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The Best of What They Said and I Read Week Ending 3/22/2020

Short excerpts from articles I found interesting.   I may not agree with the author and the following material is not intended as investment advice

  Barron’s – March 20, 2020 – Stocks Revisit 2008 Lows as Economy Looks Even Grimmer – Nicholas Jasinski

  • “…The Dow Jones Industrial Average has tumbled more than 10,000 points, or 35%, over the past month, punctuated by a nearly 3,000-point, 12.9% plunge this past Monday—second only to 1987’s Black Monday crash. The S&P 500 and Nasdaq Composite have followed a similarly steep path downward, while the more economically sensitive small-cap Russell 2000 has sold off even more. This past week alone, the Dow plummeted 4,011.64 points, or 17.3%, to 19,173.98. The S&P 500 dropped 15%, to 2,304.92, and the Nasdaq Composite fell 12.6%, to 6,879.52. Each index had its worst week since the one ended on Oct. 10, 2008.”
  •  “…The Federal Reserve is pulling out all the stops to respond and smooth out stressed markets, essentially deploying its entire 2008 financial crisis playbook in the span of a little more than two weeks. It has unveiled lending facilities for primary dealers and money-market mutual funds, and boosted the size of its daily overnight repurchase operations. And the Fed has opened dollar-swap lines with more than a dozen central banks around the world to make it easier for them to access the world’s reserve currency.”

 Barron’s – March 20, 2020 – These Stocks Just Got Cheaper – Jack Hough

  • “…When will the stock market hit bottom? The S&P 500 traded recently at 2,305. Goldman Sachs predicts a slide to 2,000 by midyear, followed by a blastoff to 3,200 by year’s end. Its model is based on the index’s valuation shriveling to barely 12 times earnings before puffing back up to over 18 times.” 
  •  “…Now the banks seem to be competing for the grossest domestic product forecast. J.P. Morgan sees GDP declining by 1.5% this year, which on its own seems OK, considering malls, restaurants, theme parks, stadiums, and theaters are sitting empty. But that figure assumes a 4% decline in the first quarter, then a 14% collapse in the second, followed by rebounds of 8% and 4% in the third and fourth quarters, respectively. Bank of America expects a slightly less dire 12% contraction during the second quarter, which will translate to a 37% earnings plunge.” 
  •  “Goldman took the bad-news lead on Friday, predicting a 24% decline in second-quarter GDP. All the banks forecast bungee-like returns to growth in the second half. That’s called a V-shaped recession, where things bounce back quickly. The other letters are worse: a U-shape, with a longer trough; a W-shape, with more than one downturn; and the feared L-shape, where growth doesn’t return to trend.”

 U.S. Global Investors - Investor Alert – March 20, 2020 – Frank Holmes 

  • “…The Fed is facing a threat that hasn’t been experienced before – a sudden collapse in corporate revenue and household income from a global pandemic. Equity markets are plunging, indicating fear of a global recession, and volatility in the bond market just hit the highest since the financial crisis. U.S. lawmakers are rushing to pass a fiscal package of as much as $1.3 trillion…Corporate share buybacks will likely come to a halt. Last week, eight major banks stopped the practice and more are expected to follow suit as companies focus more on balance sheets and supporting clients.”
  • “Are Modern Monetary Theory (MMT) supporters about to see it in practice? The idea is that countries with their own central banks don’t need to worry about budget deficits because they can just buy whatever debt the government issues. The U.S. deficit continues to skyrocket, especially after the $1.3 trillion (or more) stimulus package is released. This week the Trump administration floated the idea of a 50-year bond to finance the massive $1.3 trillion package.”
  •  “…Coronavirus bailout requests have topped $1 trillion. The National Restaurant Association wants $455 billion in industry support, while hotel and travel executives discussed a $250 billion aid package with President Donald Trump this week. Further, America’s local governments are asking the federal government for massive amounts of aid as the fallout from the coronavirus pandemic threatens to leave them contending with significant budget shortfalls.”
  •  “…The best performing major commodity for the week was coffee, which gained 12.13 percent amid fear global transport woes will limit new supply to the market. Bloomberg economists estimate that China’s back-to-work rate rose above 85 percent at the end of this week, slightly higher than the 80 to 85 percent estimate of last week. 

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