zalo

Cheapest Valuations in Decades Will Trump Panic Selling

Valuations are extremely cheap, even for a massive correction of earnings. The problem is that as fear continues, what was not real could actually become self fulfilling. But i think that the governments have intervened timely and aggresively to stop this armaggedon of becoming true by recapitalizing and backing banks. So, without a systemic risk in hands, governments can focus on rebuilding credit, even if it is necessary to do it with their own hands. For the sake of corporations and consumers, it doesn´t matter from whom they get the credit as long as they receive them. For governments, it is also important to keep the economy up and running.
So, even though we are still headed towards a strong recession, the kind of stock price crash that we had is more representative of a complete economic meltdown, which is, by the minute, reducing its probability of occuring. Even for cyclical industries like commodities producers, i think that as there was probably a bubble some months ago, now we are seeing the opposite. Nothing has changed fundamentally regarding the extreme tightness in demand and supply.