Coronavirus: when do we reach the bottom of the dip?

It shouldn’t, did I ever say it should? You picked an argument with a guy who is against bailouts. I just pointed out that a lot of this help which is labelled as “help for the companies” is actually help for the employees.

But also don’t forget that right now businesses are in trouble not because of their poor management, but because they are forbidden to operate.

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That wasn’t my intention at all. When I used the word “you” I was not referring specifically to you @Bojack but to “you” like in general… Reading again my reply indeed seems aimed at you, so sorry for the confusion :innocent:

This is indeed a compelling argument, that I didn’t consider

In case there are still ppl that didn’t comprehend why the WTI front month future contract made this historical drop in price, here’s an interesting and spot on analogy:

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This analogy is broken. I appreciate the humor, but it fails to explain why you couldn’t cancel the “service” and why the pimp was ready to pay the clients.

Let me try: imagine you love giving people haircuts, you just can’t stop. Normally you can fill your schedule without a problem and people will even pay you. But now with social distancing, nobody wants or is allowed to come. You look with terror into your schedule to find that it’s empty for tomorrow. So you lower your price, then you offer haircuts for free, but still no takers. That’s how it is to be an oil producer with oil popping out of the ground and you needing to find buyers.

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But who is so much into (unable to stop) giving haircuts, of all things?

Now, if you‘d solely replaced the word „haircuts“ in this…

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People who are addicted, or have some mental disorder. I tried to find a simple example of a supply that cannot be reduced short term, while not being vulgar :slight_smile: . I know, my attempt wasn’t the best either.

I guess, if I were to show what went down on a supply/demand chart (short term):


Long term negative price makes no sense, supply is 0, demand is infinite.

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People buying stuff they don’t understand

I think some people will not be happy when oil price goes up and their ETF doesn’t follow :laughing:

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I really enjoyed the new video from Ben Felix. Really gives you food for thought

The quote from Buffett tells you that when you want to time the market, you need to guess two things: 1. how bad will the news be 2. how bad does the market already expect them to be

The studies that show that stock market and GDP growth are NEGATIVELY correlated.

The fact, that you, as an investor, are interested in earnings per share and NOT the growth of the whole stock market. Stock market can grow by new companies joining, new stock being issued, which does not increase earnings per share.

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I explained a bit this problem in a post called commodity anyone

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I’ve been listening to their podcasts recently, quite interesting as well.

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Great if you can’t get enough from him :smiley:

Actually I beg to differ. You either didn’t fully comprehend what actually has happened with the WTI May contract or you didn’t understand the analogy.
So let’s break it down:
‘you’ - is the long contract holder (speculators, day traders, moms and pops, muppets etc.)
‘commitment to receive escort service in 15 days’ - WTI May deliverable contract
‘someone / Everyone is with their respective girlfriends’ - other traders / long contract holders
‘pimp’s house/brothel’ - Cushing, Oklahoma, the delivery point for the WTI contract

Well, it’s implied by the fact that your girlfriend stays home and you cannot have the call girl come over as it’ll get you in trouble (i.e. suffer great costs). As the contract is deliverable, you cannot cancel it without incurring costs (you can see this as the pimp coming over and kicking your ass, or, if the pimp has more class, he will sue you and then you’ll still have to pay up and your gf will find out eventually about your secret deal) so you prefer to pay someone else to take it off your hands.

This point I don’t understand where you took it from, which leads me to my initial conclusion…

Your analogy only works on the customer side. It fails to explain the producer side. Oil producers keep pumping oil from the ground, because it’s dangerous/expensive to stop. They need someone to take it from them.

The price crash happened not only because of reselling on the secondary market. Oil producers issuing new contracts also contributed. So, coming back to your example, I don’t see why a pimp/escort would offer to pay a customer for the service. For this you need supply that is price-insensitive.

That video is quite unbelievable and it’s a good reminder that you can time the market only if you are consistently lucky

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This was never my intention. The analogy I posted was explaining only why prices for the WTI futures contract went into negative territory for the first time in history.

Here you’re touching on a point which to me clearly demonstrates that you don’t fully comprehend how the WTI future contract works…

on a more recent news:

What you failed to understand is the Oil company make a contract to the first buyer. They will deliver oil for say 20 USD. The first buyer gives the oil company 20$. The first buyer now understand the demand is low so he sells his contract to an other trader for 10 USD. The second buyer now doesn’t want (and never wanted ) the oil delivered in front of his house. Because he would need to get money somewhere and rent a big place for 50$ for a total of 4 months. So he prefers to sell his contract for -40$ than needing 50$ to keep the oil.

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On the other hand it doesn’t hurt to follow the other macro trends. (and understand how complex this all is - and to not even try to endeavour in (short-term) market timing :grin:)

Just found this Swedish Investor guy recently, boils down some investing/financial books to short interesting videos. :slight_smile:

SP500 future still positive, so probably already expected.

I wonder what the total amount will be by summer, 50-60 million jobs lost?