Coronavirus/Economy/Stock Market

[Coronita]

As mentioned earlier, it seems like San Diego recreation and lesiure drivers might return sooner versus later.

https://www.sandiegouniontribune.com/sports/golf/story/2020-04-29/golf-return-coronavirus-temperature-checks-san-diego-county-wilma-wooten-lessons

[zk]

While it might be true that stocks are undervalued during crises such as this (in that their long-term value is relatively unaffected), that doesn’t change the fact that the stock market does generally go down during such times.

So, basing the below theory on actual market moves rather than market value:

The stock market has recovered a bit recently. In my pathetically-uninformed opinion, that’s because traders see the beginnings of a reopening of the economy and think that’s a trend that will continue somewhat uninterrupted. I don’t think they’re taking into account the virtually-inevitable second wave that will occur, if not this summer (due to warmer weather), then this fall.

It could also be that they’re counting on better testing and contract tracing. Obviously we should’ve had that the first time around. But we didn’t, and here we are. To count on this administration to have the testing and contact tracing necessary to withstand another wave without either massive economic interruption or unacceptable deaths is like throwing away money, if you ask me.

Or, they could be counting on the U.S. just giving up on people dying and sacrificing them for the economy. I could see that happening, unfortunately.

Or they think that herd immunity is closer than most scientists do, and that herd immunity will prevent a second wave.

Of course, they could be smart, long-term investors who understand that the effect of such a crisis on market value is relatively small. (had to throw a little humor in here.)

But I see the most likely scenario as another wave of coronavirus followed by more shutdowns followed by further drops in the stock market.

Just my 2 cents, but probably not worth even that.

[outtamojo]

Wells Fargo no longer accepting applications for home equity lines of credit.
https://www.cnbc.com/2020/04/30/wells-fargo-says-it-will-no-longer-accept-applications-for-home-equity-lines-of-credit.html

[Coronita]

yeah, actually that brings up a good point. See with all those loan forbearance, banks have a short term liquidity issue. some of them also stopped offering loans, so even if rates are low, one might find it hard to refinance. So it could be either or..try to get a loan forbearance or try to refinance but not both.

[The-Shoveler]

That was my point earlier, the Banks seem to be in a cash crunch.

Something I have not seen since 2007-8.

[ltsddd]

Didn’t all the big banks passed the stress tests a year or so ago?

[The-Shoveler]

There is stress and then there is self inflicted armageddon

[Coronita]

my understanding is that banks even as loan servicers have to deal with the shortfalls when someone takes a forbearance. And since this appears to be a free for all even for people that don’t need it, when a good percentage of the population stop making payments because they don’t have to , liquidity becomes a problem.

I think this might be why it’s also difficult to refinance right now because it appears they are capping loan applicants. And thats why I’m thinking if push comes to shove , they are somehow going to blacklist those that got a forebearance from future refinancing.. it makes sense because if the end goal is only allow X quantity of loans, all else being equal, who would you pick, someone that took a forbearance or someone that didn’t? Since most of the loans are FNMA and Freddie, they got to be keeping a record of it somewhere. And even though these forebearances aren’t going on your credit file, I wouldn’t be surprised if it come backs as one more marker to determine if they should extend a future loan to you. The sinister side of me says this would also be a clever way of locking people into a higher rate loan once rates continue to go down…since if they are going to take forebearance into consideration for future loan qualificatons, a good percentage of the population wouldn’t qualify then….I don’t think this free forebearance is really free. it’s going to come out of people’s pockets somehow at a future date. Afterall, we are talking about banks. Not Mary Poppins. It’s different for folks that really lost there job and cant make their payments because they have an immediate problem and probably not even thinking about future financing needs. But it just might be shooting oneself in the foot if you really don’t need it.

[FlyerInHi]

Banks create money so it’s not a cash crunch but rather risk management.

Last recession, bank canceled lines of credit or reduced them. That’s nothing new.

[The-Shoveler]

When Loans go bad (mortgages not paid), It most definitely causes a cash crunch.

[FlyerInHi]

I wouldn’t link forbearance to new helocs.

It’s not like banks don’t have the means to open new helocs. They are anticipating future risk because people applying for helocs now may not have jobs in the future. They don’t want unemployed people living off of credit.

[livinincali]

Let’s all think back to the subprime crisis. Early on it was no big deal it was just some dumb people that took out loans they couldn’t afford. Stock market went down a bit at first but recovered somewhat because again it was no big deal it didn’t matter those dumb asses took out bad loans. But then those dumb asses stopped paying and there was a cash crunch. Bear Streans failed Lehman failed etc. Then the market went down 80% from the highs. Employment hit 10%.

THIS TIME IT’S WORSE. GOOD LUCK TO THE STOCK MARKET. HAVE FUN RIDING IT DOWN

[scaredyclassic]

[quote=livinincali]Let’s all think back to the subprime crisis. Early on it was no big deal it was just some dumb people that took out loans they couldn’t afford. Stock market went down a bit at first but recovered somewhat because again it was no big deal it didn’t matter those dumb asses took out bad loans. But then those dumb asses stopped paying and there was a cash crunch. Bear Streans failed Lehman failed etc. Then the market went down 80% from the highs. Employment hit 10%.

THIS TIME IT’S WORSE. GOOD LUCK TO THE STOCK MARKET. HAVE FUN RIDING IT DOWN[/quote]

Because one can never tell in real time when it’s going back up, there is little choice for most … it must be ridden down

[svelte]

Here is a great take on how CV might affect the housing market.

https://www.dailykos.com/stories/2020/5/2/1942142/-As-Airbnb-income-vanishes-overextended-homeowners-struggle-to-avoid-foreclosure

I hadn’t thought of the long term impact on AirBnB, and I didn’t know many hosts owned many properties. If folks don’t start traveling soon, this is going to cause them to dump properties on the market and we all know what that does to prices. Especially in an AirBnB intensive city like San Diego.

This may get interesting.

[FlyerInHi]

[quote=svelte]Here is a great take on how CV might affect the housing market.

https://www.dailykos.com/stories/2020/5/2/1942142/-As-Airbnb-income-vanishes-overextended-homeowners-struggle-to-avoid-foreclosure

I hadn’t thought of the long term impact on AirBnB, and I didn’t know many hosts owned many properties. If folks don’t start traveling soon, this is going to cause them to dump properties on the market and we all know what that does to prices. Especially in an AirBnB intensive city like San Diego.

This may get interesting.[/quote]

I know a few landlord who would be barely cash flow positive a traditional rental income model. Those people have lost Airbnb rental and are sitting empty and transitioning back to regular rental will not help. They are in denial now, but reality with set in.

Pacific Beach will get decimated. This is when leverage comes home to roost.

[Author]

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