Economic Market Instability 2020
09/29/20 • 17 min
The year 2020 has been crazy all on its own without talking about the economy or financial markets. There have been a lot of warning signs above and beyond the common sense. What's common sense about an economic crisis coming? Well think about the definition of GDP...which is Gross Domestic Production. That's the amount of output from people work. If a larger portion of society is unemployed due to Covid then GDP will naturally fall. One of the issues is that data including GDP takes time to be reported. There is also the domino effect where a small group of people are unemployed which leads to less consumption which leads to more people being laid off to less consumption and the cycle continues until we can some how stabilize the process. Sometime jobs come back from a potential solution to Covid or at least a way to slow it down like wearing masks. Either way we'll see a drop in GRP which also effects other economic factors like unemployment, the stock market, and interest rates.
Now banks are issuing extensions to customers who can't make their mortgage, credit card, or auto payment which is a really nice thing to do. However the issue is the banks need to get paid to remain stable themselves. They can float the debt over short term shocks however from the length of time that Covid has hit the world this looks like it will have long-term effects. Banks need to be tightening credit which means making less loans to risky people.
A few market indicators are that used car values are increasing as less people are buying new cars and are instead buying a cheaper version (used) and gold and silver prices have jumped a lot. I'm not a big fan of following the crowd however Ray Dalio and Warren Buffet have also been making moves to hedge for a market crisis such as selling bank stocks and buying precious metal (gold and silver stocks).
It's a good idea for people to increase their savings as a way to prepare for bad times.
WARNING:
I am not a financial advisor and nothing in this podcast should be taken as financial advise. This is simply a discussion of what is going on from my perspective, meaning these are my opinions!
Video Version:
https://www.youtube.com/c/DimitriBianco
Support the podcast:
https://ko-fi.com/fancyquant
The year 2020 has been crazy all on its own without talking about the economy or financial markets. There have been a lot of warning signs above and beyond the common sense. What's common sense about an economic crisis coming? Well think about the definition of GDP...which is Gross Domestic Production. That's the amount of output from people work. If a larger portion of society is unemployed due to Covid then GDP will naturally fall. One of the issues is that data including GDP takes time to be reported. There is also the domino effect where a small group of people are unemployed which leads to less consumption which leads to more people being laid off to less consumption and the cycle continues until we can some how stabilize the process. Sometime jobs come back from a potential solution to Covid or at least a way to slow it down like wearing masks. Either way we'll see a drop in GRP which also effects other economic factors like unemployment, the stock market, and interest rates.
Now banks are issuing extensions to customers who can't make their mortgage, credit card, or auto payment which is a really nice thing to do. However the issue is the banks need to get paid to remain stable themselves. They can float the debt over short term shocks however from the length of time that Covid has hit the world this looks like it will have long-term effects. Banks need to be tightening credit which means making less loans to risky people.
A few market indicators are that used car values are increasing as less people are buying new cars and are instead buying a cheaper version (used) and gold and silver prices have jumped a lot. I'm not a big fan of following the crowd however Ray Dalio and Warren Buffet have also been making moves to hedge for a market crisis such as selling bank stocks and buying precious metal (gold and silver stocks).
It's a good idea for people to increase their savings as a way to prepare for bad times.
WARNING:
I am not a financial advisor and nothing in this podcast should be taken as financial advise. This is simply a discussion of what is going on from my perspective, meaning these are my opinions!
Video Version:
https://www.youtube.com/c/DimitriBianco
Support the podcast:
https://ko-fi.com/fancyquant
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