Dow still tanking daily.
Sub 15k, Olympics are about to be cancelled, that's gonna hurt a lot of people. Airlines might not get bailed out. There's a lot of irrepareble damage going on.
I actually don’t think it goes THAT much lower. The Fed is pumping an absolutely ungodly amount of liquidity into the system (they have a literally said they will print money if it comes to that) and between that and expected $2 trillion fiscal stimulus, this country is about to be awash in capital. That means asset price inflation all over again. Don’t panic. Sit tight and ignore it if you have to.
Because manufactured inflation has ever turned out well in the history of currency-based economies...
This makes me really, really, angry, even though I work in banking and it's to my benefit.
The Fed has has been feeding the market cocaine for way too long. They should have let rates continue to go up when the DOW was on the rise.
If you need interest rates below 2%, your economy is not healthy, regardless of what the market does.
I agree with you. I wish the Fed would have raised rates at a sustainable pace. To me it feels like they were quick to jack them up and now they got hacked down to almost nothing, and there’s nowhere to go.
There's always negative rates
We really need to stop conflating "the economy" with the DJIA. They are two separate things. The Dow is a good indicator of how much excess wealth the wealthy have and how effective our corporations are at making money. It doesn't speak at all to a very large portion of the population who have no money in stocks.
Yes and when the day the market bounces back we'll hear how great the economy is doing even though millions of people never recovered. Sounds kind of familiar.
The Fed’s current steps aren’t even lines of cocaine. This is straight up mainlining heroin with enough cash left over for an army of Russian hookers to pee on you.
Plus, Mnuchin is about to get a no-strings-attached half trillion slush fund to do anything he likes with. Think that’s going to get to working people? From THIS guy?
But yeah, gonna juice the Dow, which was the OPs question.
Careful with your metaphors here, cocaine is a stimulant while heroin is a depressant thus they produce opposite effects. From the context, I feel like you are trying to use mainlining heroin as a more extreme version of doing lines of coke, but I suppose you could also be saying that pumping in loads of cash into the economy will have an overall depressive effect rather than a stimulating effect.
if it’s the first case then maybe choose the more extreme case to be something like sticking your face into the fog of a kilo of fuming meth then inhaling for a full five minutes.
And by the Fed's current steps you mean the Fed since at least September 2008 when Quantitative Easing started.
This. Everything. Though, as a PM for a family office, I thrive off of volatility. I was eating doo doo for the past 8 months, trying to scalp writing VXX calls. Very dangerous. But since the flood gates opened on 2/24, it’s been easy going.
Although there hasn’t been a capitulation and volume spike yet, my feel tells me the bottoming process has begun. Trading patterns changed 7 sessions ago. That’s when institutional buying seeped in for the first time since the selloff began. Stocks are pretty fairly valued right now. Some are very attractive, actually. If you have cash and time, you can basically open up the WSJ and throw darts at it and buy what it lands on and be a winner in 2 years.
There will be big rips higher, but a proper bottom will have to pull in all the eager longs then force them to puke 'em into the real low.
Hatter I've got a question for you. Why do think my tax-free bond funds getting obliterated while my taxable bond funds are posting gains?
I mean don't understand why the market is treating each of them so differently.
I'll hang up and listen.
Tax free bonds are usually municipal bonds, and cities everywhere are about to be in a world of financial hurt when local tax collections collapse. All those idled businesses aren't generating tax revenue. And if people are working from home they're not paying city income taxes either.
Although the Fed said they're going to start buying some muni bonds, but I don't think they have started yet.
Was thinking this while sitting in the Taco Bell drive through yesterday. One huge shitload of sales taxes these states and counties are not collecting.
When your national debt is as high as ours, paying low interest is essential.
Totally agree. One of the many reasons For low rates is the feds balance sheet and 20 Trillion in debt (soon to be more).
prior to the pandemic 1/3 of all debt in the world has negative rates.
March 23rd, 2020 at 10:39 PM ^
Buddy of mine is pretty close to the top at a large bank and he says every time the lending rate goes down a quarter point he loses $40 Million. I don’t know the inputs, but it seems counterintuitive.
March 23rd, 2020 at 11:27 PM ^
That was always the main complaint I heard the past couple of years, that if you kept rates artificially low just to goose the numbers you had one less tool to help spur it on in the event there was a slowdown.
Its not going to bottom out until some reliable data comes back in a couple of weeks regarding the effects of the shutdown.
It’s a good time to grab a bargain. Before you tell me the sky is falling, see 2009.
The worst four words in investing are
“This Time It’s Different”
Ever seen an historical graph of the Nikkei?
Yes, but i really think the S&P is a better benchmark that tracks what you actually own. You have a valid point, but I think our markets have been tested by much worse than this and have come out fine.
DOW 15000.
I have a decent understanding of how the markets work. but, can someone who knows tell me why they just haven't halted trading for an extended period, maybe a few weeks? It seems like they could even make the case that it's a health hazard to have all the traders on the floor (of course it is primarily automated now anyway).
I don't want to create false market conditions but it seems like something that could go a long way in calming panic about the virus and the economy.
Markets gotta be open to create the impression that you can it and sell whenever you want. If it closes for a few weeks nobody would ever buy again because they would fear being stuck and unable to sell. They won’t even close the markets for a day, a few weeks are out of the question.
Yes this. Explain this for me too. I’m clueless to anything other than blindly throwing money at my 403(b).
Why can’t we press pause... All take an extended vacation ..and come back in a month...
It would be kind of like closing all the banks, stocks are assets and have a cash value. When that happened in the Great Depression it created chaos. You can’t just tell people hey I know this is your money but you can’t have it right now, maybe later if we feel generous. Unfortunately it is what it is. Thinking outside the box, and I have no clue how difficult this would be, but what if you stopped the automated bots from making thousands of transactions a second. That would prevent runs that trip the circuit breaker.
Is anyone still willing to argue with a straight face that we have capitalism in this country? The Fed's actions alone are China-esq. And round two of bailouts coming for businesses.
I'm not against bailing out businesses per se (but not so they can fatten executive comp and share buybacks), but I think it's a joke when something like universal healthcare is proposed and it's denounced as socialism. So we are OK bailing out profiteers encountering pandemics, housing crises, etc., but not a person battling ALS? It's gross. It's like a regressive socialism.
It’s called crony capitalism.
Only the losses are socialized. The profits are still private, because Freedom.
We could have had funded universal health insurance for the amount of money we are about to dump on corona virus after effects. It is quite sad. Just think about never having to worry about getting sick and wondering where you are going to get the money to pay for the treatment.
Or you know, the Iraq war. Late stage capitalism is in its death-throws. The New Deal was how FDR prevented the guillotines coming out. I don’t see any FDRs around.
Not quite. Medicare for All is estimated to cost $32-34 trillion over 10 years.
https://khn.org/news/does-medicare-for-all-cost-more-than-the-entire-budget-biden-says-so-but-numbers-say-no/
March 23rd, 2020 at 10:00 PM ^
Medicare for All is not the same as universal health coverage, but rather it's the most expensive possible version of universal health coverage. Other universal health coverages (like the rest of the industrialized world use) include some out of pocket expenses and often modest premiums (both of which Medicare has, too) in addition to the government subsidies. The problem with calling Bernie's plan MFA is that it's more generous than even how the current Medicare for Some works.
OK, his is the most publicized and easy to understand plan. What is the plan that would be an equivalent cost to the relief bill being argued about now?
I do give Bernie credit for acknowledging that his plan would necessarily require a middle class tax increase.
Yea, but spending all that on UHC, we’d still have this predicament, and even bigger debt.
I assume 15-16k, followed by a lot of volatility, then a big spike by end of year into next year. I’ve actually weathered the storm ok, I’ve got a lot of stock in AMZN, my employer. High risk strategy, but I believe in the company’s fundamentals and leadership. I haven’t been able to touch the stock due to insider trading policy, so just hoping to ride it out until next trading window. I’ll sell a decent chunk then, and invest back in some S&P indices, which are hopefully ripe for growth in a couple months time. We will see then. So much uncertainty right now.
FWIW I was positioned at 50% equities, 48% bonds and 2% cash up to a week ago Thursday (March 11th). At that time the Dow was at 2200ish and I liquidated my Vanguard 500 index fund and my high yield junk bond fund to cash so I know sit 45% cash, 30% tax-free bond funds and 25% individual, mostly large cap US company, equities.
I think the Dow bottoms out around 14-15,000. When it hits that I'll move my cash position back into the market but until then I'm riding this one out where I am.
Timing bottoms is notoriously tough; at what point will get back in if starts to go back up?
Read this on timing the bottom; I found it very interesting. IMO start dollar cost averaging your cash positions over the next 3 months. Figure you have 60 trading days...just buy back 1/60 each day until you're done.
https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-cost-averaging/
Pretty low.
It'll rebound when there's a sign that things are turning around. Right now nobody knows when things will restart, and the market is responding to that fear.
When the unemployment and quarterly GDP numbers come out for this year, if there isn't already a clear move toward improvement, that's when it will bottom out. Because those numbers are going to be really, really bad.
The thing that worries me, in the medium to long term, is how this is going to change work and spending patterns. Especially if we try to get business moving again too quickly.
Are employees currently working from home going to want to go back to a crowded office building before there's a vaccine if it's still circulating? What about large crowds and sporting events? Will fewer people be willing to eat at crowded restaurants and bars?
So many unknowns.
Two aspects of this, both real:
1. Someone who is now pinching pennies to not lose their house will not suddenly be flush with cash to spend at restaurants and malls when they are open again.
2. Someone whose job calls them back, while Covid-19 is still out there and still pretty bad, is not going to feel comfortable with life-as-it-was for a while.
The unique aspects of what I do mean that, other than our church services Sunday, I'm still out and about as much as I was before. But I'm never closer than 6 feet to other people, because that's pretty easy here. Nobody is. We stand back waiting for other people to get shopping carts, or to take a product from the shelf.
That's not going to change if the mall reopens.
It's possible that things have basically burned out by fall, in which case maaaaybe people are willing to go to games again. But if there's still coronavirus in low circulation, not so bad to close things but enough that there continue to be flare-ups here and there and deaths, that will make people leery of, say, joining 100,000 of their closest friends at a football game.
Especially if money is tight. How many people will think, "better be safe anyway, not worth spending x dollars for tickets this year" and just skip out on football games?
Even in the best scenarios, we're going to feel the effects of this for a long time.
I predict 15,000. The market has been heavily inflated since QE started and it’s time to return to sanity.
FWIW I think it's a mistake to draw conclusions about other issues because the market is down; there's a fair amount of "this is why I was always right" from multiple political positions these days, and it's both unseemly and silly. The market isn't crashing because it's artificially inflated, it's crashing because the economy has ground to a total halt and people are freely using the "D" word and they're not just prepper types. We haven't seen a shock to the national and world economies like this since WWII ended. That is, quite literally, a lifetime.
The market is absolutely overvalued due to government intervention and any honest finance guy will tell you that. I’m not a finance professor, but I am a business school professor who’s pretty up on this stuff.
You’re a good poster, but you’re way out of your depth here.
Yes to this and everyone else who has made crack cocaine and heroin analogies. Not to mention that the cost of just about everything has skyrocketed. Everyone brags about their low mortgage rates...which are more than offset by the artificially high cost of a home.
I'm not commenting for or against the issue; I'm warning against bringing it (or any other "normal" issue) into the current argument at all. It may be true that it was overvalued, but that does not explain the kind of fall that is currently occurring in any way. I mean, I've been expecting a serious correction for some time, because I also thought it was overvalued. But this is not a correction, and it's not just a bear market. This is a once-in-a-lifetime disruption of the world economy. It doesn't fit neatly into pre-existing narratives.
Now, it may be that a "saner" fiscal policy will wind up in place at the end of this, but right now things are so upside down that "normal rules" just aren't going to apply for a while. Right now, no one has any idea how long this will last or how big the fallout will be. Once we get a feel for that, the picture will be clearer, and questions about what the Fed should be doing on the longer term become much more pertinent.