have done, as Governor?
I would be more clear and honest.
I would provide 3 scenarios of the coronavirus case estimate based on what we do.
I wouldn’t just go with a MAX DOOM scenario to freak people out into control. So many people sold stock at the bottom bc of doom talk like his.
I’m sure Gavin will say it’s bc all his excellent leadership is why clothe coronavirus was mitigated instead of talk about herd immunity and other reasons.
I think Gavin has done all that you mentioned — been honest, provide range of outcomes based on how effective we are social distancing. And I like that he acted early. Preparing for the worst has helped get supplies and flatten the curve. (Full disclosure I’m a Democrat, living in CA)
It certainly is quite intriguing to think about what things would be like if unemployment got to 110 million by July. I sure hope nowhere near that many jobs are lost. The stock market’s behavior has been surprising to me throughout all of this, same with munis.
I chuckled to myself when I read the section about Gavin. It’s ridiculous what he wrote but that aside, I’m glad the reported numbers in CA are relatively low. I read an interesting article that it’s possible COVID arrived in California way before it became a pandemic based on a study at Stanford. I wouldn’t doubt it. I was sick for like a month in Jan/Feb. Who knows if I actually had it or not. Anyway, thanks for the thought provoking article!
How about the money printer going brrrr and the Feds and Treasurer becoming one department? Feds buying up everything short of each individual stock. Every bad news is met with more stimulus and more money printing to keep the market up.
Great article, Sam! This is a really interesting thought exercise. I do agree that this situation is an opportunity for everyone to rethink the way the want to live and work. I think it will have a lasting impact just like the great depression did.
Regarding the $4,200 that Californians are eligible to receive, that seems like a lot! Canada is giving those impacted by Covid-19 up to $2,000 per month and some other economic support. Unfortunately, I am not eligible for this even though I only work part-time. But I am grateful that I do still have income.
You also made other excellent points on businesses realizing they can be more profitable through a work from home workforce. It makes a lot of sense because of the efficiency and additional time it provides employees with. It’s better for everyone. My previous employer has taken their entire workforce to work from home, and my current employer initiated a small work from home team. My hope is that this trend continues. Frankly, working from home might make a lot of the FI community have less of a reason to pursue FI. I find my part-time lifestyle has had a similar effect. More freedom and more time is the ultimate luxury. Thanks for the read!
Thanks. You’re right about FI being less appealing if more can just WFH for 3-4 hours a day, spend more time with family, so more things, and still get paid the same!
Sign me up!
Unfortunately it hasn’t worked like that for everyone. I’ve been working from home for years. It’s new for most others in my company. And they are going at it from the crack of dawn to late at night, full speed. And that drags me with them. I wish these people would relax a little…
Sure, nothing works all the time. At least for you and others who are used to working from home, the lockdown isn’t as bad as what other people are used to then.
I see contradictions. For example, I see those forecasting a “devaluation of the dollar” while predicting the stock market recovery is “temporary.” I suppose you could have both, in theory, but as a practical matter devaluing the dollar should increase the nominal value of the stock market and cause inflation of other assets. Why? Because it will take “more dollars” to buy the same goods because the dollar is “devalued.”
But is it? A key problem with this dollar devaluation argument is that this is a global crisis. To that end, the IMF has pointed to the “unprecedented policy actions undertaken by central banks and governments worldwide.” If the dollar is “devalued,” against what is it devalued? Other country’s currencies, right? And, have those currencies also been supported?
Anyway, I don’t buy the devaluation argument, at least in any material long-term sense based on the current intervention in the United States.
But let’s get back to the stock market recovery. We’ve seen this a lot. The market plummets rapidly and, if it recovers quickly, people doubt the recovery. People doubted the recovery from ’09 so much that it became known as the “most hated” bull market in history, with people incorrectly predicting its fall for years. I know, I was one of them.
While I was alive in October ’87, I wasn’t trading — but I’ve read about it. The same was true then, however. While “an army of economists warned that the financial world was coming to an end,” the market made a rapid comeback–large-cap stock prices rose about 12% in 1988, and about 27% in 1989–and people doubted it.
I try to focus on the “big picture” and also think that history may not repeat, but often rhymes.
The big picture is that this is a global crisis impacting every country on Earth. The United States is the third-most populous country on Earth and among the richest. It makes sense that its economic response would be on par with its standing in the world.
This event is not the ’87 crash or the ’29 crash–both were domestic events that were predominantly caused by economic impurities and, in the case of the Depression, post-crash economic mismanagement. This is, obviously, unlike the ’02 crash too.
If anything, this event is most closely related to the global financial crisis of ’08/’09, but obviously that involved systemic, structural issues resulting in economic collapse–not an exogenous event resulting in government-imposed economic restrictions world-wide.
Why does this matter? It’s simple really. In the global financial crisis, we also had high unemployment (reminding many of the Great Depression), but it was scarier (to me anyway) because we knew many relatively high-paying, skilled jobs were simply not coming back and we didn’t know how much the Fed would involve itself. But the “disease” at that time was mostly due to fraud–so-called “liar loans” and other financial chicanery–that threatened, quite literally, the “end of the financial world.”
My view was that the problems were so widespread, so big, and so long in the making that it would take a decade to work through them. I was wrong. The Fed got involved more than anyone ever imagined (never bet against the Fed) and we recovered very quickly. Faster than most thought possible at the time.
Now, let’s turn to the current crisis. Even with staggering unemployment figures, the undeniable fact is that this is a temporary event. Even the direst predictions don’t assume this will continue, such as it is today, for more than 1 or 2 years, and those are the extreme pessimists. What’s more, there’s no reason to conclude that once-successful businesses who are able to resume operations will not re-employ all or most of their staff (notwithstanding Sam’s prediction of efficiencies and cost-cutting being recognized). In other words, as a general rule, people who were making a living in January 2020 have every reason to believe they will resume making a living again–perhaps sooner than they think–“once the swelling goes down.” Also remember, the entire world is feeling this pain and simultaneously looking for a vaccine, treatment, or cure. As I said above, don’t bet against the Fed–and never bet against science.
Back to the stock market. Remember the VIX? The “fear gauge”? Like ’08, it peaked close to 90 in March. It’s now sitting at 42–highy-elevated, to be sure, but 100%+ lower than a few weeks ago and dropping. Like it or not, the financial-storm is passing and that’s being reflected in stock prices. Could we see another swoon or “re-test”? You know the answer is “of course,” but if you’re waiting for another day where we hit ~90 on the VIX, you’ll likely need to wait until the next crisis.
My 2 cents.
Hmm- the reason that the worst case predictions haven’t (yet) come true is because of the mandatory lockdowns. If everyone returns to business as usual before we have a systematic way of dealing with new infections (or a vaccine), it will spike right back up. It’s kind of thankless job as a governor right now making these decisions. If you keep things closed and infection rates dwindle, people think you’re being overly cautious. If you open everything for business and lots of people start dying you’ll have to answer for that. The only way back I can see is if we are somehow able to do what places like South Korea did and deploy massive amounts of quick testing. And people whose jobs it is to trace new infections and alert all potentialy infected people. I just dont think we have the will or organization in this country to implement something like that unfortunately. So what will likely happen is that at some point in May people will start to return to normal. Then in July once things spike again, there will another round of lockdowns. Rinse and repeat until there’s a vaccine next year. That’s going to be very hard on everyone as well as the stock market. Looks like this is shaping up to be an experiment with universal basic income!
We all the news is going to get worse…stocks are a discounting mechanism so it doesn’t mean the markets will reflect that in RT…bottoms ALWAYS happen weeks/month before peak unemployment. we are going to get to the other side of all this ultimately…hopefully, sooner than later, and all this stimulus will be sloshing around the system…not really sure how relevant multiples are when rates are at o%…there aren’t many other shows in town. Also hard to fight the fed and an administration doing everything they can to prop markers up.
Buy and hold guy here and feel reasonably confident stocks are higher 9-18 months from now. Who knows tho, total crap shoot.
I think another reason it rallies with unemployment is because companies will automate the jobs lost and become more profitable. Every recession we shed jobs and then they don’t return, but the new jobs created take a long time to fill the gap.
I’m starting to worry as with the rates at zero they have to continue to print money to prevent the ship from sinking, essentially diluting our hard earned and saved dollar. What do you think about precious metals as a hedge for this currently. Then when real estate prices drop after the foreclosures make the switch to RE?
I’m starting to believe this rally is just a result of some positive news sprinkled here and there. We will see a major dip with earnings are realized in Q2 and Q3. That would be the time to buy. I’m thinking about selling some holdings to lock in profits and create liquidity to buy later on at lower prices.
This is kind of where I am. I should have put some money to work when the Dow broke below 19000 but I really thought we were on our way to 15000 the way things were looking at the time. If we break below 22K, I will start to leg back in. We could test the previous lows but I don’t think we will get that close unless the curve stops flattening or we try and reopen the economy too soon and have another major outbreak.
I keep looking at the map of outbreaks and noticing how dense the outbreak is in the Eastern US and how sparse it is in the Western US. Take out Seattle, LA, Denver, and SF and there has been very little impact. As the virus starts to penetrate more of the West, the numbers may go the wrong way again. Part of the issue may be that the Eastern US is also more densely populated than the West so perhaps the Western population being more spread out is definitely helping.
I think that lower earnings in Q2 and Q3 will cause the next dip too. People are hoarding money due to uncertainty in their employment if they aren’t laid off yet and people that do have money are likely waiting to purchase equities or real estate deals. There are inefficiencies when employees start WFH since they need to adjust to a new work environment and probably not as productive as they once were. Due to the lack of people spending money and companies not creating value, there will be little cash flowing to companies. The stimulus money is supposed to encourage people to keep spending like usual but I don’t know if that’ll actually happen because, at least where I live, we’re sheltered in place with not much open so can’t spend money even if we wanted to. There is lots of encouragement to support local restaurants but I know some people that still fear that the virus can exist in food so they opt to cook at home instead. It’s difficult to plan or commit to spending money on travel since we don’t know how long this virus will be around and if it goes away during the summer, will it be back in the Fall?
$600/week is pretty high, but it’s only for 4 months. People will have to go back to work at some point. It’s a good opportunity to try something new. It takes a while to start making money at a new gig so this is perfect. People are already living at the barebones condition. It’s time to try something new if you get laid off. Well, it’s tougher if you have a family.
240,000 was presented to get Trump under control. If they told him a smaller number, we’ll get the large number. Anyway, we probably have a million cases in the US already. It can blow up to 10 million easily if we open up at Easter, IMO.
Stay healthy.
You can make $4,200/month in unemployment here in California for ~10 months now. If I was making up to $120,000 gross a year and could live off $4,200/month, I would take at least 3-6 months off to heal, read, relax, and find different meanings in life.
I don’t think trump is in control now. Whoever is running Mount Weather under COG is likely the real President. Notice there isn’t a presidential seal on the podium every nite.
What planet does Sam live on?
That is an interesting thought! I’ve been trying to understand the rationale behind stock surges as unemployment claims continue to pile at a rapid pace. There are a few indicators as mentioned in your post for this phenomenon. As unemployment skyrockets, Wall Street expects a bigger Fed intervention… there is also the fact that bigger companies are also taking advantage of lower stock prices to do massive buy backs. Another interesting thing is the parallels between today’s market and the one in 2007 – 2009. I wasn’t really paying much attention then, but we can see a similar uptick by doing chart comparisons where the market saw considerable gains weeks / months after the first massive down before going massively south again and again. Any thoughts there?
I think this is a temporary rally, but also not sure the bottom will be fully tested again. The market crashed so hard so fast. Many people who bought the bottom in a lot of companies around March 23rd, have made years worth of returns in a matter of 2 weeks. There will be some profit taking and selling and rightfully so.
While what the Fed is doing is needed to help those out of work, its long term ramification are unknown. You can’t just print trillions of dollars worth of currency and not devalue it. So while earnings will be down and unemployment will be up, the market is adjusting to being supported by the fed through not only stimulus, but also adjusting to the devalued dollar by increasing share prices.
I fully believe this whole mess has much longer to unfold, if you have profits from buying the bottom, it is probably worth locking a nice chunk of those in. If you are investing for the long term in high quality companies and have the spare cash to invest, buy the down days when they return(they will at some point).
On Thursday the DOW had a hard time breaking through 24k, if it breaks and holds above 24k, I thin it can run a little longer, but don’t think it will break and hold above 25k in the near term.
Very interesting times indeed. Great time to have cash for stability and covering expenses, but also a good time to cherry pick some undervalued very well run companies(again not saying they can’t get cheaper, but good luck trying to time this volatile market). Everyone stay safe and happy investing.
24k IS A FIB LEVEL. 50%RETRACE. SCARY TO THINK IT STRUGGLED TO DO THIS WITH THE FED ANNOUNCING IT’S BUYING EVERYTHING EXCEPT STOCKS…FOR NOW.
I like how you upped your comments to all caps. Were you short this rally?
lmao! So many shorters lost their shorts last week!!
Sam,
Long time reader here. Thank you for providing thought provoking articles. You mention: “Receiving a severance package on top of unemployment bnefits” . During this time, some small and medium sized companies will not provide a severance package to those they let go. Part of the reason they are letting people go is because the company needs to preserve cash. Large organizations, such as the firms you previously worked for in financial services, may have enough capital to provide a severance, which makes sense why you made such a broad statement. Regular mom and pop businesses do not have the same cash reserves/requirements. Offering a severance package would mean laying off additional people to cover the severance. I know this for a fact since our firm (small/mid-sized), just laid people off last week without a severance and these were the trade-offs we were considering – offer a severance and layoff more people or don’t offer a severance and layoff less people.
That’s an interesting thought experiment and one that I hope doesn’t become reality! I’ve been using the extra stay at home time to think about my own website although I am still working remotely for a company as I was before the virus. Hoping to build a little side income from blogging so I can be less reliant on an employer.