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0 pointsajross5y ago0 comments

Maybe. Personally, I think the median investor, especially the median short term investor, tends to be more optimistic than the rational market hypothesis would argue. Information availability isn't symmetric, and the news sources favored by these people tend to paint rosier pictures of the recovery than seem likely.

I mean, one very straightforward interpretation of the headline of this linked article is that Yelp will be seeing a 30-40% shortfall in revenue for the medium term future (i.e. long enough to make the firing and hiring process worthwhile). At its worst, the market was guessing at a 38% drop in valuation, and it's now recovered significantly from that.

My guess, and no I'm not buying puts to test it, is that we're going to see another series of shocks to the market when the revenue numbers start being reported and the big employers start running out of money and shutting things down.

Right now the immediate job losses are all in the service sector and small employers, and those jobs are basically invisible to your typical trader bro.

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enraged_camel5y ago

I agree. For example, we have just started to see only some of the second-order effects, as a huge number of people missed their April rent payments, and mortgage default rates started to shoot upwards. Consumer spending is similarly tanking; people can't buy the newest iPhones when they don't have jobs.

I think Q1 numbers will start to shake people out of their optimism. We'll see.

bhupy5y ago

> Right now the immediate job losses are all in the service sector and small employers, and those jobs are basically invisible to your typical trader bro.

Most of this activity is driven by robotic trades by institutional investors. It's largely quantitative. Whether the quantitative priors are accurate, is debatable.

ajrossOP5y ago

I don't buy that. Objective quantitative analysis based on models that don't know about the pandemic should be pricing in a disastrous 30% unemployment, and clearly the market is not.

I'm not in the industry, but I have to believe the quants are doing what all of us are: they're throwing out the models, rewriting stuff where possible, but basically just guessing like the rest of us. And that process is a victim of their own subjectivity. And this is not just a demographic well-positioned to have a good, objective understanding of epidemiology.

Basically that's just a long winded way to say: wall street isn't looking at this correctly and is going to be surprised when quarterly results don't show the recovery they're expecting.

bhupy5y ago

> Objective quantitative analysis based on models that don't know about the pandemic should be pricing in a disastrous 30% unemployment, and clearly the market is not.

That's not necessarily true. First of all, 30% unemployment, while a big scary unprecedented number, represents the expected outcome of the official policy of all governments (Federal & State) , which is forced unemployment. The CARES stimulus includes a $600/week unemployment insurance _on top of_ the existing state UI. In every state, the unemployment benefit is actually higher than the median wage [1]. Businesses know this, and proactively lay off / furlough their employees so that they may collect this benefit, with the intention of having them be first-in-line for re-hiring once this all passes. The other half of the CARES stimulus includes forgivable loans to businesses with the hope that those loans can keep businesses afloat so that they may be in a position to re-hire once this all passes. Put simply, because half the stimulus is in the form of direct insurance payments to people, and unemployment is the means of receiving that, you will see high unemployment numbers. Not only is this expected, it is intended.

All this being said, it's still not certain that many of these businesses will be able to survive even with the loans/stimulus, nobody knows for sure. The market doesn't price in the scary 30% unemployment number, it prices in the expectation that this number will fall back to usual levels by next year.

The grandparent comment asked why the Dow increased today, and it's because the Fed announced $2.3T in new small-business loans, which slightly increases the percentage of businesses that may be able to weather this storm.

[1] https://imgur.com/a/AifRmdD

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0 pointsajross5y ago0 comments

Right now the immediate job losses are all in the service sector and small employers, and those jobs are basically invisible to your typical trader bro.

0 comments

enraged_camel5y ago

I think Q1 numbers will start to shake people out of their optimism. We'll see.

bhupy5y ago

> Right now the immediate job losses are all in the service sector and small employers, and those jobs are basically invisible to your typical trader bro.

Most of this activity is driven by robotic trades by institutional investors. It's largely quantitative. Whether the quantitative priors are accurate, is debatable.

ajrossOP5y ago

I don't buy that. Objective quantitative analysis based on models that don't know about the pandemic should be pricing in a disastrous 30% unemployment, and clearly the market is not.

Basically that's just a long winded way to say: wall street isn't looking at this correctly and is going to be surprised when quarterly results don't show the recovery they're expecting.

bhupy5y ago

> Objective quantitative analysis based on models that don't know about the pandemic should be pricing in a disastrous 30% unemployment, and clearly the market is not.

[1] https://imgur.com/a/AifRmdD

j / k navigate · click thread line to collapse