Since the shock-and-awe surprise rate cut, the S&P 500 has dropped 3.8%.
By Wolf Richter for WOLF STREET.
The whiplash-inducing volatility in the stock market has been quite something. Today, after a last-minute push that fizzled in the last five minutes of trading, the S&P 500 ended the day down 1.7%. By the size of recent moves, that was mild.
Over the prior four days through Thursday, the S&P 500 rose or fell over 2% each day, with two moves over 4% and two moves around 3%. These four sessions in a row of moves over 2%, up or down, had been the longest such stretch since 2011 (August 8,9,10, and 11), during the euro debt crisis. And before then, four days in a row of 2%-moves, up or down, occurred in October and November 2008, after Lehman had collapsed. Over the past 10 trading days, the S&P 500 moved over 2% in seven of them – two up, five down — and it moved by 3% or more in six of the past 10 trading days:
In the 12 years since 2008, there has not been a series of five days in a row with 2%-moves. Today almost made it to become that fifth day of 2%-moves (until the last 20 minutes), but no cigar.
And this very week, on Tuesday morning, the Fed came out with its surprise shock-and-awe 50-basis point rate cut that has triggered a huge rally in Treasury securities, with the 10-year and 30-year yields plunging to record lows. A rate cut of this type was hoped to boost stocks into the stratosphere, but the opposite happened.
On March 3, the day of that infamous cut, the S&P 500 dropped 2.8% [Stocks Sag as Fed Cures Coronavirus by Cutting Rates ½ Percentage Point]. The next day, it spiked 4.2%, but Thursday and Friday, markets came unglued again. Over the four days since the shock-and-awe rate cut, the S&P 500 has dropped 3.8%.
The S&P 500 has now declined 12.2% from its closing high 12 trading days ago. Year-to-date, the S&P 500 is down 8.0%. So that’s not a whole lot, but the way it got there, with huge drops and jumps, was a little rough. Despite the five days this week of market turmoil, up and down, in total, the S&P 500 ticked up 0.6% from the close last Friday. Those five days are the fat part in the straight line down:
A similar scenario played out in the other indices:
- The Nasdaq dropped 1.9% today, is down 4.4% year-to-date, and down 12.6% from its closing high on February 19.
- The Dow Jones Industrial Average fell 1% today, and is down 12.4% from its closing high on February 12.
- The Russell 2000 index for small capitalization stocks dropped 2% today, is down 15% from its closing high on January 16.
So just looking at the numbers, with indices down 12% to 15% from their closing highs, this selloff is nothing special. But the volatility of it, the huge moves up and down over the past two weeks have jangled some nerves.
The coronavirus-containment efforts have seriously impacted some sectors, including the entire travel sector. And the stocks of cruise ship operators and airlines have gotten totally crushed over the past two weeks.
But in terms of size – and weight in stock market indices – they pale compared to Apple, Alphabet, Microsoft, Amazon, and Facebook. The combined market capitalization of those five companies reached $5.59 trillion at the peak on February 19. The market cap of the S&P 500 is $24.4 trillion. Without these five companies, the remaining 495 or so of the S&P 500 companies had a combined market cap of around $19.5 trillion at current prices. So now I have a new index, the “S&P 5” – and it has dropped 13.3% from the peak on February 19:
In terms of the overall stock market, the standout hasn’t been the decline over the past two weeks – it’s rather mild – but the brutal volatility of it, the huge back-to-back up-and-down moves that indicate that there is more afoot than just a regular stock market correction.
The fact that this type of volatility occurred most recently during the euro debt crisis (2011) and during the US Financial Crisis (October and November 2008) is not a propitious sign.
And in terms of the Fed bailing out the stock market with further rate cuts, well, there is not all that much left to cut. Two more shock-and-awe cuts, and it’s over. The Fed has moved negative interest rates off the table, for a big reason: In countries where negative interest rates are the policy, bank stocks have gotten totally crushed and have been reduced to a tiny fraction of their pre-financial crisis peaks.
The ECB is trying to keep the Eurozone glued together, and it doesn’t care much about bank stocks. But the Fed works for the banks. The banks own the 12 regional Federal Reserve Banks, and their governors sit on the FOMC, which creates a different relationship. So the Fed isn’t going to do NIRP, because it would crush bank stocks. It might use other “tools,” but not NIRP.
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Wolf,
Did you mean native or negative in last sentence of penultimate paragraph?
Anyway, this kind of malarky is exactly why i no longer paticipate/gamble in the stock market. IMHO Las Vegas is more honest and ”level playing field.”
Clearly, big guys can get away with this kind of manipulation, while little guys doing it go to jail.
Thanks :-]
Hi Wolf.
Off-topic I know, but how much bigger is the Canadian residential real estate bubble compared with U.S. ? How much exposure do their big banks have? Will Coronavirus cause it to pop in a few months?
Thank you.
I think Vancouver and San Francisco are comparable. These things are hard to compare properly because of differences in currencies and wages. The Greater Toronto Area is a big bubble too. Other parts of Canada… it just depends. You can get good deals in Calgary for example. But it’s an oil bust town, and that’s a tough place to be, unless you’re retired.
Ditto Vintage VNvet.
And what about the currency market? Take a look at how the Euro has moved relative to the Dollar this week.
If interest rates are the, “cost of the currency” then why the Euro with negative rates is above the Dollar puzzles me.
Talk about a rigged game!
Negative interest rates are in implicit guarantee on the currency. Whenever you buy a bond with a high rate of interest in a foreign currency, you assume the currency is going to depreciate and that will compromise your profits when you repatriot. (See LTCM). EU is much better aligned on political and financial policy. The Euro was implemented to break the cycle of conflict. GWB proposed the AMERO, which was a North American currency. That might have forestalled the trade and immigration problem.
This FRED chart shows the intensity of the global panic and the likelyhood that a recovery will be highly unstable:
https://fred.stlouisfed.org/graph/?g=qirG
Thank you. This is a very good data point showing the panic.
I hope someone(s) smart figures out a solution.
Isn’t there a saying “Don’t fight the Fed” ? We’ll see if the Bear is listening or if it mauls Jerome Powell or does Jerome slay him!
Stay tuned for Bear vs Powell round 2!
Also, was wondering where the Dow 40,000 folks are…was looking forward to some insights from them and, while we’re at it, might as well include SoCalJim “pearls of wisdown” as well.
Derivatives are opaque, because we really may never know their usually-confidential terms, only the dollar amount of the losses suffered by the banks/Wall Street firms resulting from them. However, since derivatives are usually based on the happening of some financial event or the price of some commodity, and the coronavirus is throwing the prices of commodities and expected financial events off, I predict that we will later find out that the banks/Wall Street are in trouble again and are getting gigantic, secret loans from their “Fed” bank cartel, as in 2008-12.
The prior repo-market bailouts by the Fed in 2019 indicate that at least one financial/Wall Street giant may be in deep trouble. The current, unexpected events from the coronavirus might not have been beneficial to them. :-)
From what I know, as before, via quiet, untraceable talks between friends and relatives, the insiders will let their relatives/ cronies know about the looming threat. That would explain the massive sales of stocks that are still occurring and other signals of a coming recession.
A downmove of this magnitude seems rather normal but the way it happened looks like the bear took over. The volume is up on down moves what is textbook bear market behaviour.
Worse, the intervention failed after a few minutes.
The ust bond yield moved dramatically down, gold recovered the attack.
This is getting interesting.
Will the Fed fight the bear and if so how will gold react in the longer run?
Apple, Alphabet, Facebook and Microsoft seem to employ a lot of people but not in the US in terms of their market cap. The only physical US input they source is office space.
A while back I did a bit of number crunching (sorry, I don’t have my work on hand ) but as close as I could figure RV maker Winnebago employs about 48 times as many people per billion of cap.
The FAAMs preeminence in attracting investment at the expense of physical industry is part of the story of the de-industrialization of the US.
‘Boston Fed’s Rosengren Says Fed May Soon Have To Buy Stocks’
If they have to they have to but NOT the FAANGS.
Apart from Amazon the rest are not big employers in the US and buy practically nothing compared to their market cap. In terms of dollars they aren’t big employers anywhere: of the thousand dollar i-phone made in China, less than 20 dollars stays there.
Only 110 more basis points to go, until, America is officially a Banana republic.
America’s limited-resource product is the increasingly debased US Dollar.
“until, America is officially a Banana republic.”
That horse has already bolted the very genius stable.
Thomas & Idaho:. Don’t laugh but bananas are facing a new fungus that will wipe out bananas!
In the 1950s, Gros Michel bananas were wiped out by the Panama disease or banana wilt.
Today’s Cavendish bananas now face the same fate!
If so, we may soon have to stop saying “banana republic”!
‘Kumquat Republic’ has a nice ring to it.
If you look at debt to GDP, it happened long before Trump.
I can’t wait until the margin calls start.
Wolf,
How do your shorts look?
FromKS,
Pretty good. But it’s been a bumpy ride, as you can see. With this type of volatility, one day I’m hailed as a genius, the next day as a moron, the day after as a genius, and the following day as an obliterating moron :-]
Wolf,
I think this market has made all, or most of us feel moronic, it sure has made me feel that way. I’m astounded if anyone called YOU a obliterating moron!
I get several financial letters, and they all talk in a 360 degree loop, they don’t know either.
With this much confusion I still remain in cash – some may call me moronic too :) – but it’s all still here.
Regards – Martok
Cash is great until it isn’t. If the Fed can’t go NIRP it will use QE4ever destroying the dollars purchasing power slowly then suddenly. Buy some gold or silver instead. Keep only 6months of expenses in cash or equivalents tBills
Cash is trash in the doing run. Short term it’s a nice pacifier for those that don’t like the roller coaster.
@Pedro,
Are you talking about ETF’s – GLD and SLV or the physical metal itself?
Martok Physical metal if you can’t afford to lose it
Look over the past ten years, USD is holding up just fine. Ca$h is King.
@nicko2
So u think past will be prelude?
How about this kind of reversion to the mean?
Commodities / stocks ratio from 1971 to present:
https://images.app.goo.gl/KkRtrD6pGhV4xqhs8
Have the algo’s become self-aware? Is this the financial equivalent of Skynet computers launching nukes?
I don’t think it is Ma and Pa Kettle generating these moves.
I think the algo’s are geting mixed messages. From input sources like the FED and big financiers, it was and is: “stocks must go up, no matter what”. And this messages was enhanced a long time by people who didn’t want to fight the FED. But now, actual people, who are more focussed on their well being in the future, there is a different noise and it is: “sell debt, buy real goods”. And this is enhanced by the FED’s out of the blue (panic) rate cut. If there is no nice fluffy explanation for the FED’s action, something must be wrong, people deduct. Algo’s are not that smart, yet. I don’t know if algo’s are programmed to count in fraud, fear and panic. I guess for the latter there is only an off-switch.
Algos scan newsfeeds parsing keywords, not simply bids and offers, and volume. The Fed announcement was added in immediately.
Some buzz over at stocktwits that the algos are going to be reprogrammed. Software is programmed on fundamental assumptions. Some of the volatility this week was attributed to the “Biden bump”. The algos bought into the emergency rate cut, and the traders sold the news. Even an algo can be gamed.
Wolf,
You are a brilliant analyst no matter how your bets turn out in the Casino.
We all know the game is rigged so you’re braver than most for even playing this crooked game.
Wolf, I only shorted companies with chitty balance sheets (American Airlines, Whiting Petroleum, GE, Boeing and Spirit Aerosystems). I’m leverage to the max. On days where the DOW drops, I win HUGE and on days when the DOW apologizes I break even or only give back slightly.
I got bounced out on covered calls in Jan. I was disappointed in losing my positions but it was too pricey to jump back in . I started trading the SQQQ when volatility showed up. It’s been weirdly profitable. It has also given me a demented need to see your S&P 5 ( S&P 5 +TSLA is my Nasnasty 6) puke up a pile of that capitalization in the QQQ . They are tough nuts to crack and the last barrier in the way of capitulation if capitulation gets close. I am becoming Capt Ahab.
You have a busy ride because “Nothing goes to heck in a straight line”.
I read that somewhere! :-)
You have a bumpy ride because “Nothing goes to heck in a straight line”.
I read that somewhere! :-)
“How do your shorts look?”
…stained?
Hahahahahaha yes.
I don’t believe there is any margin issue. Shares to borrow are in short supply, probably due to corporations shrinking their float through buybacks. However the bear leveraged ETFs use swaps and derivatives, and the counter parties probably use futures contracts. We might get a disconnect, between physical supply and futures prices. Silver is already in backwardation, current price higher than futures contracts. Fed could put pressure on derivatives market by raising rates and crash everything:) (Fed may regret their alacrity in that emergency cut)
Rumors of empty airplanes. Another coronavirus cruise ship adrift at sea with 35 crew members showing symptoms of viral infection.
Hundreds of thousands died of the flu globally in a year. No big deal.
3000 die of coronavirus…what the heck?
What the heck, is that Covid 19 is 25X more lethal than the usual flu strains and close to 2X more lethal than the Spanish Flu. All, with no vaccine and few testing kits in the US. Plus, it is just starting to spread with suspect information. Political spin is not data. Don’t test don’t tell is no solution.
Last night I had a couple of IPA pints and about a pound of wings at the Fanny Bay Inn. Doing my bit to stay calm. Grocery stores are normal in activity and stocked with supplies on Vancouver Island. However, if someone needs a test here vthey get one and receive results in 1 hour. Infection numbers in Canada are updated regularly. Information helps keep fear at bay. Life is pretty normal here, and the important industries are preparing for a major downturn. Tourism is already dropping off big time.
I watched CGTN Chinese news in a streaming bundle. They took plasma from recovered patients and infused sick patients cutting their recovery time in half.
I have 30 days worth of food. People should self quarantine, if they are able to.. This virus left people coughing, gasping for air and killed them. Others were infected and recovered with few if any symptoms.
No it is not. Mathematical models by UK viral experts suggest an overall less than 1% death rate but of course very linked to age and co-morbity, so much lower (near zero) for the young and 8% for over 80s. You are not doing your bit to stay calm by publishing fictions.
Watching death rates, as confirmed on Johns Hopkins world map of cases/deaths/recovery, they appear to vary widely, from less than 1% to more than 4%, and I suspect that is mostly due at this point to incomplete or insufficient information.
Several friends in CA report having a severe all family ”flu” in early Feb, others in FL say the same mid to late Feb, so I suspect, due to lack of awareness and testing we are just at the beginning of this.
It also seems clear that the vast majority of people are experiencing this corona virus similar to ”common cold” type of corona virus, which has also killed millions over the years, similar to every year’s flu.
Take all reasonable precautions, including doing your best to improve your immune system with supplements, good sleep, healthy exercise if possible, etc.
In any case, rumours will not help anyone be focused on common sense prep and behaviours to prevent and cure, so try not to pay too much attention to them.
Data from S. Korea which is considered extremely trustworthy where MASS testing is occurring indicates a 0.2% to 0.4% death rate. The most likely problem with other figures is that too few people with little or no symptoms are being caught. That’s still two to four times more deadly than the seasonal flu.
SARS-CoV-2 is at least twice as communicable as the seasonal flu at the optimistic low end. It also puts ten times as many in the hospital (~15%) as the common flu (1.4% estimated in the US last season).
So, multiply the US seasonal flu figures by at least two for the number infected, by ten for the number hospitalized (which will probably overload our hospital system) and the number killed by two to four assuming the overloaded hospital system doesn’t affect that negatively which it probably will.
When this is over, China should be punished in whatever ways possible short of outright warfare because it was their early political CYA-based cover-up that enabled the massive spread in their country that then infect the world. For their violations of WTO rules they should have been ejected from that a long time ago. Let’s start with no more most favored nation status followed by ejecting them from the WTO.
The math for poltical purposes of covid19 is as follows: %(Right Wing Mortality) = #dead / Total World Population X 100 ; %(Left Wing Mortality) = #dead /#of cases X 100 . We can now talk to each other with sound bite ready analogs , RWM and LWM. I have not yet worked out the bias coefficients of the Bernie, Joe and Donald factors but , I have a Cracker Jack team of myself and my Springer Spainel working on this .
Michael Church
Not an expert, but I watched a recent Peak Prosperity Youtube. It was pointed out that mortality can be stated many ways. For instance, deaths vs population, deaths vs cases, etc. There are differing terms for mortality.
Staying calm is fine, being complacent seems dumb. I dont see how stocking up on foods you are are gonna eat anyway and avoiding crowds during an epidemic is panicking. Not testing for the virus and under-counting cases skews any related stats.
Vancouver island is full of Seniors, the epidemic will reach everywhere.
so far with 140K tests, the best data is S. Korea
mortality rate is .06…..
there are 1000’s of people who think its a mild cold…..
Amen. It is unbelievable how few persons in the USA can be tested even now, long after poorer countries have figured out how to rapidly test many thousands already.
The incompetence of this administration will result in more and more massive eruptions of coronavirus infections scattered randomly over the USA overwhelming hospitals. I think that this will trigger a wave of defaults and those defaults will trigger bank/company bankruptcies unless massive government aid is given to them as in 2008, e.g., in real estate because too many borrowers will not be able to work and will thereby not be able to keep up with loan payments.
The stock markets bull run went on for WAY too long and the fundamentals don’t support it so this isn’t being caused by the Coronavirus That’s just the icing on the cake so to speak
And there is still plenty of icing!
Marlon Brando, as Godfather Carmine, speaking to his stockbroker on the phone (in “The Freshman”):
“I don’t like it when my Kodak stock goes down. Make it go back up.”
You must be praying that the coronavirus does not abate but also that it does not get completely out of control.
A little bit of goldilocks scenario – not too hot and not too cold.
Welcome to the zombie apocalypse. No one’s in the driver’s seat anymore. Fasten your seatbelt, it’s going to be a bumpy ride.
Sydney:. Everything is OK, I just accidentally pushed the “seat ejector” button while adjusting the radio!
Hope you found a good radio station, WES, and enjoy that free-fall! Parachutes are reserved for the Wall Street Crybabies. ;-]
Something’s amiss with the other 495 or so S&P 500 companies having a combined market cap of only around $18.8 billion. Berkshire Hathaway alone has a market cap in the $500 billion neighborhood.
Think he meant 18.8 trillion.
Arrghh…Wolf secretly works for MSNBC!!!
Hahahaha caught me!
Why do you write “indices”? It’s my understanding that the correct would is “indexes” for markets.
I don’t mean for that question to come off as rude though it reads that way.
I’ve been meaning to ask for some time :D
word, not would. “Dang auto-correct!” (not). perhaps i was interloping languages again.. *le sigh*
Peoples’ language skills used to bother me. Uptalking, silly new words (woke), etc. As they say language is a fluid thing, so we have to flow with it.
@Pilgrim I refused to use “oxymoron”, and it vanished.
noname,
Both versions are legit. Mondays through Fridays, I use indices. On weekends, I let my hair down and use indexes. You will note that your spell checker accepts both.
Hi. I used the “dang auto-correct!” in regards to my error—I used “would” instead of “word”—that’s a line a lot of dopes use when they mess up.
I’ve never heard “indices” in the financial world other than here :P
Now to scroll through your weekend posts for “indexes”…can’t determine sarcasm over the Internet…
Noname:. Since there are no rules in the English language, Wolfe didn’t break any!
WES,
There are many rules in the English language. And there are even more exceptions. Which are part of the rules. And then there are many ways you can break the rules and exceptions, if you do it purposefully. Also, the English language is a living thing and grows and changes all the time, which is then incorporated into the rules and exceptions, and how you can break the rules and exceptions.
But to put this “indices” discussion to bed once and for all, here is a screenshot from my Random House Websters Unabridged Dictionary. Note both plurals are within the rules (click on the image to enlarge):
noname,
also note my reply to WES along with the screenshot from my dictionary, which shows both versions.
I’m being sarcastic about the days of the week, but I do use both versions, but not in the same article :-]
Whoever invented autocorrect can burn in hello.
I’ve been working with computers for 40 years, counting college. I resisted spell checkers until the last few years then, as I expected, when I started using them my grammar went to heck.
Just relax, and have a could one! (or a cold one!)
TBTF JPM at the discount window with its CEO breathing through a tube might make some CCP bureaucrats in FRNBY nervous about their interest rate fixing activities and whether it will amount to much of anything at all lol
Wolf,
I think you meant to say: “trillion” in this sentence…. the remaining 495 or so of the S&P 500 companies had a combined market cap of around $18.8 billion.
At least you are in the right ball park, not like the person who suggested $500M was enough to pay everyone in America $1M each…..
The state of today’s education I suppose, and fortunately, journalists have no problem with such funny math. Or I suppose the lack of education.
Corporate-controlled news media prefer spin doctors and stenographers. They risk exposure by actual journalists, especially investigative reporters, which is why they have been marginalised and mostly phased out.
That’s true, say, can I get two tens for a five?
If you don’t have it, don’t worry about it, can you lend me your credit for a few minutes, I need to get a door open.
Well observed.
The ruling elites just flaunt Gary Webb’s head on a stake as a warning to all wannabe real investigative journalists: You will be locked out, smeared and your assassination made to look like a suicide.
It’s much safer and financially rewarding to be a pretty talking head, parroting the party line.
Total market cap of S&P500~= $25T
The S&P 500 market cap is $24.4T. Minus $4.9T for the S&P 5 (GOOG, etc.) = about $19.5 trillion for the remaining 495 companies in the S&P 500. T
Which is to say, the US national debt is greater than the market capitalisation of 99% of the S&P 500 in full bubble mode.
Scary.
Next year it will be worse.
Trillion?
Yes trillions. Fixed, since I have an edit button :-]
Wolf remove my comments now that you fixed it, thanks.
Mr. Market has become manic-depressive. It’s a coping mechanism.
So, what can the Fed do?
It might use other “tools,” but not NIRP.
The Fed will have to assume more trillions in toxic financial waste, just like last time.
It’s not a permanent solution because it comes with carrying costs which make it unsustainable, so there are limits to how much waste it can assume without greatly accelerating the damage already underway. If there were any feasible alternatives you can be certain those would have been implemented. There have been none because there are none. You can convince yourself of this by noticing the Fed has been in emergency mode ever since the last meltdown and is no closer to coming up with a real solution than it was twelve years ago.
It would take forty years or more to unwind the errors of the last forty years. And that’s if the FIC would allow it, which it won’t because they will insist on the First Rule of Acquisition.
Forty years might have been enough time to transition to an economy that is sustainable and to invest in programs to prevent ecological collapse. You don’t have forty years. That crisis is already past solution. In less time than that all economic surplus, if any, will have to be devoted to coping with it, and those measures are not likely to succeed.
The rich are well aware of these facts, which is why they’re looking for places of refuge to escape the disaster.
@Unamused,
Some very good points made and agree there has been 40 years of fiscal irresponsibility, back when Pres Bush Sr called it “Voodoo Economics”.
I’m curious what you think will happen, and what “tools” the Fed have left?
I have heard by many the market will reach a core level that is lower and maintain that level, others say a epic meltdown, others say we still have a strong economy.
I’m totally undecided, however the pundits make good 360 degree cases.
The Fed already has 12 “tools” work for them :-)
I’m curious what you think will happen, and what “tools” the Fed have left?
I think the system will collapse under the weight of its own inequities, Martok, son of Urthog. Under the circumstances it’s unlikely to recover.
In 2008 the Fed was only able to kick the can down the road, as many observers have noted. They might be able to kick it a little further. It’s very unlikely there is anything the Fed could do. It’s very unlikely any solution exists at all. I’ve commissioned numerous experts to look at various issues, including economic issues. They walked away flabbergasted, every one. We futurists have been having a very bad time of it.
Prudent and judicious financial practices may have prevented the eventual collapse of the system, but too many years of entrenched destructive and predatory practices have now made that impossible. There are reasons why the motto of this blog in the recent past was “Howling About Wall Street.”
As bad as the unsustainable practices of the financial economy have been, those hardly constitute the worst problem facing the world. That would be the unsustainable practices which have put the planet on course to become uninhabitable for most of the human population, if not all. Catastrophic climate change is only one part of that. It may be possible for the hyperwealthy to preserve a few thousand when the worst happens, however remotely, but by that time they will no longer be rich, and their destiny will still be uncertain.
I used to advise people to save themselves. I don’t do that any more. Now I tell them to enjoy what they have, while they still can.
I’ve already imposed too severely on the hospitality of our gracious host, so I’m averse to repeating myself. I invite you to inspect my previous comments, like the last one I made on the previous article about Sequioa Capital.
Unamused,
The House of Martok appreciates your reply, and actually the things you pointed out is what I have been concluding will happen.
My opinion has evolved from many years of reading, researching, and listening to people who are experts in their fields, and since I have over 50 years of computer knowledge I can find the truth, interpret it, and visualize what most likely will happen.
Unfortunately I have to agree with you that this planet is unsustainable, and also the unsustainable financial decisions that began the last 40 years ago, or arguably longer when we were taken off the dollar-gold standard in ’71, has doomed any recovery.
From what I recall in 2009 the QE stimulus was a temporary measure to get the economy running, and it did, and the Fed would end that policy, and it did, followed by raising interest rates, and that’s what happened.
IMO – the economy and markets by 2016 were stabilized, – like a patient out of the critical care unit, and were on a course with interest rate hikes, and the ending of QE to recover to a normal market, without interventions.
However as we all are aware it never stopped, and the Fed is out of ammo, and the world is looking at catastrophic climate calamities. This is well documented in the Department of Defense (DoD) highest priority action plans.
Unfortunately I also have to agree that the time has come to just be happy and enjoy what we have, and the time left to each of us, and the planet. – I will read your Sequioa comments.
Regards – Martok
People I associate with scoff at even holding a couple weeks food in case Covid-19 becomes very bad. I hope they are right but I think Unamused is closer. For those with means timing is the real game, speculate and get out at the top of the ponzi-build a bunker and at least watch the sunset. Get your timing wrong or not be of means (like most of us) and its extra see you later pal.
‘Cease , Man, to weep, to mourn, to wail;
Enjoy the shining hour of sun!
We dance along Death’s icy brink,
But is the dance less full of fun?’
Sir Richard Burton (the explorer, of course, not the great actor).
Remember they said, just like a doctor, the Fed will keep on trying to save the system and keep it alive, no matter.
No amount of money can buy happiness, enough money can rent it. – Lisa_Hooker
Why is the Fed so busy managing the market? I thought their charter was to restrain inflation and unemployment. Who made them market players?
Also the FED never takes blame for inflating the balloon. I feel bad for the young traders that have never seen a bear market if we get into one. No sympathy though for the Robinhood traders that think they deserve a flawless platform for free trades. Market will have another temper-taperum when the Fed eventually hints at raising rates back once the storm clouds clear.
@ Xavier
-Sir Richard Burton (the explorer, of course, not the great actor).
Is that the one that begins something like, “From no one expect applause, do what they manhood bid thee do.”?
Gotta love Wolfstreet! Where else can you find Sir RFB readers?
More than 40 years: All this nonsense started, at the most fundamental level when Nixon and associates took USA off the gold standard, around 1974 or 5? and then they took away all the paper, called ”silver certificates” now I believe, that could actually be turned in for real money. I vaguely remember people hoarding that paper money, until the guv mint said it would stop honoring it.
IMHO, it really is fairly easy to determine that, eventually, all these kinds of paper financial structures, the basis of crony or corrupt capitalism, will come down, likely causing millions if not billions of us who are unable to feed ourselves ( AKA ourselfs, eh,LOL,) locally to perish, as it is clear from any kind of disaster event, such as earthquake, tornado, hurricane, that most cities contain enough fresh food for about 3 days, the entire supply good for 30-60 days.
Some preppers may hold out for longer with what they have stored, but those in solid community everywhere who are able to produce food locally and long term will be the only long term survivors.
Heck, even Gingrich has written or co written about this fairly clearly.
Sunday August 15, 1971 will go down in infamy as the day Nixon closed the gold window to foreign central banks. To protect the US$, US interest rates or taxes would have had to go up. But Nixon was more concerned about winning the 1972 election and got Arthur Burns to commit to a policy of easy money as a condition of nominating him in 1970 to be Federal Reserve Chairman.
Who said you cannot catch the first eighth.
If you went back to March 2009 you would see that the S&P 500 was in the 600’s. As for the S&P 5, you would be sitting on a 10 bagger in as many years.
The poor market timers have been waiting painfully for 11 years for a meaningful plunge in the S&P 500, and if and when it comes, mark my words, they will be too scared of their shadows to ever brush the cob webs off their wallets and buy something.
No, they will moan and groan in a year or two because they’ll have to pay Treasurydirect.com to park their dough.
The recent sell off in the S&P 500 is barely a blip to us long term investors.
In fact, i have barely been able to find much to buy in this sell off so far on account of the overvaluation of most issues… And it looks like this sell off may have exhausted itself this afternoon.
Stocks like Apple, Amzon and Tesla held up very well all week. It looks like they are ready to start climbing again on account of the next 75bp cut that will be unleashed to combat the virus.
I guess the cry babies always win. Ah, well, it’s forever thus.
If those poor crybabies bought gold and long term Treasuries on January 1 2000 and held them till today, they outperformed those long term investors that bought stocks.
They need to replace GE in the DJIA with TSLA.
GE was booted off the DJIA some time ago. GM was booted off a long time ago. There are no more “Generals” in the DJIA :-]
I am getting tired of defeatism. What have you done about it?
For example have you written to your Congressman about cutting subsidies to luxury cars? Have you written to your Senator telling you are tired of bailing out everything and everybody? Have you moved at least part of your savings to a bank that doesn’t treat you like a leper?
It’s very easy to say “it won’t change anything” and just lay there, but think if Mohandas Gandhi had embraced that line of thought or if Simón Bolívar had said “the Spaniards always win, it’s forever thus”.
For myself I decided long ago to be as annoying as I can be. Always write to locally elected politicians, always write to newspapers, always ask to speak with the director at the bank if I feel I am being shortchanged.
Of course I am often ignored, but do I care? They just makeme more determined in becoming even more annoying.
Try it, even if you are ignored it’s fun being athorn in the side.
“History’s shaped by those who make a stand and fight for a change. Let them know they can’t bring us down.”
-Fernanda Lira-
You’re my hero.
Defeatism is the other side of cry babies.
Their motto is blame the Fed.
Amen!
Let me add that in the USA at least, a major difference can be made at the local level, but the media has everyone mesmerized by national politics.
Missouri had a very high turnout in the presidential election of November 2016 (mid-70%), but NONE of that carried over to local elections in April 2017 (mid-10%). A good guy lost a countywide election by 29 votes out of 5000. Every votes counts locally – almost the opposite is true in statewide and national elections.
My local school district’s finances are a mystery to most residents (including some on the board.) When I ask people what they think their district spends annually, they guess half, 1, maybe up to 2 million dollars. The answer is $42 million.
There isn’t the same level of moneyed corruption, but there is a lot of waste and a lack of direction. Public input is very hard to get, and everyone complains when something blows up, but nobody ever runs for local office, even though it’s nonpartisan and a campaign can be run with almost zero money and a lot of sweat.
Heck, just getting people to attend or speak at a public meeting is hard. Trust me, as a Board member I know that people who have the courage to speak at a meeting get noticed and their case gets attention.
I doubt it. China factories are still shut down, the ships are not moving, tourism is collapsing across the world…. large events and conferences are being canceled globally. Airlines are slashing capacity, flights are half empty. These are all lagging indicators —- oh yes…and COVID-19 is just now spreading across the USA, new cases popping up everywhere — more lagging indicators. This is not a drill.
Hi, long time reader, first time poster. There’s a post on Zero Hedge talking about the possibility that Friday’s impossible melt up was a forced liquidation of a “large” player getting margin called out of a massive VIX position.
> I wanna say they were the 4th largest market maker in chicago
Sounds like a smaller player got wiped out last week the same way.
@Chalrez – I pulled the VIX chart up, sure looks like it!
https://www.zerohedge.com/markets/someone-big-was-utterly-blown-fk-out-heres-reason-behind-todays-unprecedented-vix-move
It was thes large amount of short vix holders that got marginrd out today that drove the vix, vxx, viix, tvix etc.. disproportionately higher prior to the market end of the day ramp.
The vix has been rising at a disproportionate amount the past couple of down days when compared to the market decline due to short vix margin squeezes.
It is noticeable when you look at the the past declines in December and 2008. Cutting rates worked well back in 2009.
This week,Vix owners did well, while short vix owners “stained their shorts”
I’m thinking of emailing Tom Haugh “The Chief” on the Stocks & Jocks live podcast Monday morning in Chicago to get the rest of the story on that one. He’s been down there 30+ years and knows everybody.
Does their name start ith a “C”?
Oh the suspense.
Shorting should be illegal (nothing personal, Wolf). If someone wants to bet on the numbers, that’s OK, just do it at the gambling casino across the street and stop corrupting the stock market with buying “borrowed” shares on margin and being forced to sell.
You’d love mainland China markets then!
Better to use soiled greenbacks. Use plastic risk a knock on the door if you buy too many N95 masks and too many rolls of toilet paper.
Tinfoil hat espousement.
Even if someone knocked on your door, what would/could they do? Nothing.
Better open up: finally that cheap (and probably counterfeit) Hello Kitty smartphone cover I ordered in China has finally arrived!
The U.S. frackers can’t stand $41.50 and falling oil for long. How many industries can the FED subsidies? Print baby print.
Fracking is fraudulent. It’s coming out.
and take out 10%-25% of the junk bond paper outstanding that’s directly in O&G, then there’s the “collateral” damage… need these firms and a couple more hedge funds to blow up, then ill load up on some cheap OTM options on CL futs.
No panic folks… still space for us all at the bat soup line in front of the discount window behind JPM
I’ve been buying some falling knives in the oil sector, but only the big names that will be around in 10 years. A lot of the smaller companies will go bankrupt, and when they do the oil price will rise somewhat.
Long enough time frame and you will probably make out ok. But with OPEC+ going toes up yesterday some of your paper losses could be pretty bad for a while.
Wolf – do you have any predictions when layoffs might begin? The hospitality, travel, and retail sectors would be my guess for being the most vulnerable; and really throw gas on the fire for the declining economy.
Right now, the airlines are trying to cope by working with unpaid leave, or partially paid leave, and for pilots, reduced hours. Sometime over the weekend, I will have an article from Nick Corbishley about the hotel industry in the tourist hot spots of Europe. So that will be interesting.
In terms of the startup universe, the layoffs started last year. It’s now a daily litany. But the numbers are still small (being startups), and there is still demand for tech workers by other companies.
That said, I have a friend who is a highly skilled program manager with a superb resume who lost his job (aged out), and he hasn’t found anything yet. But that may be more a problem of ageism than labor market.
Wolf, Ageism is a sharp reality here in the City of San Francisco and throughout the Bay Area.
The business model of hiring practices in SF is a Paradox: Old school mindset permeates even within the startups, showing the world its glamourous progressive independent tech movement while in collusion with the city government.
A suggestion for your friend on a handful of Remote Jobs Worksites: cloudpeeps, remote.co, the growth hub and much more
There are so many younger engineers / product managers for lower dollar.
It’s common for 50-something engineers in tech, especially high tech, to be at risk. When they get laid off they typically get a good severance in return for signing a rights waiver primarily to cover that very issue.
Lufthansa just slashed 50% of their flights.
Ageism seems to be starting at about 40 these days. At 60, I feel fortunate to have found a gig at 56.
Wolf,
This is an appropriate observation. My sister-in-law is in management at a large Canadian grocery chain. BEFORE the virus even hit, hours had been reduced for hourly paid folks, approx 10%. Management have been taking extra unpaid days off. We had an 8 month forestry strike, settled, but now barely starting up. Because of the virus, touristy folks are freaking out in BC as the cruise ship industry is collapsing. There is planning and discussion for large venue declines and cancellation. All foreign travel for spring break school trips have been canceled, trips paid for ahead of time by fund raising. And yesterday, all travel insurance operators stated that no refunds were available for trip cancellations due to Covid-19, because this is a ‘known’ event. There is an advisory out to limit all necessary travel.
Air terminals look empty.
In BC, there are now 21 cases, most linked to travel to Iran, (not China). No cases on Vancouver Island, but I was buying a replacement coffee maker yesterday (a true emergency) and at 8:00 am, a young lady ahead of me bought about $30 worth of wipes, bleach, lysol, etc. She said it was just in case of quarantine. The store was empty but she was out at opening to buy bleach.
As you know, we have always been the the gardening prep types in our house. We even save and trade our own seeds, etc. Today my wife was supposed to go to a ‘Seedy Saturday’ down island which attracts very large crowds. People trade seeds and buy stuff, eat kisok food, etc. (Hang out). Yesterday she cancelled and said, “Maybe I’ll just stay home”.
I don’t see anyway in hell Canada will not slip into recession. An OPEC agreement would help, but it looks pretty bad, actually. We were planning some Westie trips this summer through the interior and up north. Instead, we may just stay on the island and around home. Stay away from the ferries, etc. No one will be hiring unless absolutely forced to. It will be wait and see, and even after this is all over, people and business will be wary, imho.
The hit to airlines and their pilots likely will be compounded by the need for ‘currency;’ i.e. pilots need to either fly the aircraft they are type-rated in or receive equivalent training–in full-motion simulators or at least high-fidelity stationary simulators–for a minimum number of hours before they are qualified to fly passengers again. You can’t furlough a pilot for a couple months then put him/her immediately in the cockpit of a Boeing or Airbus; there will likely be some remedial training required and/or a check pilot looking over their shoulders in order to maintain safety standards (of course, the junior pilots will be the first to be furloughed). So, the airline ramp-up after the slowdown will be slow and expensive.
MCO1 (I think it’s you), seems to know the biz; please correct me if I’m off course; I’m not as familiar with Part 135 rules as Part 91.
Wolf,
Any idea how the drop in tourism might play in home prices? I was told by a realtor that there are many homes in the Seattle area that were bought to be used for Airbnb revenue.
Yes, and the Airbnb hosts have mortgages to deal with. There are many properties that have been bought exclusively to be used as vacation rentals. No rental, no income. But you still have to make the mortgage payment. So if this crisis drags out for many months, there will be a nasty shakeout on that front.
To All:
“The game’s afoot”
The new, “Great Transformation” is about to begin!
Timely observation Wolf. My gut tells me that Monday will be a market drop for the ages ! a big vix trader got hung out to dry today.
Mike:. Being Chicago, more likely was carried out on a gurney to the morgue!
Gold was up but it was a bloodbath for the gold mining stocks today. Look out below!
I just had a thought — Coronavirus targets the elderly population and infects the healthcare workers (union or non union or caregivers).
There has been a shortage of Caregivers throughout the USA for many reasons such as the lowest paid while being subjected to the mental conditions of the patient (abuse to personal hygiene). Healthcare workers are not immune to or financial stability either.
In the eyes of the ‘institutions’ — Are these healthcare workers, and caregivers on the ‘genocide’ Coronavirus list — because they have no money?
If you are not a billionaire, then you are on the list.
And remember those low paid caregivers probably don’t get sick days. Meaning they may force themselves to work when sick just to survive. Think of the disaster that will be. Of course when it happens TPTB will say no one could see it coming.
I was looking at interest rates the other day. The TIPS, the inflation protected bonds, all trade at a negative rate. Which of course is indicative that all US treasury bonds and bills trade at a negative rate when inflation is taken into account.
What they’ll do is that the printed rates will not go negative. But inflation will continue to make real rates more negative as the printed rates drop. The official inflation rate will continue to underestimate the real inflation rate, and that gap will be allowed to spread in order to increase the negative nature of real interest rates.
The Fed is world champs at lying and obfuscation. Just because they say negative rates are off the table, that in no way means they really are. They’ll just get there another way.
Besides, we’ve got a real estate developer in the White House. And every real estate developer would dream about negative interest rates as nirvana. We’re gonna have negative interest rates for awhile no matter what they say.
TIP ETF is making new highs. When the rate of inflation exceeds the equivalent fixed rate TIPs provide a nice cushion.
1) Market makers sold shares of their $1.0T club at retail prices and buyback at 20% discount, on Friday.
2) UST10 plunged to 0.7%. With billions in their pocket market makers can buy tons of guppies, paying 5% to 8% dividends, at waterfall prices. They don’t have to send the market further down.
3) Crybaby bankers borrow at one and a quarter, lend at twenty
and at 4 PM they drive a golf cart.
4) SPX ping pong will send prices above the front end of the cloud.
5) Pharma from China rotation will employ more high wages employees in US.
6) DOD budget will increase in order to create a corona task force.
7) Their special force will be authorized to stop & frisk suspicious targets in NYC
subway. If the test is positive, the scout will pull the emergency brake
and the every passenger in that car will be transported to a coronavirus cruise ship moored near Staten Island for further observations.
1) AAPL from : 327 to 256, minus 22%.
2) MSFT from : 190 to 152, minus 20%.
3) GOOGL from : 1531 to 1257, minus 17.8%.
4) AMZN is shipping goods to their prime boxed people.
The book will be written….
Forcing interest rates down to abnormal levels is stimulative ONLY in the short run. Protracted, they foment dangerous and destructive activities that are not readily detected, but build and become pent up forces for unwanted events.
Misallocation of resources, over leveraging, cross collateralization and rehypothecation schemes. Over accommodative central bankers who are bound and committed to one tact, and enter into an irreversible condition.
Some of you are not old enough to remember the reign of Paul Volcker at the Fed. I just finished my grad schooling then. I was restarting my life. Anyway, despite the interest was very high then, to fight inflation, life was much simpler.
We need to forget the Greenspan, Bernanke, and Yellen era that has brought us to this fragile system. Time to peel off the old skin and reboot. I am ready for the pain. I’ve been there, I think.
Me too, double time!
Born in 1931. Early years: Mom crying as Dad got laid off from job after job, etc. (there’s a wold of hurt in that etc., too).
But probably because of that early hurt, by the time Paul Volcker arrived, I had accumulated enough forested land too sell some timber and put the proceeds in Treasury notes via Treasury direct.
Now, it’s best to let the trees grow – accumulated wealth is better stored there.
That’s because interest rates on the Treasuries during Volcker’s time was 14 – 17%, at the same time as his policy was killing inflation, so there was actual income on savings.
Quite the opposite, today.
Amen. 16.75% mortgage in 81, wow that hurt. Yet 5 year CD’s paid 12%. Tough time with pain. Like iamafan been there and we are so conservative now I say let it all RIP. For those who have never been thru tough times – oh what it teaches.
Amen squared.
I have never forgotten being 24, 2 kids and a wife at home, laid off, and mortgage at 18%. Worked away and never missed a payment, but never forgot it.
My kids have been told the story, but until they go through their own wake up, it doesn’t mean anything. Yet, unfortunately.
Ah, that’s just a fairy tale you old geezers imagine. Everyone knows no one has ever received income from having money in bank savings.
/s
I spent 30 working years with passbook savings rates around 5%. Bought a 10 year at 15 1/2% in 1981. Then Greenspan in 2001, and the money didn’t go into productive investments, it went into residential housing. I was forceably rebooted and have been experiencing pain for the past 19 years.
Regarding STEM ageism. Turned 62 as a senior embedded systems PM (12 years with Fortune 50 company) and my job was found redundant. 20k severance for signing a 20 page agreement to take no legal action for anything. But in all-in-all a fair severance package.
Lisa:. They got me at age 47! Never worked since!
Anybody over 45 was considered old!
The people making the decisions were all in their late 20s to early 30s.
That was 19 years ago.
Have to wonder if the circle has come around for them yet?
I’ll be 57 next week. I’ve been an embedded systems programmer since 1990. It’s worked out very well for me… so far. Soon I’ll be one of the oldest engineers in the department. My days are numbered for sure.
Another Embedded Systems Programmer here….54 and still working. Biggest thing that has kept me going has been the fact that the younger generation aren’t being taught the fundamental skills needed to do embedded, so they grimace and hire the old geezers who know how to do it. I also transitioned over to contracting/consulting quite a few years ago…when companies are desperate to Get Shit Done, they suddenly stop caring how old you are.
The other important factor has been turning down the gigs that pay small money. You need to be in a position to say “No” when the money doesn’t make financial sense.
At a time when I was still paying off student loans (1975), I made one of my best arbitrage recommendations to a colleague of mine at work: Drive over to Windsor, Ontario from Dearborn, MI and buy a US$ CD at a large Canadian bank. The pickup in interest income was about 500 basis points. US bank interest rates were still regulated in those days, screwing Mom and Pop savers. Canadian banks paid market rates. I don’t remember what the minimum deposit requirement was.
re: “Regarding STEM ageism. Turned 62 as a senior embedded systems PM (12 years with Fortune 50 company) and my job was found redundant. 20k severance for signing a 20 page agreement to take no legal action for anything. But in all-in-all a fair severance package.”
Lemme guess: HPE?
Iamafan, it may go the way of deflation.
I won’t see too many folks feeling sorry for the airlines…as they have made massive profits over the past 5 years and they have acted in a collusive manner…ask anyone who travels weekly. The number of flights available has been reduced…flights are all full…at ridiculous prices. While the airlines have changed their model and can charge for all things such as baggage, fare changes, etc. to avoid taxes…the actual experience of flying is disastrous…
Airlines to introduce a new 1% user fee for keeping track of fee.
Hear, Hear!!
re: “…flights are all full…”
Well, there is an upside: Half-full aircraft pollute (almost) as much as full ones.
The markets have so much more to fall. Eleven years of moral hazard. Spx can fall 50 percent and still be in a raging bull. What goes up hard and fast falls harder and faster. Bulls and btfd will pay now. That being said shorts are struggling as well. In markets like this both sides suffer. When you have five stocks making up 40 percent of the markets you have a big problem
I think the Fed is desperate to keep the market going up. If the market starts sliding down, then all the pension funds have no where else to go to get the kind of returns they need to fund their pensions. Once pension failures start snowballing look out.
As an aside. The drop of the last few weeks was expected by some smart folks. It was a set up for a parachute trade. As much as we were prepared for it. It exceeded all expectations and shorts closed way early So due to the interference of the fed over so many years. I have to be open to the possibility that it will be different this time as what has been done to the markets over the last decade is unprecedented. There maybe no normal for sometime. All bets are off on supports.
Jerry & Co. should RAISE the rate to about 6%! Yummy! Doing this will be the “cure” for just about everything that “ails” the present whatever-you-want-to-call-it system in which a microscopic % of the pulation owns or controls the vast, vast majority of wealth and LARGE SCALE capital equipment for their very own ASTRONOMICAL profit.
To keep making the same amout of profit on “credit” cards, the banks can simply raise their interest rate from the present very reasonable 20+% to 26+%. (Don’t worry, when their cupboards and refrigerators are bare, their tanks are empty, and their children need medicine or a simple operation, desperate, panicking “consumers” will “willingly” use their cards rather than suffer the alternative.)
To keep the US’s vitally-necessary forever-wars going, Jerry will have to turn the printing presses’ speed up from Warp 1 to Warp 10. And Trump and Congress will, of course, have to cut corporate taxes dramatically.
No problem because, as we all know very well from our 24/7 brainwashing, the national debt does not really matter because “we owe it to ourselves”.
And what will “we” do with all of this new freshly-printed debt? What “we” have always done, of course. Once again with feeling, we, the people, will invest it in forever-wars “over there” and their forever-jobs “over here” to MAINTAIN the hegemony of the USD –in plainer English, to literally FORCE the rest of the world to trade these printed out of thin air USD for their REAL products, services, resources, etc.! (Those nations who have foolishly leant money to the US by buying bonds can simply pound sand. They’ll get over it, eventually. And if they don’t, we’ll have those weapon systems to “defend” ourselves, our “intersets”, our “foreign policy” and, again, the hegemony of the USD! America First!)
Boy, this economy thing is so simple.
1) Our younger generation are obese nihilist blowing their whistles with a smile. They are fake soccer refs trying to destroy things.
2) The coronavirus might be a chronic disease.
3) When the virus attack people die.
4) When a serious violence erupt, the gov take severe defensive actions,
people don’t fly and the economy dive.
5) After few month the economy recover, tourist fly and GDP rise.
6) People go back to work, buy RE, spend money in restaurants and forget about coronavirus dripping.
7) At first, it looks like the end of the world, but after a while, when few people die, becoming a way of life.
8) People will accept risk and life go on. Being boxed in, fearful, is more risky than not living a normal life.
And we can do it all with fewer old folks.
If there’s a government program I would be one. Will it be painless? Can I take twenty years appealing to SCOTUS before execution?
(-:
And we can do it all with fewer old folks.
You can’t afford me anyway.
People went on during the great depression also, just not at near the same standard of living they had previously. It is the lifestyle of living beyond their means on credit that is the anomaly, it is not sustainable, and never has been. Debt is the real crisis, the virus is only the trigger.
There is an old saying that nothing really matters, until it does, and then it matters a lot….
9) Eat and drink because tomorrow we die.
So I commended the enjoyment of life, because there is nothing better for a man under the sun than to eat and drink and be merry. Remember – Lisa_Hooker
Not really tomorrow. As of early last week, the worldwide total of deaths from the pandemic was about the same number of people here, in the U.S. , who die DAILY from self-inflicted and pleasure-seeking causes, unrelated to any disease or germs:
Some of the annual causes of deaths in the U.S.
Smoking: 480,000
Alcohol: 88,000
Homicides: 11,000
Car crashes: 40,000
Drug overdoses: 70,000
Suicide: 47,000
Obesity: 300,000
Looked at another way, with 17 deaths in the U.S. so far, it would take six months with that number of deaths each day to total the number of deaths from that list in a single day.
If the number of people who participated in those acts which led to the numbers you posted above all got Coronavirus, the death toll would be unbelievably enormous.
Do you even understand that part of these statistics?
I guess I’ll just point a gun at your head and when you complain that your life is in danger, tell you that it’s not because many more people die from lung cancer than gunshots.
The monetary base (3.4T) is declining, although Fed has added 300B since Sept (REPO) at 100B a month – leveraged, for six months. I would say they aren’t getting much for (your) their money. The stock market has lost over 6T in value by comparison. Money velocity is rolling over, at new lows. This is probably a sea change event obscured by a pandemic, and a political shakeup.
I can’t say enough about the Monetary Base because much of it was created by Q.E. anyway and stayed in the books between the Fed and the too big to fail banks. However, one thing I can say is that whatever gimmick the Fed has done since has not worked for the little guy. We have too much debt now – government, corporate, and individuals.
Another thing is, the Fed lowered the Fed Funds rate by half a percent but have not told us how they intend to increase the money supply. Maybe we have to wait for the next meeting.
And the stock market can lose as much as it wants but it ain’t part of currency or deposits. I guess stock holders can hold more cash and money supply might increase.
“However, one thing I can say is that whatever gimmick the Fed has done since has not worked for the little guy”
I’m a little guy, own a couple small businesses, invest in the S&P 500 Index and other index funds, own some real estate, and I have done very well and continue to do very well thank you very much. I work hard however, and I don’t blame the Fed or anyone else when things don’t go well. What is happening now is unfortunate, but there will be opportunities, and those opportunities will be risky and require hard work. Always been this way. Keep your eyes and your heart open. This unfortunate event has created a lot of positive opportunities. I’m working on one now.
Okay we put the “wealth effect” on the shelf. Direct stimulus for consumers might be in the pipeline, tax holidays. These kind of market events tend to be good for minimum wage earners. I think that is what ‘Keepcalm’ is saying. Money supply is not as critical as velocity, and Fed should probably HIKE rates here, to cut off the derivatives spigot. Deflation is bad for consumer sales, people wait until prices are lower. Inflation would light a fire under spending. This is premised on the corr of rate hikes and inflation which at present is not what Fed believes. Volcker busted double digit inflation by pulling rates even with CPI, it should work the other way as well.
It appears the plunge protection team is back trying in vain to stop this correction and finding they do not have enough ammunition to do it. This virus is starting to gain momentum and the panic that will accompany it will force mass liquidations. No intervention will stop the correction this time. The myth the Fed is all powerful is about to be disproved.
JDog:. The last time I saw the PPT, they were in a bar on 5th avenue, being merry!
It’s not so much ppt. I too closed my s&p shorts left ndx shorts opened on friday, because nobody wants to be caught in a nasty surprise on weekends. It happened last friday as well. Some shorts began to close some positions, (leveraged short term ones), other shorts who entered late covered, some bid came in and we had a 15min rally and finally someone levered to infinity got caught on the wrong side of vix and went tits up. A normal day at work as they say. But something else far more disturbing than this has come to my attention hence my first post. Bottom picking. This disgusting practice is the underlying cause of many ruined marriages. Be careful, stay sane, and wear a mask. Good 3 of the morning btw, from China.
1) The coronavirus challenge our top scientist to develop a first prototype defense. New future models, more effective, will be in the pipeline later on.
2) Our top R&D labs are super busy to find a quick solution against this deadly threat. Their effort will last years.
3) College kids in the labs and high school grads will production millions of kits.
4) Pharma from China will rotate back to US and employ high wage employees in the thousands.
5) Codvid-19 supply disruption from China will force our co to build new plants as soon as they can.
6) Tariff will protect the national infant industries, because its an emergency.
7) Europe messy NR will cave US yield curve down.
8) Industrial Capex will benefit from above zero rates.
9) Covid-19 dripping will fill the local newspapers obituary section in the back.
10) When out of control deadly violence erupt, more people will die, the rest will duck.
11) Covid-19 might be a chronic that will go on for years. It will not be contained.
12) Its a low level guerrilla war. The gov will do what they can. The gov will tightening their grip and fist. But between deadly flairs, life will go on as usual.
13) Eat & drink, because tomorrow we die. Our GDP & DOW…will fly.
The primary dealer weekly inventory for >7yrs to <=11yrs, fell to a low of only $107 million, from $9.491 billion just 2 weeks ago.
They made a killing with drop of the 10Y yield (price went up accordingly).
I truly believe that the fed does not care if the US stock market goes down. It only cares that the US stock market does not go down first/alone.
If the world is @#$%ed in equal measure that is fine.
The world is about to be @#$%ed in equal measure.
Credit markets have been contracting since the last week in February. That is why you are getting the shakes and the out of nowhere rate cut. This will force down bankruptcies and liquidations to the weak hands first(frackers and CRE, which has a Chinese component to it).
Capitalism is the debt based system. Always has been, always will be. The easier it is for debt to produce growth, the easier it is grow without debt. Too many Rockefeller inspired ‘Austrian’ and ‘Glibertarians’ on this site would be destroyed when their liquidation undermines the foundation of capitalism itself. Usury is usury and boy you 2 dips love the usury. Simply put, there is nothing to invest in that the market see’s as worthy to invest in that will produce growth easy. So you get the consumer debt overload and central banks figuring out how to keep the party going before breadlines and supply lines being undercutting the hope of capitalism’s future). There is no other industrial revolution out there.
Debt levels rise and fall with the long term business cycle. The level of debt both at the consumer level and business has not been this high since before the Great Depression. The two periods are very similar in many respects. The 1920’s were a time of unprecedented growth in consumer debt as “installment loans” were the vehicle by which industry could induce people to purchase all the wonders of the industrial age. RE values skyrocketed and people financed everything from new cars, to radios and kitchen appliances. People were buying new homes and remodeling older homes to retrofit the new conveniences of indoor plumbing and electricity. Both the consumer and the business sector got themselves into an unsustainable level of debt and the entire system collapsed. Sound familiar? Following the Great Depression, people had a different view concerning debt, and tried to avoid it as much as possible. Now their grandchildren seem destined to relearn the lessons of the past….
In other news retail sales excluding auto should be good this qtr with all the sheep buying toilet paper and lysol….
fear is selling,
Lets add some things up here
S Korea has best stats to calculate
150K tests
18 deaths
.05 mortality rate
cd,
Make sure you’ll read my article about auto sales in the first quarter. I’ll post it in early April. The auto industry is the industry I follow more closely than any other, having working in it for a long time.
If you read any of my prior articles on the auto industry, you will know that the biggest automakers except Toyota no longer release monthly delivery data. If you read about monthly delivery data, they’re estimates by the media. Reality shows up in early April.
So here is the thing: the people that are panic-paying toilet paper, they’re NOT buying ANY big-ticket items, including cars and houses, because they’re WORRIED, and people who’re WORRIED, don’t buy new cars.
So you’ll get the answer in less than a month right here, in detail. From what I hear from my dealer friends, it’s not going to look very good.
cd,
March 6 LA Times article says S Korea has 6,767 positive for COVID-19 and 44 deaths for a 0.65% fatality rate.
This compares to a death rate of 0.1% for influenza in the US
The US currently has 19 deaths for 464 cases. That is a 4% death rate.
The US response to COVID-19 has been totally irresponsible, still in complete denial and totally lying with both eyes closed about the case rate. Despite a promise by the VP with the Judy Dench helmet hair to have 1.5 million test kits out soon, few tests have been run so far.
A March 6 article in The Atlantic said that they could only verify that some 1,895 people total had been tested so far in the US. This is a great article to read to see just how badly the COVID-19 response in the United States has been mangled so far, especially compared to S Korea.
California and Washington state are far out in front in developing their own testing kits in their own state labs, and will this week start having the ability to test thousands of people a day. That great Republican State of Texas, the second most populous state in the country, only has the ability to test 30 patients a day. Many states, have similar or even lower numbers of testing ability. Many states (especially those run by Republicans) are not even reporting how many positive COVID-19 cases they have.
The CDC is quite capable of bungling an epidemic all by itself. My personal experience as a budding young physician in the 1980s with the irresponsible and politically correct way that the CDC completely botched the public health response to the AIDS epidemic in the US is quite similar.
However, in this case, the CDC appears to also have been locked down in an obvious effort by Trump to keep the total reported public numbers of COVID-19 super low so the almighty stock market and economy do not tank and jeopardize his chances for re-election (they are both well on their way to tanking anyway, and he WILL get the blame for sure, no matter what Faux NotNews says).
Early on, the CDC refused to give tests to anybody who did not meet ultra strict criteria for testing, not even to a nurse who developed symptoms of COVID-19 who had been treating a COVID-19 patient.
The CDC currently does not even report the correct numbers of total COVID-19 cases, as it only reports those cases that it has tested, and excludes the state reported tests.
Dead COVID-19 patients are a bit harder to cover up, although I’m sure with the homeless and uninsured rates in this country (especially in anti-Obamacare Republican Texas, the leader among states in the United States in the total percentage of uninsured patients), many people with COVID-19 will just up and die and never get tested.
So, the full truth may never come out, but I do expect that the final numbers for COVID-19, when more people are actually tested will show lower fatality rates than 4%, probably not as good as those in S Korea, which is really sad and shows you just how far the Orange One has destroyed this great country of ours in just a brief three years.
Today at the White House, Trump minions are mostly concerned with image damage control. Most of the rest of the foot soldiers are probably, sort of, concerning themselves with, like actually, public health (i.e. our lives) . But someone is almost certainly watching the Fed and preparing to tell them to lower rates some more, even to ZIRP or NIRP. Stay tuned for further developments.
Looking forward to that article. What is Tesla like in its delivery data transparency?
I have an idea that could be a bigger hit than Dancing With Stars, or whatever it is called.
My show would be based on unwinding massive accounting frauds dumbed down to 97 IQ that admittedly is exclusionary to a large portion of our Diverse population.
People that are passingly familiar with arithmetic will get some hearty mirth and find out just how screwed up the “Economy” really is. It will have to be independently produced in some place such as Hattiesburg, Mississippi because Hollywood wouldn’t touch it because of religious themes.
Great idea!
Suggest you bring onstage a few of us old fossils to tell how it used to be …
We could also help the media folks with their arithmetic.
https://legalinsurrection.com/2020/03/nyt-editor-and-brian-williams-fail-at-math-on-bloomberg-spending/
Mr. Blakeslee, I have seen that so that is why my new show idea on Control Frauds have to be made far away into flyover country as they would be poorly reviewed by those on the coasts blessed with the mathematical tools to interpret what’s goin’ now baby.
The Coasters would use their math knowledge that we rubes are not privy to, to justify anything that we expose on the New Show.
It would not be a show for big brains on Wall Street on Silicon valley but might be a hit for those that can run a gas station in the black.
Good analysis concerning the Fed Mr. Richter. I totally agree with you. Here’s a link from Mr. Mason that is interesting.
https://seekingalpha.com/article/4330291-federal-reserve-watch-fed-adding-bank-reserves-to-support-rate-cut?utm_medium=email&utm_source=seeking_alpha&mail_subject=john-m-mason-federal-reserve-watch-fed-adding-bank-reserves-to-support-rate-cut&utm_campaign=rta-author-article&utm_content=link-1