RE:Preliminary analysis done, going to sit out for now I agree with you on some of your points. We are in wait and see mode. For me that means a good time to "dollar cost average in". To each his own. On that note, I am using my disposable income to dollar cost average in.
The economy never went into complete shutdown. There is a huge difference between discretionary spending economy vs non-discretionary spending economy.
The non-discretionary is much larger than the discretionary spending economy. I agree that it will take a while for the discretionary spending economy to recover.
The economy(discretionary) is starting to re-open. This will take a while to find the best "safe" rate. We will be in a physical distancing economy for a while. This will be a ball-and-chain on the discrestionary spending economy. It is a chunk of the economy, but the smaller chunk.
The non-discretionary spending will carry the day for the next while. And I am comfortable that a larger part of the loan book will be serviced by this category. I don't buy into your 2x-10x for loan book pie in the sky number. Comes across as BS.
GLTA cept the dhorties of course.
Northforce13 wrote: Some various points:
* I Exited not long ago due to uncertainty, shares rose a bit thereafter then declined to below the exit price. I'm not going to re-enter at this time, still not enough clarity
* Great to see the posts, some nice diggin in and opinions on stuff -)
* As opposed to the 2008/2009 recession, this is more deeper. The effect of a recession that is 2x as bad might not be 2x as bad for loan books... there could be some exponential factor in there, whereby 2x as bad recession = 10x as bad effect on loan book, and so forth
* The damage is not an equal decline across the board, which would be much easier to assess and manage. So some assets will be annihilated while others are perfectly fine. This means there will be bombs going off in various areas of bank's loan books.
* Speaking of bombs going off, Equitable Group actually lost money in the quarter. The book value declined due to a 36.5 million after tax other comp loss, which isn't mentioned anywhere in their headline numbers. I haven't dug into the details of this, something to do with "cash flow hedges" and so on.
Consumers will be uncertain about the future, which should suppress spending and the economy just in itself. Companies will be similarly uncertain, plus they will get whacked with costs to comply with covid 19 operating methods, which will increase costs and increase prices of everything by some amount, which will further suppress the economy.
Consumers will have changed their habits somewhat. Like online ordering. Some of these changes will be permanent and cause some disruption in some industries.
Governments have racked up mind blowing amounts of debt, and they are still going. This could result in much higher taxation, and or high inflation.
We will know more as the big bank earnings start to hit in several weeks.
The big banks will have an additional month's worth of data, and will include April in their numbers and provisions as opposed to EQB/HCG which did not (but I think they claimed it would not change anything... though I'm not sure I trust them).
The virus is going to continue to fade slowly, particularly with summer coming along.
Conclusion: I'm going to sit and watch, I do not feel safe owning these at this time. Too many unknowns and moving parts. The last time there were cheap it was because some chicken farmer 2000 miles away was spreading lies to drive the share prices down. The companies were fine and in good shape. This time is nothing remotely resembling that.