[HN Gopher] Dow Falls 2997 points worst drop since 1987 crash
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Dow Falls 2997 points worst drop since 1987 crash
Author : blackhat2017
Score : 279 points
Date : 2020-03-16 20:21 UTC (2 hours ago)
(HTM) web link (www.mortgagerateguru.com)
(TXT) w3m dump (www.mortgagerateguru.com)
| visualstudio wrote:
| Dumb question. Why can't they just turn off all stock markets for
| a month?
| dmitrygr wrote:
| Announcing that will cause a panic the size of which you cannot
| imagine!
| Der_Einzige wrote:
| They may end up doing that to prevent a collapse. They also ban
| short selling sometimes even if the stock market is kept open.
| jacquesm wrote:
| It will just make things _much_ worse. Without a liquid
| market for stocks, no matter how bad the whole economy would
| grind to a halt at some point. Though we 're a long time away
| from the next IPO (by my guess) as long as there are buyers
| the market should stay open because that will allow a lot of
| entities to fulfill their obligations. If you close that
| avenue off there will be a severe knock-on effect from
| institutional investors that suddenly find themselves without
| liquidity. That's a scenario that I'd rather not contemplate.
|
| The 'no buyers' scenario in fact did play out two weeks ago,
| there were 1.8 million shares of Shell for sale on the
| Amsterdam exchange without buyers. Shares to be sold without
| reserve, and yet, no buyers. It took a long time to fill
| those orders and that's why Shell did not have a price on the
| board during that time. Never, ever, happened before.
| nodesocket wrote:
| That would cause severe pressure on other financial
| institutions and invoke immense panic.
| dougmwne wrote:
| But what if I need money for food and rent but my emergency
| fund runs out? If I own stock but cannot sell it that would be
| a bad thing, right?
| seanmcdirmid wrote:
| That is sort of like turning off a heart rate monitor during a
| heart attack.
| hyperion2010 wrote:
| The same reason why not testing for the virus doesn't stop its
| spread. Markets can spread psychological panic very quickly,
| but a lot of the short term behavior here is based on very
| short term bets about what other people are going to do on
| average. Give the market a month to integrate some information
| that is relevant over slightly longer timescales and we'll see
| where it thinks we are.
| jacquesm wrote:
| Only if you want to re-enact 1929 for real.
| kilroy123 wrote:
| I think that's a fair question. We have actually done this
| before when World War 1 started.
|
| https://en.wikipedia.org/wiki/New_York_Stock_Exchange#20th_c...
|
| I think doing so now would be a massive disaster as it would
| cause extreme panic.
| generalpass wrote:
| There are many institutional investors such as pension funds
| and insurance companies (whatever they call their holdings)
| that rely on returns from things like stocks.
|
| Since they wouldn't be able to sell stocks, they would start
| selling everything else they've invested in.
|
| Same would go for anyone else requiring cash.
|
| Then everyone holding the other stuff that is liquid, will sell
| it because why hold onto a plummeting asset when the only
| reason to own it is the value?
| jfengel wrote:
| If you think people are worried when stock prices are falling,
| imagine what happens when they all go to zero. That's what
| happens when you close the markets: stocks can't be sold and
| thus have an effective value of zero.
|
| Much of the fall so far is bringing prices back to reasonable
| levels after a record-setting bull market. Not that that's
| especially fun news; between that and a genuine recession
| coming up, a lot of people will lose a lot of money. But it
| means that, as scary as this is, it may also be necessary, and
| even beneficial. (In the "long run", that is, and in the "big
| picture". Still sucks for a whooooole lot of people for a very
| long time.)
| dictatorsunion wrote:
| I don't understand why people are catching a falling knife. It is
| as though they have never been in bear markets before. Understand
| the market psychology and don't waste your money. I have friends
| who DCA-ed and regret because it took them years just to
| breakeven.
|
| In a standard fear cycle (Google it), we are only at the middle
| stage between denial and fear. There is an acceleration downwards
| that we have not experienced yet (Crypto 2018 and China 2015 are
| good examples if you want to look back at recent history). Wait
| for that to happen first. You also can feel the time to buy when
| people are very distraught and demoralized by the endless drops.
| Twitter activity will change a lot, trust me.
|
| A good way to read when to buy is, aside from seeing that
| everyone is completely mentally exhausted and demoralized, is
| that the VIX is around 30% and dropping, and distribution is over
| with accumulation channels being formed, which is when multiple
| supports are being built. This is when bulls and bears are in
| equilibrium, with bears quite exhausted but still exuberant. If
| you want better certainty, at least wait for the stock you want
| to buy to cross the 200 SMA, because it is a good indicator that
| the stock is being rationally valued once again.
|
| My point is that DCA is only good if the trend favours it. It is
| central limit theorem where you reduce the variance by multiple
| sampling. Good shorters DCA downwards as well, so you are
| fighting these people too if you are DCA-ing now.
| coliveira wrote:
| The very fact that there are still so many people willing to
| "buy the dip" shows that we're just in the beginning of the
| process. There will be a time (a few weeks from now), when
| almost everyone will be screaming sell. This is just how ALL
| bear markets work.
| rnd33 wrote:
| Are all bear markets the same? If there's a clear signal when
| to start buying why isn't everyone doing it?
|
| To me technical analysis of the stock market is the modern
| equivalent of a shaman predicting next year's harvest. It
| sounds very convincing but there's little scientific evidence
| that it can predict anything accurately.
| dictatorsunion wrote:
| It's as though you think everyone is rational. If they are
| they should be selling, but no, they are buying.
| [deleted]
| [deleted]
| Swizec wrote:
| > It is as though they have never been in bear markets before.
|
| We haven't. It's been 12 years since the last bear market.
|
| I was literally 20, in college, and with nothing to even think
| about investing.
|
| How many are too young to even remember 2008?
| dictatorsunion wrote:
| There are industry-based bear markets and bear markets in
| other countries almost every year. They all work the same.
| screye wrote:
| I am not well versed in the economics of depressions, but almost
| all the ones I know of were preceded by some monetary imbalance
| or the explosion of a bubble based on falsely propped up ownings.
|
| 1929 was stock being leveraged off mortgaged homes and loans,
| that was clearly no sustainable.
|
| 2000 was the dot com burst.
|
| 2008 was mass defaults on home loans.
|
| Is there any reason why apart from slow business for 2 months due
| to corona and the oil war (that resulted from corona causing a
| loss in demand), the economy can't juts go back to being business
| as usual once this all passes over ?
|
| Is there a particular kind of asset, the collapse of which will
| seal this drop as a proper depression ?
| jeremyjh wrote:
| If we are very lucky the epidemic will not even be peaking yet
| in the US two months from now. If it has, we are looking at
| catastrophic losses of life. More likely the noose will not be
| loosened for 9-12 months. It's gone too far to be contained and
| can only be slowed until a vaccine is widely deployed. The
| economic damage is incalculable.
| jasondclinton wrote:
| > Is there a particular kind of asset, the collapse of which
| will seal this drop as a proper depression ?
|
| That's a good question. Right now the market is reacting to on-
| the-ground realities. The follow-on question you are asking
| gets to: what will be the aftershocks?
|
| The thing that I'm concerned about is the amount of risky
| business loans[1] that have been handed out in the past decade
| because rates were so low and mutual funds were looking for
| high returns. If a lot of businesses go bankrupt and that, in
| turn, puts the banking system at risk, then things would be ...
| bad.
|
| [1] including businesses taking "no covenant" loans to--in some
| cases--pay their earlier investors dividends!
| pcj-github wrote:
| Consumer habits and psychology are going to be affected for
| years. We're going to see jobless rate skyrocket, small and
| large businesses defaulting left and right. Your tech job is
| definitely not safe either.
| seanmcdirmid wrote:
| Many people think the world is rife with real estate bubbles,
| definitely in china if you don't think there is a big one in
| the USA. The stock market rose very quickly with respect to
| earnings as well, and we've had over a decade of very low
| interest rates world wide, leading to lots of debt both private
| and public.
| [deleted]
| hogFeast wrote:
| The only depression you named was 1929. 2000 was barely a
| recession. 2008 was more severe but...still not really. The US
| unemployment rate hit 10% which is high...but most countries
| Europe have had rates at this level for decades. For reference,
| the current rate in France has an 8 handle.
|
| In terms of depression vs recession, to put it simply, the risk
| is that we move into a situation from which escape is
| difficult. For example, and this is a hypothetical, everyone in
| airlines loses their jobs, this causes demand to fall, more
| people lose their job, supply falls, etc. Depressions destroy
| resources. Recessions reallocate resources.
|
| So I don't think this looks particularly serious...if
| policymakers act promptly. This means ensuring that credit is
| supplied to companies that are solvent and firms that insolvent
| are shut down. The only thing that looked bad going into this
| was everything going on in tech, and the level of corporate
| debt (and its distribution). There is still a huge amount of
| complacency here (a big part of this cycle has been ETFs...I
| talked to a quant the other week who is neck deep in corp bond
| indexes who confidently told me defaults wouldn't rise...the
| guy has never looked at a balance sheet in his life).
|
| But one very bad sign is gold and govt bonds falling with
| equities. This is probably being caused by someone running a
| risk parity strategy trying to get out of their positions but
| it could also be a sign that liquidity is disappearing (and
| people are selling whatever they can sell). Equally, last week
| the momentum tech stocks weren't really selling off, and now
| they are really starting to tank (although this is probably a
| good sign long-term, short-term people are clearly panicking).
|
| Also, as a point of history, there was no "mass defaults" in
| 2008. The default rate definitely rose substantially and there
| was a liquidity crisis but this ended up working itself out and
| the vast majority of these assets came good (we know because
| the govt bought them all).
| koheripbal wrote:
| Bankruptcies can be pretty damaging. If we see a lot of loan
| defaults, we might see a banking crisis.
|
| ...but probably not. Banks are very well capitalized these days
| - much much better than 2008.
| Zenst wrote:
| Banks can cover some things going wrong, sometimes, not
| everything going wrong at once.
|
| Just takes one queue at a bank, few social media posts and
| next thing, all those branches have queues due to panic and
| end up with a self fulfilling prophecy so to speak.
|
| Heck, if people can panic buy toilet roll, nothing is out of
| the reach of stupidity.
| cycop wrote:
| My bank would only let me take $3k out today , they said
| come back tomorrow for another $3k .... it is already
| starting.
| reverend_gonzo wrote:
| Many believe the economy has been propped up by the Fed (by
| lowering interest rates) because they've been afraid of a
| recession. The Fed also doesn't really have any more ammo left
| to prop things up.
|
| So, the cause is that the Fed has been propping an economy that
| is ripe for a recession and a reset. The coronavirus is the
| trigger that will force the hand.
| Zenst wrote:
| Many currencies have been propped up and artificially kept
| competitive via QE as the new tool to augment interest rates
| as having driven them so low, they had to use something else.
| The next tool in the box is negative interest rates.
|
| Kinda all leads into a perfect storm, and now have whole
| generations having grown up with no saving mentality and a
| have today, pay tomorrow expectation that if things ever go
| back to normal, real interest rates that encourage
| responsible spending instead of artificially stimulating an
| economy. Well, it will be a huge education for many and as
| always, the people end up paying for it.
| MrRadar wrote:
| Most businesses don't have the cash reserves to handle
| effectively shuttering for 1-3 months, which is probably what
| will be required to get a handle on the Coronavirus outbreak
| without overwhelming our medical systems. This means those
| businesses will be forced to lay off many (if not most)
| employees, possibly going bankrupt altogether, and those laid-
| off employees will themselves have trouble paying their own
| bills causing them to go bankrupt, lose their house and car
| (and health insurance in the US!), etc.
|
| It's a huge vicious cycle that will almost certainly lead us
| into a deep recession in the short term, and will likely
| require huge fiscal interventions by the major governments of
| the world to prevent an outright depression (as all the
| remaining monetary options have already been used up to little
| effect). It's telling that Senator Mitt Romney was floating a
| temporary Yang-style UBI today... even a week ago that would
| have been unthinkable to hear from a Republican, even a
| moderate like him.
| arthurcolle wrote:
| SPY puts printed today. Up 110%, sold before Trump had his press
| conference.
|
| I think there's going to be a little bit of a bounce tomorrow and
| then resume drilling.
| synaesthesisx wrote:
| Agreed. I had puts on TQQQ and also UVXY calls (yes, I play
| volatility like a madman). My last couple TQQQ puts sold today
| for....5100%
| bubbleRefuge wrote:
| I think as soon as there is some clarity around fiscal policy, we
| will see markets stabilize. Fiscal policy is coming, we just
| don't know the extent. So 2 or 3 months from now the virus will
| have burned out and we will have massive amounts of fiscal
| stimulus in the economy and the boom ensues. This is the way our
| Economy and stock market function. As soon as the stock market
| begins to see this, it will explode to the upside. That maybe in
| a week or a month or 2.
| Waterluvian wrote:
| I have a "balanced" index fund with my retirement savings. I'm
| 33. I'm simply not touching a thing. I hope this is the correct
| move.
|
| It's amazing. I think I'm a pretty smart guy and I'm finding it
| very difficult not to second guess these choices. And the worst
| time to make choices like this is during financial crisis.
| skrowl wrote:
| This probably isn't the bottom. Wait a little while longer and
| when things start picking back up, dump in as much as you can
| afford.
| jacquesm wrote:
| That's pretty bad advice.
| Rapzid wrote:
| I'm going to trickle cash in to total market index funds each
| week going forward. I'll just keep adding on the way down.
| klodolph wrote:
| Good advice! Just time the market.
| [deleted]
| agumonkey wrote:
| I'd rather die of self inflicted bankruptcy !
|
| -- ex trader 2021
| usaar333 wrote:
| It probably isn't the bottom. That doesn't mean expectation is
| optimized by waiting.
| hirundo wrote:
| I wouldn't care to risk retirement funds until the scope of the
| virus is better defined.
| mdanger007 wrote:
| the investor who buys in just before a vaccine is announced
| will make some scratch
| djannzjkzxn wrote:
| I don't think it's possible to tell the difference between
| volatility and things picking back up. Somebody trying to
| follow this advice might have bought on Friday when the market
| went up.
| tathougies wrote:
| The market is likely to go much higher than friday in the
| coming decades.
| [deleted]
| djannzjkzxn wrote:
| I agree completely. My advice to anyone who isn't employed
| as a stock trader is to buy when you have investable cash.
| In particular my comment was disagreeing with the advice to
| "wait a little while longer."
| [deleted]
| zenlot wrote:
| Worst advice ever. Do not try to buy the dip in this market.
| Most likely it will lead to loosing money.
| pengaru wrote:
| It can't possible be worse than advice to buy at the start of
| this covid-19 disaster.
|
| I feel for those stuck holding this particular bag of shit.
| Fortunately I pulled out after the last TSLA earnings call,
| and look forward to the future shopping spree once the dust
| settles.
| UncleMeat wrote:
| Buying when it is low is not as good as buying when it is
| lower. But it is still good. Buying today is much much
| better than buying a month ago. Or six months ago. Was it a
| bad idea to buy then?
| dllthomas wrote:
| It's clearly better advice than dumping in more than you can
| afford? -\\_(tsu)_/-
| foobarian wrote:
| You only lose money if you sell :-)
| Matheus28 wrote:
| Don't forget the opportunity cost of waiting 5 years for
| your investment to go back to net 0 :)
| VikingCoder wrote:
| Or if your asset gets delisted. Or if there is no list.
| alkonaut wrote:
| Timing the market is possible if you know more than the market
| otherwise it's just gambling.
|
| But what do you do if you got lucky selling now?
|
| I sold three weeks ago figuring it would be bumpy ahead, but I
| don't want to miss the bottom entirely. Now I'm thinking the
| low risk strategy is to buy very slowly over a long period.
| thinkloop wrote:
| The S&P 500 is down 30% since Coronavirus started [1], back to
| April 2017 levels [2], about two years worth of gains erased.
|
| But this comes after a decade-long record bull run that's been
| begging for a 15% correction. Treasury yields were inverted a few
| months ago, last week bond prices got disjointed from their
| underlying assets, QE has been incessant since 2008, rates are at
| literal zero - the bull market was fake, propped-up and
| political; there is nasty sausage festering in the belly of our
| financial system and it's set to explode. Get ready for at least
| another 30% drop.
|
| Or:
|
| The internet is truly the greatest invention of all time. There
| is nothing more valuable than the exchange of ideas. We have only
| begun reaping its rewards. It will be responsible for another 100
| year bull run of greater magnitude than the industrial
| revolution. Not only is innovation at record levels, but the pace
| of increase of innovation is at record levels. The bull run was
| not fake, P/E levels of the S&P are in line with historical
| averages [3]. We are taking Coronavirus very seriously and China
| has shown that you can "flatten the curve" when you do [4]. This
| will blow over in a few months and the economy will be right back
| to where it was. But the stock market is forward-looking and can
| recover in an instant, the buying opportunities are now.
|
| [1] https://imgur.com/a/aq2yw70 (chart)
|
| [2] https://imgur.com/a/EOWR4Kf (chart)
|
| [3] https://imgur.com/R0zpJiP (chart)
|
| [4] https://imgur.com/VTMOeh9 (chart)
| Der_Einzige wrote:
| All you gotta do is buy puts and you'll be able to ride a yacht
| in a few years when this is all over.
| appleflaxen wrote:
| This is only the first round.
|
| The second round will be over-leveraged investments being
| uncovered, as any leverage they had in stocks evaporates.
|
| Given that the over-leveraged loan situation was out of control
| during the 2008 GFC, and nothing structural was done to change
| behavior, it's extremely likely we're going to see some secondary
| changes.
| vearwhershuh wrote:
| The current S&P P/E ratio is still higher than it was at any
| other time except the 1920s bubble, the .com boom, and the top of
| the 1960s bull market.
|
| https://www.multpl.com/shiller-pe
|
| There are problems comparing the P/E over time periods this long,
| but it is a cautionary datapoint.
| akvadrako wrote:
| Yeah, when everything is a bubble it's bound to pop sometime.
|
| Probably just too much free cash for banks.
| icedchai wrote:
| I moved $100K to cash on Friday. I should've been more
| aggressive.
| bedhead wrote:
| I manage a fund for a living and have been doing this stuff for a
| while. I'm generally an optimist...and I've never been more
| terrified in my life than now. This makes 2008 look like a keg
| party. We have a health crisis and the prescription from
| government has been to induce an economic crisis, one that's
| possibly (and increasingly more likely) orders of magnitude worse
| than anything we've ever seen, including the great depression. We
| are committing suicide. This is a battlefield triage situation,
| you save the soldiers you can and read the others their last
| rights. It makes me utterly sick to say that, but that's the grim
| reality. We need to _immediately_ change our approach and adopt
| what the UK is doing. AMA
| riffic wrote:
| > last rights
|
| rites
| mgolawala wrote:
| So Weird, reading your comment reminded me of how this is
| similar to how the immune system of an infected host can react
| with such ferocity that it kills the host. Like a Cytokine
| storm or a persistently high fever.
|
| Imagine if our reaction to this disease, to prevent human death
| and suffering... will cause so much poverty, hardship, and
| social instability that the outcome is more human death and
| suffering, than if we had just let the virus run its course and
| had just gone about our daily lives accepting the losses.
|
| I sure hope we are doing the right thing. Makes you wonder.
| anonu wrote:
| Worst drop ever for the Nasdaq Index today: -12%. These aren't 1,
| 2 or 3 standard-deviation events... these are more like 6 or 7
| standard-deviations from the mean...
| whatshisface wrote:
| That's not so impossible for the stock market whose
| distribution has a big, long negative tail. (If you plot the
| daily delta of the logarithm of the S&P you will see that it
| looks like a normal distribution, except with a fat long tail
| of very bad days.) It goes up little by little except on the
| days it goes down by a lot.
| marcinjachymiak wrote:
| If you're experiencing 6 sigma events daily, your modelling is
| wrong.
| hn_throwaway_99 wrote:
| It's "wrong" because the stock market doesn't follow a normal
| distribution but instead a power law.
| usaar333 wrote:
| Vix is currently at 82%, rather than a more typical 15%. You
| should expect daily fluctuations of 5 to 6x what is ordinary
| for the next month. In fact today's drop is only about 1
| standard deviation.
| amiga_500 wrote:
| I'm quite surprised by this because it was my understanding that
| companies were doing us a favor by employing most people. That
| they were forestalling replacing us with robots by paying us near
| subsistence wages.
|
| I'm very confused. On the one hand I have all the things I've
| been reading in the papers about workers being superfluous.
|
| But yet on the other hand when I just look at the evidence, it
| seems like companies really, really need workers.
|
| I wonder what will happen when this is over...
| ComputerGuru wrote:
| Jobs that were economically beneficial to replace with machines
| or outsource were replaced with machines or outsourced. People
| with jobs now have them because they are needed now, even if
| not in ten years. How is that hard to understand?
| amiga_500 wrote:
| I do understand that. I think workers are needed and should
| be paid well to reflect that, instead of the constant
| undermining of the psychology of wage negotiation by the
| apparent imminent replacement by robots.
| mullingitover wrote:
| Consumer spending is kind of the foundation of the economy, and
| as of today in the US it's about to go into freefall.
| Especially services.
|
| This fall is pricing in the inevitable waves of bankruptcies in
| the service industry.
| amiga_500 wrote:
| Why don't the fed just print money, a program could order
| stuff on amazon and they could deliver it to a land fill
| (obviously the landfill would have to be automated by
| robots).
|
| for services they could just automate making bookings with a
| deposit and not show up. or a little zoomba vacuum thing
| could show up.
|
| wouldn't be inflationary as cash is being destroyed like mad
| as we are all replaced by robots, so that won't be a problem.
| xaxsacsdaffbnk wrote:
| People lose business and need cash to get through the crisis.
| tathougies wrote:
| Companies need consumers more than they need workers.
| amiga_500 wrote:
| I have that sorted:
| https://news.ycombinator.com/item?id=22597679
| skohan wrote:
| Is there a risk of a compounding factor with the current level of
| corporate debt?
| say_it_as_it_is wrote:
| This is the moment that management cuts staff and pushes
| survivors to work harder than ever with no more than the threat
| of the axe. Realizing productivity gains from job insecurity is
| unethical, so it only gets used under the illusion that it is the
| only way for the employer to survive. The reality is that the
| employer could have operated like this all along but couldn't
| drop the axe without looking like a butcher until now.
|
| Getting laid off is sometimes better than surviving the shit show
| that is now to come. Quitting for new work, even better.
|
| Seize the moment, people. Do not be a victim. You can rebuild
| your careers. Do not stay with a butcher.
| tomp wrote:
| Seriously?! "Quitting for new work" when in a week or so no
| companies will even be doing in-person interviews?
|
| This sounds just insane to me. "Quitting before you find a job"
| is bad advice even in _very_ good economy.
| seanmcdirmid wrote:
| The boat on in person interviews sailed a couple of weeks
| ago.
| whatshisface wrote:
| All of the return-seeking money that pushed up asset prices in
| the first place is still out there, because stock market crashes
| don't destroy money (they just redistribute it). I wonder who has
| it now, and I also wonder when it will end up back in the market.
| nodesocket wrote:
| Great point, all the "big boy" traders who have been raking in
| profits on put options, VIX volatility, and leveraged inverse
| etf's eventually will switch their trades to bull.
|
| However, keep in mind, a market down 30% requires a 43% gain to
| break back even.
| throw03172019 wrote:
| Sorry for a maybe dumb question but what is the logic for 43%
| gain needed?
| nodesocket wrote:
| See this article on investopedia[1].
|
| [1] https://www.investopedia.com/investing/selling-a-
| losing-stoc...
| bkberry352 wrote:
| 100 -> 80 is a 20% decrease ((80-100)/100). 80 -> 100 is a
| 25% increase ((100-80)/80).
| czep wrote:
| Math: 30% drop means going from 100 to 70. Now to get back
| up to 100, you need a 43% gain (30/70).
| greenshackle2 wrote:
| 1 * (1 - 0.3) = 0.7
|
| 0.7 * (1 + 0.43) ~= 1
|
| It might be more intuitive with round numbers. If you lose
| 50%, you need to _double_ (+100%) to get back to your
| original value.
| [deleted]
| [deleted]
| jedberg wrote:
| 100 - 30 = 70
|
| 70 * .43 = 30.1
|
| 70 + 30.1 = 100.1
| acchow wrote:
| 30% loss from 100 is 70.
|
| 30% of 70 is 21. So a 30% gain at 70 gets you to 91.
|
| 1/.7 = 1.429
| [deleted]
| avalys wrote:
| If the market drops by 50%, e.g. from 20,000 to 10,000, it
| will need to increase by 100% from that point in order to
| recover (from 10,000 back to 20,000).
| ComputerGuru wrote:
| Because gains or drops are a percentage of where they were
| at just before, not from a fixed value.
| [deleted]
| dougmwne wrote:
| I was under the impression that the money supply can contract
| since most of it is in the form of debts and asset valuations
| and not in cash. If my house is worth $1 million but then
| because of a recession, less people are interested in buying
| houses and its price goes down to $500k, where did that money
| go?
| whatshisface wrote:
| > _most of it is in the form of debts and asset valuations
| and not in cash_
|
| There are several definitions of money supply, but I don't
| think asset valuations are included in most of them.
| inetknght wrote:
| Naive answer: your money never left you. Its velocity was
| reduced and your home's buying power has been adjusted to
| reflect that.
| pan69 wrote:
| Not only that, the initial $1 million you lend from the bank
| was literally created out of nothing. I.e. it never existed
| before you lent it.
| btilly wrote:
| _...stock market crashes don 't destroy money (they just
| redistribute it)._
|
| Source needed.
|
| Stock market crashes absolutely destroy money by any reasonable
| definition of the money supply.
| ailideex wrote:
| > Stock market crashes absolutely destroy money by any
| reasonable definition of the money supply.
|
| Mind sharing that definition? I don't see that quite squaring
| with this: https://en.wikipedia.org/wiki/Money_supply#Empiric
| al_measure...
| acchow wrote:
| We're destroying valuations, not money.
| archontes wrote:
| I'm no expert, but I think I get what he said.
|
| If I have $100 and I buy a stock worth $90 from you, there's
| $100 in the economy.
|
| If the stock goes up to being worth $110, there's still $100
| in the economy.
|
| If the stock goes bust, there's still... $100 in the economy.
| mgolawala wrote:
| To put it into perspective, the last time the market behaved like
| (multiple drops of this magnitude) this was 90 years ago, in
| 1929, and it was at the start of the Great Depression. Today was
| the second largest percentage drop for US Markets in history.
|
| Now is not a good time to sell your stock holdings (at least not
| anymore). This smells of a panic right now.
|
| I think a severe recession is all but guaranteed at this point.
| Let's hope we get through this with no more than that.
| taurath wrote:
| > This smells of a panic right now.
|
| It is a panic, but its justifiable to panic over the entire
| economy being shut down for an undetermined amount of time. No
| person on earth can say when this will end, given what we
| currently know about the virus, whether its possible to become
| reinfected, and how effective our strategies will be.
| neuronic wrote:
| Everything happening right now are delay strategies to get a
| vaccine / antiviral treatment. Before we can control this the
| economy will be shut down. Nothing will be like before, the
| financial stress in the global economy is too extreme.
| pmiller2 wrote:
| I don't plan on selling, but if things don't get better in a
| couple weeks, I'll be doing some tax loss harvesting by selling
| some VT and VTI and buying VOO or the equivalent.
| m3kw9 wrote:
| Is not bad to sell, the problem with most people selling is
| they won't get back in till things go way up, trying to time
| the bottom and missing the run waiting for it to come back
| angry that they missed the gains.
| badfrog wrote:
| If you think recession is guaranteed, why not sell?
| [deleted]
| Ensorceled wrote:
| If this drop is related to a panic sell off, then it's deeper
| drop than it needs to be. If you sell now, you might be
| selling in a panic low and locking in your losses.
|
| If. Make your own decisions.
| hitpointdrew wrote:
| That is opposite of what you should do. You would just be
| locking in losses (or greatly reduced profits). As long as
| you are reasonably sure you can hold your stocks for a few
| years then just hold on to them. Or better yet, go on buying
| spree and get cheap stocks.
| badfrog wrote:
| My read of "I think a severe recession is all but
| guaranteed" was that OP thinks prices will continue to
| fall. Am I misinterpreting?
| mgolawala wrote:
| First, there is always the possibility that I could be
| wrong. The markets could hover around these levels and
| fall no further. Second, I may not know when to buy back
| in. Do I back in after they have fallen 10%? How about
| 20%? Should I wait till 25%? What if it goes down another
| 3% and then starts to head backup.. and then back down
| again above these levels before falling another 30%?
|
| What you are suggesting is market timing. I am not very
| good at it, and I don't think most people are. You not
| only have to know when to sell, but you have to know when
| to buy back in. You have to get it right twice.
| usaar333 wrote:
| Perhaps. A 30% spy drop is already in predicting
| recession territory
| (https://www.investopedia.com/a-history-of-bear-
| markets-45826...). Even if I was 100% confident there
| would be a recession, it's still not clear the markets
| are not undervalued at this point.
| Kerrick wrote:
| The textbook definition of a recession may mean that
| prices will continue to fall until the recession ends --
| in fact, as soon as prices rise it ends the recession.
| But by that definition, the "great recession" ended in
| the USA in June 2009.
|
| I'm guessing the above poster meant something more like
| "period of society-wide economic hardship" by recession.
| By that more colloquial definition, you might say the
| great recession lasted through 2014. The stock price
| plummet, however, was largely finished for most of that
| period of hardship.
|
| I have no crystal ball; I can't tell you where we are
| going to be. But if the above poster meant "We're past
| the plummet, all that's left is the slow climb back to
| normalcy" then their comment makes more sense.
| nicky0 wrote:
| I thought a recession was defined by GDP rather than
| stock prices.
| projektfu wrote:
| That's the definition of a bear market.
| bobbylarrybobby wrote:
| If you think prices will fall, sell now and then buy back
| in after they've fallen
| bsanr2 wrote:
| Right. This is a "hold the line" situation.
| Unfortunately, not one aspect of American society
| suggests that we're going to have each other's backs as a
| break becomes more and more possible. Therefore, it may
| be better to assume that it's every man for himself, and
| grab what you can while the getting's good.
|
| This is why you have a robust social safety net. Not
| because the liberals and hippies think lazy people are
| entitled to free stuff; because everything - _everything_
| - is built on faith that the bottom won 't ruin " _you_
| ," specifically.
| SheinhardtWigCo wrote:
| Or hold and hedge by buying UVXY et al
| trophycase wrote:
| Do not buy and hold leveraged ETFs interday. Buy puts if
| you want.
| lowdest wrote:
| Good advice, but the IV on most puts makes them
| incredibly expensive right now. I prefer shorting the 3x
| long etfs.
| submeta wrote:
| UVXY?
| gruez wrote:
| https://www.proshares.com/funds/uvxy.html
| [deleted]
| [deleted]
| leetcrew wrote:
| this is much riskier than just holding. stock prices are
| about expectations, not necessarily reality. for all we
| know, everything might spike back up to January 2020
| prices the second there's an inflection point in the new
| infection rate, and you could miss your chance to buy
| back in.
| rolltiide wrote:
| The whole debate is about being too married to stocks and
| ignoring the wide wide universe of markets and asset
| classes.
|
| To anyone else, recognize that the citizenry is not limited
| to being passively investing in stocks, yet many of them
| are when they shouldn't be.
|
| People in all the other markets say "buy the dip"
| arbitrarily too, and many of those markets are often
| inversely correlated to the stock market. So just repeating
| what your favorite investment guru once said does not give
| you any more insight than the next person.
| mschaef wrote:
| > As long as you are reasonably sure you can hold your
| stocks for a few years then just hold on to them.
|
| What's 'a few years' mean to you? The Nikkei hit its high
| of 40K around 1989-89 and hasn't traded above 80% of that
| in the 30 years since.
| akhilcacharya wrote:
| Isn't that misleading given the price of the Yen?
| pradn wrote:
| That doesn't include dividends paid out by the companies
| in the NIKKEI.
| imcoconut wrote:
| Their population demographics are different from ours.
|
| We will continue to provide workers and consumers over
| the coming decades - economy-wide demand will return once
| the crononavirus threat subsides.
| prewett wrote:
| You could take the absolute worst case scenario if you
| want, I guess, but every other peak in the history of
| world markets has come back faster than that... Besides,
| that's not even fair. Why are you assuming the parent is
| talking about holding stocks bought at the peak? The kind
| of people that hold their stocks for years tend to be the
| kind of people who don't buy at a peak. Long-termers tend
| to be more of the Buffett persuasion; he has said that he
| wouldn't care if the market completely closed for 10
| years, because he buys businesses that grow in good times
| and bad, and he collects dividends in good times and bad.
| All the while the employees of the companies are spending
| their efforts in making his stock more valuable.
| coliveira wrote:
| I don't think anyone should go to the market trying to "buy
| the dip" in this situation. If you have cash, keep it. In a
| market that is dropping, 0% gain (cash) is a fantastic
| investment.
| kradroy wrote:
| I have never thought about all-out selling during this. In fact
| I'm buying more with each dip. I feel that securities are a
| bargain right now. With select selling I'll also be taking
| advantage of tax loss harvesting for years to come.
| iMuzz wrote:
| Be weary of catching falling knives.
|
| I've made that mistake before.
| seanmcdirmid wrote:
| So about 2008? Placing this crash is difficult and will only be
| clear in hindsight.
| treis wrote:
| 2008 was one sector of the economy dragging down everyone
| else. Shutting down everything for weeks to months is going
| to wreck everything. There's not a pause button. It's an
| emergency stop that's going to take a long time to recover
| from.
| pyrrhotech wrote:
| Your first two paragraphs are severe contradictions. If this is
| anything like 1929, the bottom will be around 340, after
| retesting highs from 1987. In that case, 2400 SPX is a bargain
| sell and still getting out near the top in the scheme of
| things.
|
| Even if this is only a relatively mild recession like 2000 or
| 1973, we'll be seeing 1600 - 1700 SPX or at least 30% below
| today's close.
| pathseeker wrote:
| It's not a contradiction if it was meant to point how how
| ridiculous the market is behaving for something so relatively
| tame compared to the over-leverage that led to the great
| depression.
| coliveira wrote:
| Goldman Sachs already said they expect a further drop of 20%.
| Of course, this is just the beginning.
| xwdv wrote:
| Others have already forecast a drop of at least 60%. 20% is
| definitely only the beginning.
| akvadrako wrote:
| If anyone could predict the stock market they wouldn't be
| telling you.
| coliveira wrote:
| The issue is not prediction, is expectation. The market
| moves on expected outcomes, not on reality. The reality
| may change down the road, but the expectation is to go
| down a lot more.
| akvadrako wrote:
| Sorry but that's completely wrong; the marketing moving
| is a reality. The issue is prediction - will the market
| move and in which way??
| coliveira wrote:
| Incorrect, the market moves on expectation, anyone that
| has traded the market knows this. If expectations are
| terrible, the market will tumble, it doesn't matter what
| is happening right now.
| akvadrako wrote:
| I am only talking about one thing - the market going up
| or down. That's the entire reality. Expectations
| contribute to that, making them part of reality.
| xwdv wrote:
| Forecasting that the market will drop 60% has a way of
| making that an expectation if enough people believe it,
| and then it happens, and the prediction comes true.
| lancewiggs wrote:
| The S&P500, the best general index, closed at 2386 today. It's
| risen over 300% since the last crash, the GFC in 2007. It's
| been an extraordinarily lengthy bull run, and well overdue fo a
| crash.
|
| Before the GFC the index was 1550, and after it was ~760 (~50%
| drop)
|
| At the peak of the dotcom boom it was generally under 1500. In
| 2002 after that crash it was 800. (45% drop)
|
| The recent peak was ~3380. A 50% drop is ~1700, which is almost
| 30% below where we ended today.
|
| The question to ask yourself is how does this collapse compare
| to the dotcom collapse and the GFC?
|
| The dotcom collapse affected internet businesses and was
| contagious (sorry) from there.
|
| The GFC start with banks and finance and was contagious from
| there.
|
| This starts with pretty much every industry, and has immediate
| impacts on supply and demand. It's going to be very ugly.
| airstrike wrote:
| > well overdue for a crash.
|
| This is not how markets work.
| [deleted]
| brundolf wrote:
| The thing with dotcom and GFC is that they both revealed
| fundamental problems in the marketplace. Dotcom was over-hype
| around internet startups, GFC was the financial house of
| cards around subprime mortgages. There was no "going back to
| the way things were" in those cases.
|
| In this case, on the other hand, the primary mechanism is
| "people can't work/aren't going out and buying things".
| That's absolutely going to "go back to the way things were",
| in some sense. It's just a question of how long it will take,
| and how much damage will be dealt in the meantime. But it
| feels very different from those other ones, which could be
| good or bad.
|
| Put differently, the GFC was like organ failure: things
| couldn't just heal, they had to be reworked and replaced. The
| current crisis is like a knife wound: the basic problem will
| heal on its own, but in the meantime you have to keep from
| bleeding out and hopefully avoid necrosis.
| taurath wrote:
| > In this case, on the other hand, the primary mechanism is
| "people can't work/aren't going out and buying things".
| That's absolutely going to "go back to the way things
| were", in some sense. It's just a question of how long it
| will take, and how much damage will be dealt in the
| meantime. But it feels very different from those other
| ones, which could be good or bad.
|
| This to me is more akin to a natural disaster which wipes
| out large amounts of our economic infrastructure in the
| form of consumer spending. How do people and businesses
| bridge the gap? Businesses are already over-leveraged due
| to incredibly cheap debt. Some have good balance sheets and
| will survive, but many many will not. Most small businesses
| cannot survive 2 months without being in business, let
| alone 6. The solution can't be for them to take out loans
| which they'll never be able to pay off.
|
| The thought that this is just an acute problem that will go
| away is wishful thinking. The effects will be further and
| wider than many of us can imagine right now.
| qooleot wrote:
| Are you sure COVID-19 didn't partially prick a systemic
| issue that was hard to see on the rise (as many also missed
| the housing crisis before the fall)? For example, the
| amount the stock rise was attributed to stock buybacks in
| an unsustainable manner caused by late stage government
| policies (tax cuts, low rates). There has been some pretty
| extreme levels of corporate debt that correlates with this.
| chrischattin wrote:
| 9/11 happened during the dotcom crash, which likely had a
| much greater effect on the economy as a whole.
| Nuzzerino wrote:
| > Now is not a good time to sell your stock holdings (at least
| not anymore). This smells of a panic right now.
|
| I'd love to make large buys of stocks at a time like this, but
| I have no idea whether my job/company/industry is safe. Last
| time I was laid off from work was particularly rough for me,
| and I'm only just now getting back on my feet.
|
| The uncertainty of the situation is probably making many others
| think twice before buying/spending so that's going to make it
| harder for stock prices to recover in the short term.
| koheripbal wrote:
| Two points.
|
| 1. Today's drop is sort of misleading because it followed an
| irrational (IMO) low volume rally on Friday. We're still
| roughly flat from last week.
|
| 2. A recession is pretty much what we're ASKING for in order to
| stop the virus. People need to stay away from one another. So
| if it's not online, the business should be closed.
|
| 3. (bonus point) Unlike systemic recessions (like 2008), this
| one is purely externally driven (like 2001) - which means it's
| temporary. Whether we deploy a vaccine, deploy anti-virals,
| flatten the curve, or just suffer, it'll still be over in a
| maximum of 18 months. Since stocks are valued by their 20 year
| forward earnings, the market is very much oversold. (the
| exception being for companies that is going to go bankrupt in
| the next year due to cash flow issues - and receive no
| bailout).
| coliveira wrote:
| > the exception being for companies that is going to go
| bankrupt
|
| This is not a small issue. If businesses are closed for two
| or three months, I believe half of the businesses in this
| country will be close to bankruptcy.
| rel2thr wrote:
| You are assuming that COVID will go away and not become a
| yearly thing. Also assuming that this type of shutdown won't
| become the new normal in response to a virus. ( something
| that happens every 4 or 5 years )
|
| I too am hopeful, but I think there is 10-15% chance of
| massive long term economic downside
| ksj2114 wrote:
| There are so many assumptions in here that are IMO wrong.
| We're not asking for a recession. And I have no idea what you
| mean by "externally" driven. Everything is connected in the
| economy.
| TheGallopedHigh wrote:
| Externally meaning an authoritative power told the economy
| to stop. As opposed to 2008 where the market internally
| collapsed.
| mgolawala wrote:
| I agree with both of your three points. (ha!) It was why I
| stated that it felt like a panic. The problem is panics are
| much like stampedes, they can take on a life of their own
| once they get started.
| VikingCoder wrote:
| Why do you presume there won't be another external or
| systemic recession in the next 18 months?
|
| You can't just assert it's temporary. You can say, "The
| causes of this downturn are temporary."
|
| We have no idea what the market will do in the future. We
| have strong evidence it will recover, but that's not the same
| thing.
| JoshTko wrote:
| The problem is that the externally driven factor can cause
| systemic issues. Having 25% retail & restaurant sales for a
| year will wipe out savings for a significant portion of the
| world. Most people will be fearful of spending for a long,
| long while.
| hkmurakami wrote:
| This is particularly acute since the American economy
| derives a big part of its drive from consumer spending,
| unlike other economies that may be more producer or
| infrastructure driven.
| m_a_g wrote:
| >...this one is purely externally driven (like 2001) - which
| means it's temporary.
|
| This can't be stressed enough. It may take a while but
| everything is going to be alright and normal again.
| addicted wrote:
| I don't get this. If a meteor hits the earth and wipes out
| 25% of the population, that would be external. But there's
| absolutely no reason to believe the significant reduction
| in economic activity and wealth would be temporary.
| matwood wrote:
| You think COVID-19 is going to kill 25% of the
| population?
| kaitai wrote:
| If economic impacts to less-well-off people continue,
| though, we're going to see significant impacts on consumer
| spending. If economic impacts wipe out every small business
| without enough cash to stay afloat for 2 stressed months,
| we're going to see significant consumer spending,
| employment, and consumption impacts. Fine, everything will
| rebound in eight weeks... except for my local taco place,
| ramen place, pizza place, sporting goods place, and
| bookstores, which can't pay their rent for two months given
| a huge reduction in business.
| tomp wrote:
| A lot of the companies won't survive.
|
| A lot of the companies that _do_ survive, will take a huge
| beating by the government, forcing them to be more resilient
| (to supply chain problems, short-term lack of labour, ...),
| reducing expected profits.
|
| I 100% expect _made in USA_ (or _made locally_ for other
| countries) to be the selling point of _both_ Trump _and_ the
| Democratic candidate the next election. Most certainly after
| a shock like this.
| Reedx wrote:
| Maybe, but why don't you think the markets will bounce back
| once we're on the other side of this? Have underlying
| fundamentals changed longer term?
|
| South Korea, China, Singapore are encouraging and seeing a
| return back to (almost) normal life. Granted, we're not dealing
| with this nearly as effectively and there may be a 2nd wave to
| come. But at this point they seem to make the case for
| optimism.
| seanmcdirmid wrote:
| A lot of ventures that were hanging on by threads will be
| ruined by this, so the pandemic is likely to clear out a lot
| of the weaker businesses as any good recession or crash is
| apt to. It will take a while for the marker to grow around
| that loss (though good in the long term, there is pain in the
| short). It could also trigger a housing correction, which has
| ripple effects on the construction industry, and those people
| are no longer eating at restaurants, and so on. Think of
| busts being inevitable anyways, and a crisis is merely the
| way into one.
| adamc wrote:
| "apt to" -- presented in the hopes it is useful.
| samsonradu wrote:
| I wouldn't underestimate the effectiveness and ability to
| respond of highly developed (and small) states like
| Singapore, Hong Kong or Taiwan.
|
| They have very good control of their borders and the
| (medical) resources to act in case of trouble. Not only that
| but I think they have learned a few lessons after the
| 2002-2004 SARS outbreak.
|
| Anecdotal, but while in Hong Kong (2014) there were a few
| things that stood out:
|
| - they had thermal screening for ALL passengers - while
| walking towards customs an agent asked me to take my hat off
| and pointed to the thermal cameras. In contrast, at
| Bucharest's airport they were set up 3 weeks ago. As of 2019,
| there were 1.2M Romanian citizens living in Italy, about 600k
| in the northern part.
|
| - banners against spitting in the trash bin - coming with a
| big fine. More generally speaking, a general state of
| cleanliness which can't be found in many EU capitals.
|
| - no toilets in the subway - might be sources of
| contamination. And when you finally found a public toilet,
| they were as clean as they can be.
|
| I think there are better odds of finding a cure fast than for
| Europe to contain this. Note, the evening before the Milan
| area lockdown people were rushing to the train stations -
| Schenghen area is borderless.
| neuronic wrote:
| Western cities are extremely disgusting and dirty compared
| to Singapore, Tokyo or Taipeh.
|
| The moment I step out of a train arriving at central
| station it smells like piss and a bunch of drunk homeless
| people perform a spitting contest.
| anonuser123456 wrote:
| There is a very large amount of corp debt on shaky ground. A
| lot of people are _very_ concerned that this debt is going to
| blow up in a very similar way to MBS in 2008.
| cshenoy wrote:
| Not OP but I don't think we'll bounce back as quickly due to
| the lack of urgency coming from the Federal government. I
| suspect we'll fall into a vicious cycle of business layoffs,
| corresponding dip in consumer spending, reduction in
| r&d/business investment as we are now and after cases taper
| off which now seems even further away than what it could've
| been had the CDC/FDA/WH been on top of this earlier. Some
| countries took the threat seriously and immediately took care
| of things.
| gotoeleven wrote:
| What lack of urgency are you talking about?
| vngzs wrote:
| The US lags just about every developed country on testing
| for Covid-19 disease.[0]
|
| 'It's Just Everywhere Already': How Delays in Testing Set
| Back the U.S. Coronavirus Response[1]
|
| [0]: https://www.vox.com/science-and-
| health/2020/3/12/21175034/co...
|
| [1]: https://www.nytimes.com/2020/03/10/us/coronavirus-
| testing-de...
| buboard wrote:
| as a non-US person, the US can do much more than testing,
| (which is what most other countries can do). A cure, or a
| quick vaccine is what matters, testing is just a measure
| of how bad you are performing. Containment measures are
| necessary, and they work, but eventually we ll all get
| the virus, in a vaccine or not
| makomk wrote:
| The person described in that Vox article - upper
| respiratory symptoms, no direct contact with someone with
| confirmed Covid-19 - wouldn't meet the criteria for
| testing anywhere that I know of off-hand. Certainly not
| in the UK or Australia, probably not in South Korea
| (though they allow people who don't qualify to buy
| testing out of pocket), not in a whole bunch of EU
| states, and Italy has _much_ bigger things to worry
| about. Maybe in the more urban parts of China?
| agency wrote:
| You can't have contact with someone with a confirmed case
| of Covid-19 if nobody is being tested for Covid-19.
| sovnade wrote:
| The community spread by this point has hit the entire US
| surely. They can't track every single confirmed person
| location-by-location because it's been far too long.
| willyt wrote:
| You are wrong about South Korea. Their testing has been
| incredibly effective from the beginning, patient 31 in
| South Korea had no known contact and was told to take a
| CV test by her doctors, but didn't take the advice until
| a 2 days later. https://graphics.reuters.com/CHINA-
| HEALTH-SOUTHKOREA-CLUSTER...
| wnmurphy wrote:
| Not doing any actual airport screening, rejecting the WHO
| tests so we could develop our own (for some reason),
| denying that there was even a problem for 4 critical
| weeks, telling people as recently as a week ago that they
| should be out going to restaurants and bars... all the
| failures of leadership that caused us to blow well past
| containment.
|
| In contrast, Japan, Taiwan, Singapore, Thailand, and Hong
| Kong got right on top of it, and early. They're also the
| only countries seeing a flat rather than exponential
| trend right now. Which means their hospitals are not at
| threat of being overwhelmed.
| destitude wrote:
| Oklahoma governor was in a crowded restaurant with his
| family just two days ago telling everyone else to do the
| same.
| joe_the_user wrote:
| South Korea and China itself are the best models for
| countries that have (sort of) bounced back. And they
| leveraged a variety of mass mobilizations the US hasn't
| started with. So basically we're in for a LOT of pain in
| dealing this.
|
| Exogenous shocks _usually_ don 't provoke recessions but is
| going to be like a planet-wide tidal wave. Things are going
| to be very different at the end. Huge, efficient enterprises
| may well end up even stronger but would the market for a
| given medium sized enterprise even make sense? We don't know.
| dnautics wrote:
| The assumption is that mass mobilization is 1) effective
| and 2) necessary. We simply don't have enough data to know
| one way or another. Not saying self-isolating isn't
| prudent, but you can't really make reliable long term
| economic forecasts assuming any particular disease profile.
|
| Full disclosure: I've been short term short the market for
| the last three weeks.
| abraxas wrote:
| This is probably a wave of margin calls forcing a lot of
| funds to liquidate. This contraction will reduce the money
| supply and scare this generation of investors.
| cm2187 wrote:
| Looking at Europe (but the US seems to be taking the same
| direction). All restaurants, shops, entertainment, tourist
| industry are closing, and will remain closed for several
| months. Large businesses will fire people (see airlines now),
| small businesses will go bust.
|
| If these health policies undershoot their targets in term of
| number of people infected, then we may have to deal with this
| virus again next fall/winter, so add a few more months of
| similar pain.
|
| I just don't see how this will not have lasting effects. Even
| in Dec 2008, at the very worst of the crisis, you had deep
| discounts in shops, but at least you could consume. But here
| all malls will be basically closed.
| sovnade wrote:
| There's not even any indication that this is seasonal. It's
| spreading pretty well in Australia/India which are
| extremely hot right now. It will probably continue to
| spread in Europe/NA all throughout summer.
|
| Our state and many others have closed schools, made all
| restaurants take-out/delivery only, barred gatherings of >
| 10 people, etc. I don't know how the small businesses are
| going to survive more than a couple weeks of this.
| svara wrote:
| Singapore is an interesting one. Their outbreak looks really
| benign, but actually they are on an exponential trajectory as
| well. The rate is just much lower, something like 7% daily.
| It doesn't register compared to the countries with fast
| growth, but if it stays like that, they will reach high
| numbers too. It translates to 10x per month.
|
| See https://studylib.net/coronavirus-growth
| tomrod wrote:
| The have flattened the curve
| JohnJamesRambo wrote:
| A crash of this magnitude was overdue without coronavirus.
| The market can't just go up and up forever, that's not how
| markets work. Super long 11-year irrational raging bull
| market with blowoff top had to unwind and still does after
| coronavirus is a memory. The underlying financial factors
| will still be the same and probably even worse because we
| (mostly the president) keep trying to prop up the stock
| market like the guys in Weekend at Bernie's. Best to just
| tell the truth that Bernie is a dead guy, so the adults can
| put the pieces back together to the economy.
| radiator wrote:
| Longer term, nothing of the underlying fundamentals has
| changed. This is why the collapse is inevitable.
| dev-ns8 wrote:
| I look at it this way. Your essentially buying a companies
| future earnings by buying their stock. For some time here,
| corporate earnings are going to take a hit. B2C probably the
| hardest, but B2B will also feel the effects, ripple effect if
| you will. The strain these quarantines are putting on Small
| business owners will also ripple into the larger corporate
| companies that the market is composed off because these SBO
| are the consumers too.
|
| I don't have a full understanding of the Repo market, but I
| do get it at a moderate level. I understand that it acts as
| the "lube" to our financial system and It's obvious it's not
| functioning correctly. What effect will this happen on the
| growing corporate debt that's out there? What effect will the
| lower revenues have on the ability for business' to pay back
| the debt and interest?
|
| These are questions I have, but don't necessarily have
| factual answers for. However I don't feel good about the
| answers to them and for that reason do think were in for a
| recession.
| rupert1234 wrote:
| In 08/09 the market felt this bad, and ended up worse. S&P went
| from 1576 to 666 iirc. That's almost 60% down. We are only
| about 30% down now.
| tinyhouse wrote:
| No one knows. You have the entire world working (mostly
| together) on ending this. I'm optimistic things will get much
| better in a month or so.
| noads wrote:
| What? We just had our national day of prayer, that seems to
| be the main response. How on earth can you be optimistic in
| the face of all available evidence? What are you basing this
| month timeframe on, did you just completely invent that
| number out of thin air?
| jug wrote:
| I expect far WORSE in a month or so which is the scary part
| here because it is questionable how many companies will
| survive this long period of salaries with zero demand even
| with emergency aid packages. By next month the infection rate
| is calculated to barely having plateaued yet, with
| exponential rate until then.
|
| I worry this will go so far that it'll take a very long time
| for worldwide business to heal due to layoffs and wrecked
| personal finances killing demand even when we're past the
| corona spike, and by then weapons like Fed's lowered rates
| will have already been used.
|
| I wouldn't be surprised if we're leaving this year with a
| -50% stock market value and 5-10 years for everything to get
| back to speed and valuation like it were.
|
| It's not even uncommon advice to not be heavily into the
| stock market if you have less than a >7 year savings horizon
| for these reasons.
| jghn wrote:
| If one assumes that the market was a powder keg waiting for a
| spark to explode, it doesn't matter when the virus part of
| the equation clears up
| bryanrasmussen wrote:
| I'm hoping for post-pandemic exuberance to lead us out of
| the economic problems.
| [deleted]
| edgefield0 wrote:
| Maybe in a year or two. In a month or so, covid will still be
| ramping up in various parts of the world.
| Traster wrote:
| Could you define 'much better'? Because we actually do know
| what the incubation period of this disease is, and we know
| how the virus has spread. It's a practical certainty that the
| spread of Covid is goingto gte worse, not better over the
| next month and that the mitigation strategies are going to
| completely tank some companies over that time.
| fuckknows wrote:
| This is going to take much longer than that to play out.
| tomp wrote:
| If there's anything I learned about this virus is that my
| pessimistic predictions were _way_ too optimistic.
| icedchai wrote:
| A month seems a bit optimistic. Even Trump himself was saying
| July or August. Note, he didn't specify the year.
| CRUDite wrote:
| Well, as someone who has traded alot, i did always wonder when
| the 2013 gap would be filled.. but at ~ 150 spy that is still far
| away.
| magd wrote:
| Too much winning!
| every wrote:
| I'll just sit here on my municipal bonds, thanks...
| yurr wrote:
| so ..... any thoughts on cryptos ??
| alexandercrohde wrote:
| Maybe people won't like this question. Is there a point at which
| does "social distancing" do more economic damage than it does
| health good?
|
| (Not saying we're there yet, just asking if such a point exists,
| and when.)
| yurr wrote:
| so ..... any thoughts on cryptocoins ??
| ghastmaster wrote:
| Housing needs to follow. For people looking to get into the
| market like me, these prices are a barrier.
| tathougies wrote:
| Housing is unlikely to follow unless more old people die of
| covid than expected. Rates are so low and big money will be
| looking to diversify into alternate asset classes.
| selectodude wrote:
| A million dead, mostly elderly, is not completely out of the
| realm of possibility, especially if we hit the high end of
| 150 million infections in the US. Statistically, 150 million
| infections would kill closer to 4 million.
| rnd33 wrote:
| The number of confirmed cases in South Korea is flattening
| out at around 8,200 people out of a population of 52
| million (0,016 %), China is flattening out at 81,000 cases
| (0,006 % of the whole population). Is it really reasonable
| to assume the number of infected people in the the US will
| be 3,000 to 8,000 times higher?? If these are the
| calculations Wall Street are doing then I'm not surprised
| the stock market is falling...
| btilly wrote:
| You really think that 50% of the population is the high
| end???
|
| Per https://www.thelancet.com/journals/laninf/article/PIIS1
| 473-3... it seems that the basic reproduction number is
| over 2. Which means that herd immunity only sets in if
| under 1/3 of the population is vulnerable. Which means over
| 200 million Americans get it.
|
| The alternatives are permanent lifestyle changes, or a
| successful eradication of the disease worldwide.
| 01100011 wrote:
| Are you really sure this is a good time to get into the market?
| I mean, property is usually a good long-term bet and rates are
| low, but you'd have to be pretty liquid to want to move now.
| Then again, if you think inflation is going to come in a big
| way, todays prices are reasonable.
| VBprogrammer wrote:
| Some people be crazy. Here I am wondering if I should start
| holding some of my emergency funds as actual real life cash
| and other people are looking to make a few bucks by investing
| in stocks.
|
| You can't feed your family on AAPL.
| steve76 wrote:
| Work remotely. Everyone needs leads.
| zizee wrote:
| PSA: The Dow Jones industrial average is a terrible measure of
| the stock market. It tracks just 30 stocks, some which have an
| outsized influence on the measure.
|
| This is not to say the stock market is not in freefall, but there
| are much better indexes to track general market movement.
| legitster wrote:
| The main benefit is that it has been around a long time, so
| it's somewhat useful for broader historic trends.
| rupert1234 wrote:
| PSA: No, wrong. It might not be the _very best_ but it is
| absolutely not _terrible_. A cursory look at the correlation
| over time could have told you this.
| nabla9 wrote:
| Most of the SP500 movements come from small number of companies
| too.
|
| Dow Jones is bad index but the narrow number of companies is
| not the worst part. DJIA is price-weighted index which is
| completely arbitrary and there is no reason for that. They
| can't add Berkshire Hathaway into the index without completely
| changing the rules. BRK-A price is so high. Index would track
| only BRK-A after that.
| jedberg wrote:
| I'm not sure why they don't add BRK-B though.
| kolbe wrote:
| In my opinion, BRK shouldn't really be in the S&P 500
| anyway. I don't get why a company that owns AAPL should be
| in an index that already owns AAPL.
| prewett wrote:
| Well, BERK-A is the canonical class. But Berkshire Hathaway
| is practically an index of its own, being a big, giant
| holding company. I don't think it belongs in any index.
| KMag wrote:
| "DJIA is price-weighted index which is completely arbitrary
| and there is no reason for that."
|
| Well, I believe the reason is that it's much easier to
| calculate on hand-cranked mechanical adding machines. There
| is a reason, but it's obsolete.
| all_blue_chucks wrote:
| PSA: The Dow Jones is a very good proxy for the stock market as
| a whole. If it were not people would have stopped paying
| attention to it years ago.
| bretpiatt wrote:
| Today it correlated with the better indexes. DOW (-12.93%):
|
| [1] S&P 500 (-11.98%)
| https://finance.yahoo.com/quote/%5EGSPC?p=^GSPC
|
| [2] NASDAQ (-12.32%)
| https://finance.yahoo.com/quote/%5EIXIC?p=^IXIC
|
| [3] Russel 2000 (-14.27%)
| https://finance.yahoo.com/quote/%5ERUT?p=^RUT
| binarymax wrote:
| Also: NYSE Composite (-11.84%)
| https://finance.yahoo.com/quote/%5ENYA?p=^NYA&.tsrc=fin-srch
| mdgrech23 wrote:
| I wouldn't say it's terrible but if you're looking for a quick
| way to assess the market there are better options such as the
| Wilshire 5000 index. That being said that's crashing too so it
| doesn't really matter. The market is crashing folks, thats the
| reality of the situation.
| quantgenius wrote:
| Actually right now the DJIA might be a _better_ measure of the
| large cap market than the S&P 500. The problem with price
| weighted indices is that at the top of bubbles they wildly
| overweight the recent winners. The performance of the S&P in
| recent times is mostly just the performance of the trillionaire
| companies. The same thing happened in 2000 when approx 40% of
| S&P returns was the returns of the Internet (as opposed to the
| larger tech) sector and in 2007 when financials had an outsized
| effect.
|
| I wonder how much of the performance of GOOG/FB/AMZN is VCs
| funnelling cash to overvalued startups building a brandname who
| then funnel said cash to GOOG/FB/AMZN for advertising and
| overpriced AWS services? Not that I think the trillionaire
| companies are going anywhere but I suspect they may be hit
| harder than people think they will be.
| saiya-jin wrote:
| Super beginner question - as somebody holding some Swiss cash on
| top of some basic reserve, I understand now it would be too risky
| to enter any stock/other market. I am a pessimist in expectations
| what will happen - rather gloomy state of affairs for next year
| or so, no fancy vaccine/quick tests etc.
|
| Here is the question - what investment vehicle, if any, would you
| consider for looking into when wanting to presumably enter this
| situation in say 4-5 months? Ideally say some medium term
| returns, not benefit after 30 years.
|
| Sorry for possibly annoying question to the experts, just looking
| into some guidance
| mrpickels wrote:
| Banks are our friends, the government is like our dad, the media
| is like our mom, let's hug them and meet the brave new world!!!
| throwaway713 wrote:
| So I know it's almost impossible to predict the stock market,
| but... a lot of this crash seems to be based on panic and human
| psychology concerning the virus (I know there is some effect due
| to the oil price war though).
|
| My question is: if we assume 20-40% of people in the U.S. are
| drastically underestimating how bad the virus is going to be,
| then they are more likely to hold their stock until there is
| finally "proof" that the virus is as bad as everyone with some
| amount of scientific understanding knows it is going to be, at
| which point we would expect some portion of these people to panic
| sell. Wouldn't that indicate that in an event like this, we're
| not betting on essentially random fluctuations of an emergent
| economic system, but rather on many people not understanding the
| trajectory of the virus?
|
| In other words, it's almost like a prediction market at this
| point -- you're betting against other people about how damaging
| the virus is going to end up being. Am I off base here?
| sgillen wrote:
| I would argue that to some extent that's how the stock market
| works all the time. You're betting about how other people will
| react to information.
| testacct316 wrote:
| Trump threatened Powell's job in order to force him to reduce
| interest rate and start printing money [1]. Our economy is being
| micromanaged by Trump who is not an expert in monetory policy and
| only has disdain for experts of all kinds
| (virus/economy/climate). Trump says he is qualified to do that
| because his uncle went to MIT [2].
|
| [1] https://www.nytimes.com/2020/03/14/business/economy/trump-
| po...
|
| [2] https://www.washingtonpost.com/outlook/2020/03/12/truth-
| abou...
| [deleted]
| SirensOfTitan wrote:
| I'm buying S&P index every day at this point, trying to drive my
| average down without trying to find the bottom.
|
| ...with that being said, I feel really worried about American
| economic stability long term now. Governors are closing
| restaurants and businesses leaving tons of folks out of work
| while providing minimal safety net coverage. Even liberal states
| like New York are ignoring the downstream economic effects these
| closures will cause. If most Americans truly cannot afford a $500
| surprise bill, we're in for a very, very rough ride.
| Hasz wrote:
| Absolutely. I'm 21 -- I have 30 to 40 years to weather this
| storm. For people of similar age, you could not ask for a
| shallower entry into the market, albeit a tumultuous one.
| tomerbd wrote:
| It's not so shallow, the stock market is still bubbly, these
| are the prices of mid 2017, when everyone said that the stock
| market is a bubble...
| AznHisoka wrote:
| To add further perspective: The S&P is just below where it
| was in December of 2018. Do you still have the same
| optimism about the US (and even the world) economy now than
| you did then?
|
| For me, the answer is a resounding No.
| mrlala wrote:
| Yeah exactly.. people are saying it's the low today? Yeah
| good luck timing that.
|
| Maybe they are right.. but like you just said- these are
| prices just a couple years ago. The modern world has never
| seen what is going on, and the economic impacts are almost
| unfathomable.
|
| Claiming we are near a bottom just because it's dropped a
| lot is naive.
| zoomablemind wrote:
| That's what I'm seeing too. Even more, based on the
| mandated closings and limits on business, there'll be some
| future econ. damage to restore. How do we lately do that?
| Stimulus packages, bail-outs, QE. The very same thing that
| drove us to the [still] frothy highs and ticked up the
| external debt.
|
| It is a global issue, but at the end each economy will be
| affected locally.
|
| Let's just hope the human cost could be contained.
| orbifold wrote:
| I have puts on a bunch of stocks that target the 52 week low
| or 10-15% below that in ~3 months. So far that strategy has
| been wildly profitable. There have been tons of stocks that
| doubled or tripled in value in 2019, no way that is a
| realistic price in the next 2-3 years.
| kirse wrote:
| Having been roughly in your position back during the 2008
| dump... https://news.ycombinator.com/item?id=318595
|
| Don't forget, the market can drop 20% a day for awhile.
| Plenty of smart folks are sitting on the sidelines with cash,
| but time will tell if this is the trigger for a much larger
| longer-term 2020 deleveraging.
|
| Markets aren't even where they were pre-Trump election yet,
| so this 30% haircut from the top isn't even a "correction"
| from some viewpoints.
|
| I personally wish I was ballsier back in 2008/2009 (Ford for
| $1, BoA for similar prices, etc), but it'd also be premature
| to jump into this market if you truly think it's the tip of a
| recessionary iceberg. Recessions take 3-6 months minimum to
| spill over into WallSt. If you're not jaw-agape at the prices
| of some of your favorite companies, it's probably not the
| bottom just yet.
|
| Further, if you take the pessimistic view (ala Japan Nikkei),
| you might get stuck holding stock that never recovers. Be
| patient.
| rabidrat wrote:
| FWIW, I was ballsier back in 2008 and bought WAMU on the
| way down. It's exciting to watch your investment go all the
| way down to 0 :/
| rnd33 wrote:
| The problem is separating the great recessions from less
| dramatic recessions. Was 2008/2009 a once in a decade
| recession or once in a century recession? In a normal
| recession you'll never get Ford for $1, and most stocks
| will never feel that cheap.
| baybal2 wrote:
| 29 here
|
| Entered the workforce right after 2007, in my 16, after
| moving to Singapore from small town Russia as an exchange
| student. Financial fortunes of my patents went nowhere, and I
| had to keep myself afloat for pretty much 2.5 years.
|
| Made not so bad money selling low end electronics to the
| third world on Alibaba, and such.
|
| Then, my parents made me dump all my money on the best things
| since sliced bread: "Business Education" in Canada. So I will
| "never ever be in need, and be making money like those big
| men from America"
|
| Wasted 3 years of my life on that, it was useless.
|
| And in 2014, they made me buy an apartment in my hometown
| under an immense pressure, and "or else" threats for me "not
| having a chance getting a wife, without one"
|
| A month later, the Russian roubles folds, property prices
| collapse. And I just parted with $78k USD, having just a few
| months of savings left, while my job in Canada was burning.
|
| Somehow, I recovered. 5 months later I got $29k back to
| Canada. Life was good again, I got my first Canadian
| girlfriend.
|
| Then at the end of 2015, when I just began making big plans
| for my life again, my troubles began to mount again... It was
| found out that my last employer in Canada was for some reason
| unable to secure LMIA after applying for it for 3 times in a
| row.
|
| I tried every option to extend my stay in the country, but
| the government was hellbent on reducing the amount of work
| permit holders, closing every legal workaround for extension.
| I spent tons of moneys on immigration lawyers, without avail.
|
| I decided to cut my loss short, and leave in 2016.
|
| Having to leave Canada after 6 years, leaving a lot of money
| there, and almost getting a family, was a bitter, bitter
| loss. I was enraged for month.
|
| After leaving 10 years abroad, I was completely unable to fit
| in Russian society of the day, and got robbed just weeks
| after arriving.
|
| After doing few remote gigs, and throwing tons of money left
| and right to sweeten my grief, I got to think of going to
| China, a country whose manufacturing Industry I owe most of
| the money I earned in my career.
|
| Been working in China since 2016
|
| Ironically, the most normal part of my life began in the
| least normal country of them all.
|
| My last relationship was a beautiful 29 years old self made
| entrepreneur, and an owner of a chemical factory. I dated her
| for a while, but had to leave for a series of extended
| assignments abroad. After returning just 10 month later, I
| found her already engaged to somebody more enterprising than
| me :(
|
| Again, fortunes cut short just few centimetres away from the
| finish line. This bittersweet life.
|
| Now, when China is descending into mass madness again, I am
| risking to loose everything again.
| zoomablemind wrote:
| You're young, and it's an asset already. Figuratively
| speaking, your Monopoly chance card stack is still big, it
| may have a plenty of good things to come for you,
| especially with those hard ones already out. Good luck.
| adrr wrote:
| Why catch a falling knife? I am actively shorting S&P to
| protect my other holdings. SPY is the largest ETF is now hard
| to borrow which is just crazy to think about.
| nouveaux wrote:
| While you're not outright advocating a trading strategy here,
| what you're suggesting is dangerous if you're not talking
| about the downsides to shorting.
|
| Do not, I repeat, do not attempt a short without
| understanding all the risks.
|
| When you buy a stock for $10, the most you can lose when that
| stock goes to zero is $10. In theory, when you short a stock
| at $10, your loss is infinite as the stock goes up higher and
| higher. In practice, your broker will most likely force you
| to cover that short long before that. Just know that the loss
| can be big and fast.
|
| You should apply strategies you are most comfortable with and
| please do your research before attempting anything besides a
| long term buy and hold of index funds.
| adrr wrote:
| I am not advocating or suggesting anything, just stating
| what I am doing. My theoretical downside risk is that spy
| goes up 100x, my 401ks also go up 100x. I am trying
| minimize my risk at the expense I may give up some gains if
| there is bounce up.
|
| Index funds aren't necessarily safe. Nikkei index has never
| recovered from its 90s high. NASDAQ took 15 years to
| recover. Know the risks.
| icedchai wrote:
| I never short stock directly, but I do buy puts.
| bosswipe wrote:
| I bought SDS which is an ETF for shorting S&P500 2x. It's
| up 41% since I bought it. The trick though is knowing when
| to cash out.
| bobbyi_settv wrote:
| If you're going to keep putting money in, you might want to
| diversify rather than throwing it all at one index
| buryat wrote:
| > Even liberal states like New York are ignoring the downstream
| economic effects these closures will cause.
|
| They also understand the effects of not closing right not in
| outlook of a deadly decease without available treatment.
| rconti wrote:
| Every time I see this, I fail to grasp the logic. So you had
| money sitting on the sidelines for safety during boom times,
| and you elect to put it in a riskier asset class during a
| panic?
|
| I'm not saying this isn't likely the most profitable action, I
| just don't see how the principles are consistent with each
| other. The former is conservative; the latter is wildly
| speculative and risky.
| steveklabnik wrote:
| A related idea that might interest you:
| https://www.investopedia.com/terms/d/dollarcostaveraging.asp
| bduerst wrote:
| Market has been hot so far this year, so the wise thing to do
| has been to slowly trim holdings for cash - i.e. up to 30% of
| your portfolio - so that you can buy on the dip. The
| correction has been a long time coming but the pandemic is
| making it even worse.
| rupert1234 wrote:
| Prices is the answer. That's why you are failing to grasp the
| situation. If you can buy a house for 100 in boom times but
| 50 in panic times, it's often better to get it for 50.
|
| Same asset, lower price = less risk. The only thing which is
| up for debate during a panic is "is it the same asset now?
| How similar?"
| adam_fallon_ wrote:
| You're forgetting the fundamental rule of the stock market.
|
| Buy low, Sell high.
| refurb wrote:
| Exactly.
|
| The people that got in in 2008 made out like bandits. The
| people that wait until 2010 or later missed out on a lot of
| the gains.
| akvadrako wrote:
| The people that bought right before the crash also made
| out like bandits. It's impossible to time the market,
| just buy if you have money.
| kaitai wrote:
| If you have enough money, you can do some of both.
| ksj2114 wrote:
| Would I have rather bought two weeks ago at 3000+ or today at
| 2400? Answer: today! The logic is that eventually the market
| will recover and you want to buy before that happens.
| reggieband wrote:
| Can't speak to OP but I always think about the "buy low, sell
| high" cliche. If you follow that idea then when you think the
| market is high you should not buy.
|
| My personal feeling the last 2 years was that the market was
| higher than it should have been. So I avoided buying
| equities. Now that the market is going lower I'm considering
| buying again.
| gizmo686 wrote:
| Its not fundamentally crazy.
|
| In one sense, standard investing advice is to periodically
| rebalance between investment classes when your holdings
| diverge too much from you desired profile. In this, for a
| "simple" investor, that would probably mean transfering from
| bonds to stocks; since the portion of your portfolio that is
| in stocks recently fell substantially below your desired
| portion.
|
| Assuming an efficient market, it is almost a no brainer that
| you should rebalance. Since your risk profile didn't change
| from a month ago, and stocks are being correctly valued, your
| portfolio is now overly conservative.
|
| If you dont believe the market is effiecient, the question
| becomes 'in what way is the market inefficient?'. If you
| believe it is now undervalues stocks, you should buy them
| since they are now on sale for a bargain price.
|
| Personally, my view is that the market is irrational, but I
| don't know how; so I am planning on not reballancing until
| after the dust settles. This minimizes the downside risk
| caused by me not knowing what I am doing.
| milesvp wrote:
| You may be missing one of the more fundamental reason to
| rebalance your portfolio at predetermined points in time to
| a predetermined balance. That it takes emotion out of the
| equation. By rebalancing, say, every time you put money
| into your IRA, you're always "selling high and buying low"
| without the risk that you'll let emotion overturn a
| generally good investing strategy.
|
| While you may actually be in a position to time the market,
| my understanding is that empirical evidence suggests that
| the vast majority would be better off not trying to time
| the market. And that people who mechanically follow
| rebalancing procedures will tend to outperform those who
| rebalance based on some kind of intuition or market
| calculation.
| koheripbal wrote:
| > Even liberal states like New York are ignoring the downstream
| economic effects these closures will cause
|
| What do you suggest they do? Keep restaurants open? Also - I
| think they're hoping that people will still order restaurant
| food - just at home and have it delivered.
|
| ...might be a boon for Chinese restaurants, ironically.
| bsanr2 wrote:
| Cash transfer from wealthy individuals and families via the
| IRS.
| xnyan wrote:
| UBI, tax credits, emergency direct to consumer low interest
| loans with suspended interest in the crises or all of the
| above.
| addicted wrote:
| It's very difficult for state governments to do these
| things although the state governments re trying.
|
| Frankly they need the federal government to step in.
| everybodyknows wrote:
| Analyst sees 2000 SP possible with worst-case government policy
| responses:
|
| https://www.marketwatch.com/story/coronavirus-stock-market-p...
| [deleted]
| [deleted]
| nostromo wrote:
| This is similar to 9/11 where politicians would act without
| thinking just to appear like they were doing something.
| Security theater was the norm for many years.
| anthm1988 wrote:
| Bitter about human lives being prioritized over your stocks?
|
| Poor little psychos.
| quadrangle wrote:
| I hope you're not saying that measures which actually achieve
| more social distancing is somehow theater.
| nostromo wrote:
| If our response has been commensurate with the threat or an
| overreaction is definitely an open question. One we
| probably won't be able to answer definitively for a while.
| yitianjian wrote:
| I saw one really good comment - we'll know for sure if we
| under reacted, but we'll never know if we overreacted
| treis wrote:
| This is the attitude that has me worried. It's CYA with a
| sprinkle of panic.
| nostromo wrote:
| Oh I think it's very possible we'll know.
|
| "Remember in 2020 when everyone lost their jobs and their
| houses and their retirement because some octogenarians
| died from a bad cold?"
| addicted wrote:
| Which is exactly why it isn't an overreaction.
|
| Thanks to the lack of testing we have no idea how bad
| this is. And due to the severity of the worst case
| scenarios and relatively high probability of them be
| happening, in the absence of more information, an
| overreaction is indeed prudent.
|
| That's what people don't get. Uncertainty often increases
| the need for more action, it doesn't reduce it.
| roywiggins wrote:
| They've relaxed the no-liquids rule now!
|
| for hand sanitizer only.
| jedberg wrote:
| I've had a bottle of hand sanitizer in my bag for years and
| they've never once said anything. Either their security is
| so bad they've never caught it, or they've always been lax
| about sanitizer.
| jfoutz wrote:
| whew. Good thing isopropyl alcohol isn't explosive in vapor
| form or someone might make a bomb!
| jfengel wrote:
| Or at least, things claiming to be hand sanitizer. Which
| just makes the rule more absurd. If you've got a favorite
| shampoo, time to go looking for a nice large hand sanitizer
| bottle to transfer it to. (Though I wouldn't do that for
| contact lens saline, a thing I'd kinda like to bring on in
| large bottles, since the small ones are absurdly expensive
| and somewhat less available.)
| sfritz wrote:
| They technically allow large bottles of contact solution
| in carry-on because it's a medical necessity
| (https://www.tsa.gov/travel/security-
| screening/whatcanibring/...). I just keep it in my
| toiletries bag and they pull it out to run a quick test
| most of the time.
| bduerst wrote:
| That's exactly why it's not really that good of a time to buy
| just yet. There's a chance we have a long ways to go and you'll
| probably run out of cash if you keep buying down the slide. We
| bought some on the crash last week but now it's just a waiting
| game to see how low it's going to bottom out.
| spamizbad wrote:
| Americans hate social welfare. A very reasonable recommendation
| of giving every adult household a fixed chunk of cash is being
| shot down because "But what about Bill gates!" -- There aren't
| that many rich people and also they pay plenty of taxes so...
| who cares if they get $1000 or whatever back from the
| government?
| anonuser123456 wrote:
| Something to consider for people thinking of jumping into the
| market via an index fund; in 2008, corporations were in OK shape
| to weather a downturn. In 2020, a lot of corps are very highly
| levreged. I think it's likely we'll see a lot of shareholder
| wipeouts. This will have an interesting effect if you buy an ETF.
| If 50% of your stocks get wiped out... that big bounce you might
| expect won't be in your portfolio. Yes, the index will recover
| it's value... but the composition of pre-post shareholders will
| be different.
|
| I don't think the country is in the mood for shareholders to get
| bailed out unless individuals get bailed out first... and I don't
| see that happening.
| lettergram wrote:
| Just my 2 cents - Take your assets out of the market.
|
| Until we (in the US) see a few senators, a justice or two and /
| or the VP/president/etc succumb to the disease we haven't hit
| peak panic.
|
| ~50% of the workforce is about to be out of a job for a few
| weeks. A large portion of Restaurants are about to go bankrupt,
| daycares are about to go bankrupt. Houses are about to drop in
| price (no money, and elderly dying).
|
| The reality is, this could be worse than the Great Depression. At
| least if we keep this up for any length of time. What we are
| doing right now is seizing the economy and if we close down
| everything, it's going to be hard to start back up.
|
| Governments are going to crumble because of this.
|
| Long term (a year out) things should be improving. But IMO we
| have a long way to fall. I wouldn't be surprised if banks start
| folding.
| AnimalMuppet wrote:
| I'm pretty sure banks aren't going to start folding. The Fed is
| ahead of the curve this time (or at least not nearly as far
| behind it as in 2008). They seem to be pretty serious about
| doing whatever is needed to keep things from falling apart.
| lettergram wrote:
| I said I wouldn't be surprised, not I think they will.
|
| For reference, I work at a bank. The opinion is my own. The
| problem has to do with a run on the bank.
|
| All banks are currently reporting negative earnings. Most
| banks rely on credit, and revenue from said credit. If that
| breaks down (because people can't pay). They collapse.
|
| I think the fed can bail them out. I also think that requires
| printing money so inflation will be high.
| pdonis wrote:
| _> The problem has to do with a run on the bank._
|
| That's not what you're describing:
|
| _> All banks are currently reporting negative earnings.
| Most banks rely on credit, and revenue from said credit. If
| that breaks down (because people can't pay). They
| collapse._
|
| That isn't a bank run; it's not having a hedge against
| credit default risk.
|
| A bank run would be all of the depositors trying to
| withdraw cash at the same time. But there's no reason for
| them to do that because their deposits are insured; even if
| the bank fails, their money won't go away.
|
| _> I think the fed can bail them out. I also think that
| requires printing money so inflation will be high._
|
| The Fed is already printing money; they restarted
| quantitative easing along with the latest rate cut. I agree
| that this will cause inflation--in fact, if the printed
| money ends up, in effect, guaranteeing people's insured
| deposits, it will most likely cause _more_ inflation than
| the previous rounds of QE did, since that money will likely
| be spent (whereas in those previous rounds of QE most of
| the printed money just sat in the banks ' accounts at the
| Fed, since the banks were unwilling to lend it out).
| AnimalMuppet wrote:
| > I said I wouldn't be surprised, not I think they will.
|
| Fair enough.
|
| > I think the fed can bail them out. I also think that
| requires printing money so inflation will be high.
|
| If things go that way, I don't think it _has_ to result in
| inflation. The thing is that, when a bank collapses, some
| money disappears (because of fractional reserve banking).
| If the Fed prints _exactly the right amount of money_ to
| counterbalance that, it doesn 't have to be inflationary.
| (The Fed could mess it up, of course...)
| pdonis wrote:
| _> when a bank collapses, some money disappears (because
| of fractional reserve banking)_
|
| The money doesn't disappear when the bank collapses. It
| disappears if the loans that defaulted and caused the
| bank to collapse are written off instead of being assumed
| by some other party. If the borrower's inability to pay
| is only temporary, the loan probably won't be written
| off; it will just be restructured, and the money won't
| disappear.
| AnimalMuppet wrote:
| OK. But those loan defaults are what lettergram feared
| would cause the banks to collapse. So they're not
| independent. The bank can collapse from other reasons,
| and loans can default without the bank collapsing, but in
| the scenario lettergram was talking about, loan defaults
| _cause_ the bank failures.
|
| So, you're right, but I think my overall point still
| stands.
| rescripting wrote:
| Serious question: what tools do they have left to try and
| shore things up? They've reduced interest rates to 0. They've
| injected 1.5T of liquidity. Mitt Romney today just announced
| they're giving $1000 of helicopter money to every American.
|
| If all of this doesn't work, whats left?
| anonuser123456 wrote:
| Quantitative easing.
| jacquesm wrote:
| Currency devaluation. That only goes so far though. You
| can't really print your way out of this easily.
| seanmcdirmid wrote:
| Looking through Wikipedia, only one congress person was known
| to die of Spanish flu
| (https://en.wikipedia.org/wiki/Jacob_Edwin_Meeker), so I don't
| think the numbers will get up enough in this pandemic to effect
| someone high profile in government.
| ScoutOrgo wrote:
| But if you sit on cash, you will miss the day where it has a
| huge gain due to some news like a vaccine announced.
| marcinjachymiak wrote:
| Most of the people betting on this becoming a
| recession/depression think that the coronavirus is just the
| pin to pop the (ETF) bubble. Most of the companies that have
| announced that they're working on vaccines have pumped
| already, but feel free to invest.
| raincom wrote:
| Coronavirus and oil crash are huge catalysts. A vaccine won't
| help much, as investors become risk-averse. When majority of
| investors become risk-averse, risk premium goes high, thereby
| reducing stock prices.
| jcranmer wrote:
| By percentage, this isn't just the worst drop since the 1987
| crash--the 1987 drop is the _only_ worse drop. This is worse than
| any day in the Great Depression.
| jusonchan wrote:
| I'd say keep a close eye on the Coronavirus situation. If a
| vaccine is found and is effective, likely the market will calm
| down and hit the bottom. After that its about keeping the
| companies afloat until they can get their revenue back up again.
| Most likely the quantitative easing programs from the Fed will
| help in this regard.
| ailideex wrote:
| > If a vaccine is found and is effective, likely the market
| will calm down and hit the bottom.
|
| Realistic timeline for this seems months.
| jmull wrote:
| An optimistic timeline is a vaccine will be available next
| year and I don't think much of the market is looking that far
| ahead right now.
| ailideex wrote:
| By that time we may not even need it anymore.
| whycombagator wrote:
| Also the worst % drop since 1987[0]
|
| [0]
| https://en.wikipedia.org/wiki/List_of_largest_daily_changes_...
| aazaa wrote:
| > Our Advise: It is time to carefully pick up some stocks based
| on crushed valuations, but the market is not likely bottoming.
| It's hard to say are we two weeks away or months away from market
| bottoming.
|
| You'll know it's time to buy when the advice you get from
| permabulls like the mortgage industry is to sell.
|
| What will happen in between? Failed rally after failed rally.
| Bear market rallies are extremely effective destroyers of
| capital. The suck the gullible in and spit out the bones.
|
| By the time it's really time to "pick up some stocks based on
| crushed valuations," nobody will care about stocks. And nobody
| will care about or believe the rally.
| legitster wrote:
| I'm a bit more optimistic about this crash - a significant
| portion is due to the (important) constraints on society -
| closing schools and restaurants. Meaning we can look forward to
| some pent up demand on the other side when those constraints are
| loosened.
|
| On the other hand, if the US goes into lockdown for a month or
| more, there's a significant chance that we could be returning to
| a world very unlike today. The market does not like this kind of
| uncertainty, and an house of prevention would have been worth $10
| trillion dollars of cure.
| 2OEH8eoCRo0 wrote:
| I think it's showing all the cracks in the US system. A large
| part of the country scrapes by, have no savings, have no access
| to healthcare, etc.
| legitster wrote:
| For sure. But I don't think that's fundamentally different
| than any other crash in the US. But it may show that there is
| an economic benefit to having a stronger welfare net.
| mcphilip wrote:
| I think there will be some pent up demand, but some parts of
| the economy don't benefit from that --e.g. I'm not going to buy
| more lattes when things return to normal, I will just go back
| to my daily fix.
| koheripbal wrote:
| ...but you might buy a coffee machine at home to satisfy that
| fix over the next 3 months.
| gruez wrote:
| A coffee machine's contribution to the economy is a
| fraction of one or two months of take-out coffee at a
| cafe/restaurant. If you factor in how much value is being
| generated in the US vs elsewhere (eg. China), the
| difference is even more pronounced.
| r00fus wrote:
| That's not all - some will forego, lose the habit then not
| re-uptake.
|
| Also schools - how will additional schooling later on make up
| for the lost service & revenue (schools need students to get
| tax revenues)
| legitster wrote:
| > That's not all - some will forego, lose the habit then
| not re-uptake.
|
| This is why I think the economy on the other side could
| look so radically different. What if every coffee shop and
| brewery went out of business... and had no reason to re-
| open? Could something completely different fill the void?
| underbluewaters wrote:
| Sorry to single you out, but the fact that people still don't
| understand that a 1 month+ long lockdown is a certainty means
| we are nowhere near the bottom. By April the US is going to
| look a lot like where Italy is at now.
| rupert1234 wrote:
| Sorry to single you out, but the stock market usually trades
| in anticipation of recessions. It's not a proxy for the
| current GDP, it's an expectations market. The stock market
| could start a slow rise tomorrow and go until the end of the
| year and the entire year could be in a recession.
| legitster wrote:
| I think it's realistic that we could see some sort of easing
| within a month - like maybe restaurants and bars can reopen
| if they meet some stringent requirements. But would agree
| that it will be a long time before things return to "normal".
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