"Between Meals" - April 10, 2020

[Bob cruise director]

On shore. And hungry. I hesitate to say too much more for fear of spoilers, but I have not enjoyed this particular item before. I'm debating with myself whether it's worth risking an excursion to correct that...

And thank you to Joe Ross and spotter for the new and improved grid approach!

forums/viewtopic.php?f=18&t=135&start=100#p17360

I did not solve this meta as quickly as many others seemed to. Reworking the puzzle usually helps me, and this template made that much easier to do.

As you well know, this is like golf - time does not matter.

[TPS]

And for Dow Jones or any other brilliant person, can you explain to me why the market is going up when unemployment is skyrocketing and multiple industries (airlines, restaurants, motels, energy, vacations) are on the ropes.

Valuations are calculated by discounting future cash flows. So the market is forward looking. (The Dow Jones is not the most accurate way to explain but it is the simplest to do so at a high level). The DJ declined from around 30k to 19k and has now rebounded back up to ~23k. So it is still down ~20% from the highs.

To get to valuation you have to look at the numerator (future cash flows) / and the denominator (the discount rate). So two things have happened the Fed has slashed the Fed Funds rates and money has flocked into treasuries - that means bond yields are low and are likely to stay ow for the foreseeable future - thus the denominator has gone down.

Also, expectations of future cash flows have like improved from the "doomsday" scenario many people were predicting two weeks ago.

So predictions for the numerator have likely gone up and predictions for the denominator have gone down - thus valuations look more attractive and people buy stocks. But valuations are only as good as the assumptions used to create them - so could the market turn around and crash another 20% - sure if there was a catalyst that results in a reduction of estimates for future cash flows. But for right now many people think a 20% decline from the highs in a zero interest rate environment with tons of liquidity represents a buying opportunity.

Hope that helps.

[Bob cruise director]

And for Dow Jones or any other brilliant person, can you explain to me why the market is going up when unemployment is skyrocketing and multiple industries (airlines, restaurants, motels, energy, vacations) are on the ropes.

Valuations are calculated by discounting future cash flows. So the market is forward looking. (The Dow Jones is not the most accurate way to explain but it is the simplest to do so at a high level). The DJ declined from around 30k to 19k and has now rebounded back up to ~23k. So it is still down ~20% from the highs.

To get to valuation you have to look at the numerator (future cash flows) / and the denominator (the discount rate). So two things have happened the Fed has slashed the Fed Funds rates and money has flocked into treasuries - that means bond yields are low and are likely to stay ow for the foreseeable future - thus the denominator has gone down.

Also, expectations of future cash flows have like improved from the "doomsday" scenario many people were predicting two weeks ago.

So predictions for the numerator have likely gone up and predictions for the denominator have gone down - thus valuations look more attractive and people buy stocks. But valuations are only as good as the assumptions used to create them - so could the market turn around and crash another 20% - sure if there was a catalyst that results in a reduction of estimates for future cash flows. But for right now many people think a 20% decline from the highs in a zero interest rate environment with tons of liquidity represents a buying opportunity.

Hope that helps.

But the future cash flows for most of the companies is negative as they have no bookings or sales for the next six months or more. No one is buying anything or planning anything for a variety or reasons (no job, fear of travel, fear of getting sick or losing their job so they are putting off real estate purchase or car purchase). and many of these companies took on debt as the interest rates are low and the have payments coming due and no cash to pay them. Although the doomsday scenario is less, consumer confidence is extremely low right now.

[Bird Lives]

I'm guessing that some of the early solvers are not correct...

What makes you think that?

Just a hunch. Some of these folks are pretty fast.

Mike M (?) used to have a Monday post giving the stats on right and wrong submissions and listing some of the more popular wrong answers. Is he still doing that?

[michaelm]

Finally, the AHA.
On Shore.
RIP John Prine.
Enjoy that vodka and ginger ale.

[flyingMoose]

What makes you think that?

Just a hunch. Some of these folks are pretty fast.

Mike M (?) used to have a Monday post giving the stats on right and wrong submissions and listing some of the more popular wrong answers. Is he still doing that?

Yes, but with WSJ most recently working from home, these may drift to Tuesday.

For Look Inside, see #342
forums/viewtopic.php?f=5&t=345&start=340

For What Not To Do, see #399
forums/viewtopic.php?f=5&t=339&start=380

fM

[jenirvin]

On shore! Now to go grab lunch. Hm... what to have...???

[TPS]

But the future cash flows for most of the companies is negative as they have no bookings or sales for the next six months or more. No one is buying anything or planning anything for a variety or reasons (no job, fear of travel, fear of getting sick or losing their job so they are putting off real estate purchase or car purchase). and many of these companies took on debt as the interest rates are low and the have payments coming due and no cash to pay them. Although the doomsday scenario is less, consumer confidence is extremely low right now.

Most companies are evaluated on out year EPS, EBITDA, and/or CF so public equities were already probably trading off of 2021 multiple and some analysts were even using 2022 estimates. Many are expecting that there will be pent up demand when the economy reopens and that there will actually be a boom because people have been forced to curtail their spending. Lots of people are working from home and people on SS are still getting their checks but they aren't spending money on gas, eating out, trips, shopping and that when the economy reopens those people tired of being cooped up will go out and spend and do things. I am not saying they are going to be right but that is what the market is currently pricing in.

[billkatz]

I made it ashore - I was trying to make this too complicated.

[Bob cruise director]

What makes you think that?

Just a hunch. Some of these folks are pretty fast.

Mike M (?) used to have a Monday post giving the stats on right and wrong submissions and listing some of the more popular wrong answers. Is he still doing that?

Yes but it has been coming out on Tuesday and abbreviated as everyone is working remotely. (no idea how you put a paper together remotely)

[billkatz]

tax law is the crazy place these days, particularly with the 880 page CARES Act and the changes it threw at us, plus three (really, more than three) IRS Notices about the tax deadline.

If you want to know more about 2019 taxes, google "IRS Notice 2020-23". It was issued at approximately 5 pm Central today, making even more changes to the 4/15 deadline (hint - it's pretty much all due 7/15 now).

Regards,
Tom
(CPA & Attorney, head of a trust company tax dept here in STL)

Does that mean that the June estimates are no longer due before the April estimates?
My wife is an estate planning/estate tax attorney, and had to go in to the office last week as estate tax deadlines were not changed, and the IRS does not accept them electronically. I understand it all fit in one box.

[Bob cruise director]

Speaking of sandwiches, another interesting discussion is what you call the ends of a loaf of bread

[Big Mac]

Newbie on shore and submitted. Been doing these for the last few months and this forum has been quite helpful. It’s now a Friday morning ritual!

[ky-mike]

Speaking of sandwiches, another interesting discussion is what you call the ends of a loaf of bread

I've always called them heels. Do you have another name for them?

[SewYoung]

Speaking of sandwiches, another interesting discussion is what you call the ends of a loaf of bread

When I was a kid, when referring to sliced sandwich bread from the grocery store, we just called them the end pieces. And when removing slices from the bag, we reached past the end piece and pulled out the next slice so that the end piece kept the next piece from drying out so fast. (That and nobody wanted the end piece for their sandwich.) Now when I get down to eating the end pieces for a sandwich, I make the sandwich " inside out" so that you don't really see that you are eating the end pieces.
When I make bread (not very often), I call the ends "heels".

[boharr]

Speaking of sandwiches, another interesting discussion is what you call the ends of a loaf of bread

I've always called them heels. Do you have another name for them?

HEELS. A meta I actually got!

[Frenchy]

On shore! This one was fun for a newbie like me

[Frenchy]

Speaking of sandwiches, another interesting discussion is what you call the ends of a loaf of bread

We always called them butts

[Al Sisti]

Speaking of sandwiches, another interesting discussion is what you call the ends of a loaf of bread

When I was a kid, when referring to sliced sandwich bread from the grocery store, we just called them the end pieces. And when removing slices from the bag, we reached past the end piece and pulled out the next slice so that the end piece kept the next piece from drying out so fast. (That and nobody wanted the end piece for their sandwich.) Now when I get down to eating the end pieces for a sandwich, I make the sandwich " inside out" so that you don't really see that you are eating the end pieces.
When I make bread (not very often), I call the ends "heels".

I was always fine with making a sandwich with only the two crusts/ends/heels... that is, until it dawned on me that one of them had been handled 20 times.

[TPS]

I feel like Monte Cristos are best made w/ heels for whatever reason. Man now I want a Bennigans MC!