Member Info for Nash2020

The real pandemic starts the day lockdown ends. The coronavirus is a crisis of math. The coronavirus is an easy problem to solve…if we understood exponentials. Unfortunately, the human mind is incapable of grasping exponentials. We cannot intuitively perceive how a small number can grow so large in such a small amount of time.
A parable is relevant at this point. A king wanted to reward the inventor of chess and asked him to name his prize. “I want you to fill up the entire chess board with wheat. One grain of wheat on the first square, 2 grains on the next square, double that on the next square for 4 grains, 8, 16, 32 and thus fill up the entire chess board,“ said the inventor.

At first, the king was offended, and thought his paltry request was a joke, but the inventor of chess was serious. So, the king told his servants to fill up the chess board. The servants came back and told the king that it couldn’t be done. They had used up the entire wheat stock of the kingdom. There was no more left to continue to fill the chess board. Just the last square alone on the board would require 9 trillion grains of wheat.

Just like the king in this story, every world leader has been fooled by a small number of coronavirus cases and the power of exponential growth.

We are accusing China for hiding the exact number of cases. But the important aspect is that 80,000 cases in two months should have been enough for us to wake up to the scary reality of this exponential growth. Despite seeing the data, the world leaders did nothing. Some basic math around the virus:
Starting from the first locally transmitted case in the US on February 26, 15 cases have grown to ~460,000 cases (April 9th) in only 6 weeks, in spite of lockdown measures being taken all over the country. On April 8, there were 31,000 new cases. Yesterday, there were 34,000 more new cases. And today, there will be even more.

There is no current indicator that the virus’s exponential growth will stop. Our current lockdown measures have slowed the rate of this exponential growth. But due to the nature of exponents, decreasing the rate of exponential growth still leaves you growing exponentially, and only marginally slower.

Exponential growth can only stop if there are no more people left for the virus to infect in its environment.
There is a ~1% mortality rate for the virus in the best circumstances. Assuming our health care system can handle the influx of new cases (flatten the curve), if every US citizen got coronavirus, ~3 million people would die. Stopping exponential growth without infecting the full population requires cutting off the supply of healthy individuals that can be infected.
The incubation period of the virus is ~14 days. If everyone is in complete isolation for 4–6 weeks, the virus will disappear. Complete isolation means no going out for any reason at all. No walks, no groceries, no “essential” businesses. This has been proven successful in China.

to what level will it go down:
- test previous low
- make new low

I fully agree with not opening the establishments.

I know somebody who have not gone out from their home since mid Feb contracting COVID19. The only thing they did as per requirement was visiting the bin room and taking parcels.

The scientists found that SARS-CoV-2, the virus that causes the new disease COVID-19, was detectable in the air for up to three hours, up to four hours on copper, up to 24 hours on cardboard, and up to two to three days on plastic and stainless steel.

It is a big tussle between lives and livelihood.

What position bearish or bullish?

For the benefit of everyone I wish you are right and I am wrong in my analysis.

I am not a bearer of bad news but the below article seems realistic. In my opinion even if is true by 50% the FTSE should go down to below 5000.

https://uk.reuters.com/article/us-health-coronavirus-britain-economy/uk-economy-could-shrink-by-the-most-in-300-years-in-2020-idUKKCN21W1EQ

FTSE testing March lows is a possibility due to various factors:

- Brexit
- Low oil prices impacting lower profitability to oil companies
- Financial sector being in stress due to write offs, NPA, lower margins
- Housing sector will be badly hit due to lower earnings, loss of jobs, uncertain valuations
- Sterling weakness due to lower interest rates combined with low productivity and Brexit would reduce margins drastically

The current market strength is due to the Helicopter money ( Artificial money created by central Banks). However, once the dust settles on COVID 19 the focus will shift towards valuations.

Any market is based on demand supply. For example Oil market OPEC+ production cuts are required to stabilize price of oil at a sustainable level which would enable business feasibility. However, due to lack of demand even with a production cut the price of oil is falling.

Similarly due to uncontrollable money printing by Central Banks the markets are going up. Another reason is there are no better ROI from any business venture, savings account, Property, etc therefore everybody is investing in stocks which look cheap based on historical prices and valuations.

Lloyds like many other banks will start looking over valued at current levels once their Mortgage holidays, Car loans, Business loans being written off combined with lower margins due to the above factors is taken into consideration.

I think by 25th May latest the market will bottom out when this might reach in lower 20's.

However we are in very uncertain times and there are lot of unknown variables which will lead to fluctuations of immense proportions.

https://www.ii.co.uk/analysis-commentary/lloyds-bank-shares-cannot-afford-close-below-level-ii511310

Sharing a nice analysis of LLoyds Shares

Yes, a trading channel is formed. However it needs to go down to the base of triangle around 22p by the end of May.

In my opinion the SP is making lower tops since it broke the support around 47.

The 52 week low has been 27.70 and it's next support level is 22.89 which in my opinion will break before rebounding to 47.

The whole above process usually happens in 3 or 5 waves which involves intermediate tops and sideways movements.

My suggestion is to not to hold on to the stock but trade it on a short term basis until it reaches lower 20's.

Apologies in advance for any typos or for giving unwarranted suggestions.

This is the summary of the Hedge fund manager's interview

To gauge those valuations, Niles says he looks at a ratio of the entire stock market capitalization-to-GDP. The ratio peaked at 1.5 when the market reached all time highs in February. Now the ratio has dropped to 1.1, however it remains higher than the average of 0.8 in 1970, and is above the bottom of 0.6 hit during the financial crisis.

'Just to get to average, you would have to have the market go down 30%,' Niles says, pointing out that the ratio's denominator has not yet been adjusted to reflect the expected decline in GDP. Economists are project it may fall by as much as 20% in the second quarter.

'It is very easy to figure out the market probably goes down 30% before we're even near fair valuation.'

Please note he is referring to the US markets but than all other markets tend to follow.

Even if we take the above news with a pinch of salt we are still nowhere near the bottom.

Any idea why the link to the Youtube is getting removed

https://www.dailymail.co.uk/news/article-8180279/Investor-warned-clients-coronavirus-markets-collapse-says-stocks-arent-close-bottom.html

Sharing an interesting article from a hedge fund manager
https://www.dailymail.co.uk/news/article-8180279/Investor-warned-clients-coronavirus-markets-collapse-says-stocks-arent-close-bottom.html

If the above is true what price would Lloyds be?

Yes a trading channel is formed. However it needs to go down to the base of triangle around 22p by the end of May. With no short positions evident in Lloyds combined with the massive interest from institutions and retailers the fall would be slow.