On the one hand we have those who believe in the Apocalypse, the desperate. On the other hand, there are those who think that this is no problem and that this is just a passing situation. Where's the truth then? Nobody knows, but probably in the middle...? So let's see: We are really experiencing a kind of sanitary and economic catastrophe of biblical proportions that may become part of the history books very soon. Here's my opinion and it is just an opinion, ok? I will try to talk about some facts. Doubt almost everything that appears in the media. It's almost all fake news, misinformation. These are the ones we should be afraid of and keep our distance from in most cases. Even I am a victim sometimes of that cancer. First of all, we already know the behavior and rules that we now have to follow: hygiene, social distance, responsibility, confinement. A vaccine takes about 10 years to develop. They say there is a possibility that in less than 2 years you can get one. However, the virus will not end, it can only attenuate and the vaccine will only be a prevention, especially for groups at risk. I'm not even going to discuss whether it's a good deal, a China deal, as we say in Europe ... Life will gradually have to return to a controlled normality. This virus will not disappear overnight. Yes, I believe, it will continue, maybe come back and we will have to learn to live with him, as well as others that may arise. This #coronavirus has an exponential, logistical and linear regression component that cannot be ignored. Many people do not know that they are infected and the growth rate of infected people is around 15% a day. So for now, STAY HOME! In reality, we don't even know the true numbers of those infected or cured. In economic terms, we are in an unprecedented crisis in which it is necessary to GIVE MONEY to people. GIVE it! In my humble opinion, so many banks have been helped, so it is now time for them to help people and governments to forgive debt.
There are already people going hungry and without money to pay bills, unemployed and with more debts to pay. A dangerous spiral that will end social revolts that are very difficult to control, because if you lack money to eat and live, there is no way to control it. It is not enough to insure part of the salary, because in most cases it was no longer enough, now it will be less.
The US dollar went up, but losses from other currencies went down by at least 40% and in some cases 50%, they say...
The Startup bubble is bursting. Startups have also opened up everywhere. The bubble grew. It all seemed so easy. Imagine a stacked deck of cards trying to build a structure of apparent strength that everyone knew was fragile and that now collapses at once.
All markets began to fall dramatically and general panic ensued. Everything is trying to find safer assets. The dollar is in high demand or so-called short-term paper. Of course, there were some attentive people who would even be waiting for this moment of Crash to earn some money. However, no one expected such a sudden and drastic pandemic - The logic of the Black Swan, by Nassin Nicholas Taleb. Therefore, the most attentive and prepared are now looking for a quick recovery. Those that are too leveraged may lose margin, given that markets have previously risen. In a state of leverage, what happens is that the debt at this point is greater than your investment as well as the value of what you borrowed from the funds to invest. The shares lost 40 or 50% of their initial value. The investor's assets lost margin and value. These actions are now below the required safety maintenance margin. This means that these investors will now have to invest even more, put more money in assets to cover that maintenance margin, those that have and that can (which is the market value of securities x maintenance margin - I think 25%? - to correct this deficiency). This seems to be happening since last February - after several Circuit Brakers. Yes, like a sudden power outage and everything goes black. The interest rate of American pension funds was low and many bought shares to stimulate the economy. They even bought many Junk Bonds from Startups like Netflix or others, thinking that they became creditors of that company. But we must not forget that our monthly fees do not cover the debts of these companies. They are likely to fall to the point of being bought at a very low price by their competitors such as Disney and Amazon and thus there is less of a competitor on the market. All the dependents of this artistic world who depend on continuous investment in projects, are now in shifting waters and at risk of sinking. I'm sorry because I'm a Netflix fan and I hope it won't be like this, but that is another story...
We are in a global liquidity crisis. We return to the Law of Supply and Demand.
The dollar is expensive and those who want it have to pay, because the value of money is determined by market laws.
Right now, it's more like that situation: - I have dollars. How much are you willing to pay for them? This is it! All sectors in general, all of us, are having trouble paying our debts, we need money. Whoever has gold, silver, among others, is not with that they will pay food and wages now. It will save for later and monetize. But this is the long term.
In the short and medium term, how will you pay? With money. If everything stopped, there is no cash flow, daily, monthly rents.
No more rent, no more money! Never forget: Cash is King! Those who invested in Real Estate now have an opportunity to acquire cash flow with their monthly rent. This situation of devaluation of companies inevitably results in radical cost cuts, reduction of jobs and wages. But it is still not enough. Loans or asset sales are then used to guarantee liquidity. Prices fall.
There is now more stock for sale than for purchase.
People will buy the essentials and save money.
Valuation is a concept and varies. Today what counts is not the same as tomorrow. And the positions of each employee of these companies that do not generate value for them, will be quickly forgotten, because for a company to be efficient, every cent counts. They will be fired, not being essential. This is going to happen a little bit everywhere, except for some essential sectors that have been revealed in this crisis. The markets have stopped growing. Only the best, the most competent and the best prepared will be hired. So, study, prepare and specialize! There has to be injection of money in companies, but not only, also in people to buy and balance, to have consumption, money has to turn.
Otherwise, everything will close: factories, companies in general, and unemployment will skyrocket. A snowball thickened all the time without limits until it burst, Tower of Babel effect - a Depression. I pray it doesn't happen. We need serious politicians, more and more. You will now have the only chance of your life to prove your competence and the True Sense of State. In short, the market always has space for competent and prepared people, because they will make a difference in the result that companies want to achieve. Only companies with good foundations and well-structured will survive. This is the Age of Market Correction. Capitalism ended in 2008.