It’s hard to deny, although some do, that the stock market, pre-coronavirus, was pushing the limits of what it means to be in a bubble.
Of course, bubbles come and go, but as Hofstra University’s Jean-Paul Rodrigue suggests, this one had a particularly fierce tailwind.
“Although manias and bubbles have taken place many times before in history...” he once wrote, “central banks appear to make matters worse by providing too much credit and being unable or unwilling to stop the process with things are getting out of control.”
Rodrigue explained that bubbles unfold in stages, an observation backed by 500 years of economic history. “Each mania is obviously different,” he said. “But there are always similarities.”
His concept of the bubble has been passed around finance circles for years. Most recently, John Hussman of Hussman Investment Trust used Rodrigue’s chart to warn investors of what’s to come: Read more...
The Small Business Administration issued new guidance on Thursday making it less likely that big publicly traded companies can access the next round of funding for the U.S. government's small business relief program. It also stepped up pressure on public companies that have tapped funds to return the money.
The update comes after a public furor that large companies tapped the facility, known as the Paycheck Protection Program, for hundreds of millions of dollars in loans while thousands of small businesses have yet to receive funding.
Companies applying for the coronavirus relief funds must certify that the loans are necessary and that they cannot tap other sources of money, the SBA said. By definition, public companies have access to the capital markets. For instance, Shake Shack said it returned the $10 million it got through the PPP after it sold $150 million in new shares.
"Borrowers still must certify in good faith that their PPP loan request is necessary," the SBA said. "It is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification."
The change comes as a second round of funding for PPP, after the initial $350 billion was depleted last week, is set to be approved by lawmakers later Thursday. The program is set to get $310 billion in fresh funds, and industry executives have said that even this amount will likely last only days. There is no guarantee that lawmakers will approve more money for the program after that. While the spirit of the PPP, a key component of the Trump administration's $2 trillion-plus economic response to the coronavirus pandemic, was to help small businesses, the rules during the program's initial round allowed large restaurant and hotel companies to apply for loans of up to $10 million.
When that happened, and companies including Ruth's Chris Steakhouse and Potbelly Sandwich Shop were revealed to have used the program, small business owners became incensed. Read more...
We ran out of money in just about two weeks after opening the Small Business Administration's (SBA's) $350 billion lending facility under the CARES Act. Several small businesses, especially the ones without existing business ties with the banks, could not get any funds under this program.
This happened at a time when there is an unprecedented level of liquidity in our financial system: The U.S. Treasury and the Federal Reserve Bank have committed more than $6 trillion in the last few weeks to help our economy.
Their policy interventions are covering practically all critical parts of the financial market: treasury bonds, commercial papers, muni-bonds, mortgage-backed security, and several other credit markets. In an economic system with so much liquidity, why are small businesses struggling to get even a penny? The answer lies in the banker's incentives to lend.
We need a better system that addresses these incentive issues, not merely more funds. Read more....
Upon hearing initial reports of novel coronavirus cases in the Wuhan province of China earlier this year, Kurt Seidensticker quickly got to work. The founder and CEO of collagen supplement maker Vital Proteins put an emergency response taskforce in place, and later, as state-wide shutdowns began to take place, shuttered corporate offices and shifted the Chicago-based company from a five-day production schedule to a four-day.
At the same time, the company saw a more than 50% increase in demand for its suite of 250 products, including powders, shots, capsules and protein bars.
“If you think about everything that is going on right now [as a result of COVID-19], people are less distracted with in-person meetings and work. At the same time, they are also worried about their health,” Seidensticker says. “We’re estimating to ship 1.7 million products just this month and have also seen a 38% uptick in our subscription service.
Several weeks ago—seemingly ages before the coronavirus outbreak shuttered concerts, sporting events and much of the world economy—this baseball-obsessed Forbes writer found an unusual birthday present from a colleague among his unread emails: a video message from one of the better pitchers in the major leagues.
“This is Shane Bieber of the Cleveland Indians, but more importantly, this is Shane Bieber of my man Paul’s fantasy team—Paul, good s*** putting together that roster,” said the 24-year-old righty. “The only thing I gotta say is, I’m hearing my man Zack traded away Mike Trout. … What are we doing, bro? Read more...
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