We have a virus problem, <i>not a credit</i> problem. The Fed is whipping out all the financial tools and it's totally ineffectual at best, and disastrous at worst as now those tools are used up (as it were).<p>Trying to address this pandemic with financial tools geared towards the market feels like trying to address a house fire by rebuilding parts that are still on fire <i>without actually putting out the fire</i>.<p>With no one at the wheel addressing the actual problem, the outlook feels grim. RIP my retirement account.
Former fund manager here. A few thoughts:<p>- Trading halts are there to let people catch their breath, supposedly. More likely it's in order to be able to announce news, because without news what's gonna change?<p>- The news everyone wants now is fiscal stimulus. From what I can see, there's a lot of consumers whose personal finances will blow up if the economy shuts for a couple of months. So perhaps what needs to be announced needs to be aimed at those types of people. Certainly people will protest if fiscal stimulus means just handing money to people and companies who aren't in dire straights. How about a rent break or something drastic like that?<p>- The effect of systematic strategies should not be underestimated. By that I'm lumping passive index trading in with various forms of systematic rules based trading (my specialty actually). Things that hop on the momentum bandwagon will make the move more extreme. They will also tend to whipsaw on reversals. There's also risk parity funds, which now need to reposition based on risk being higher.<p>- Also you have to figure on short options players getting blown up on this kind of thing. (Vol trading was my other specialty). Basically what I mean is in recent years it's been quite enticing to simply sell options to pick up premium, which normally is a bit too expensive in relation to the expected volatility (ie it seems smart a lot of the time). Of course nothing is free, and when there's a blowout the short gamma guys are also pushing the market the wrong way.<p>- There's at least one major investment bank that thinks this will end soon, markets to recover in H2, and no systemic risk. (Got that from a friend chain so grain of salt.) Not sure what to think, since this is more a question of how politicians will respond than ordinary day-to-day reading tea leaves.<p>Interesting times.
Every time I see one of these articles I'm reminded that it was only just over a month ago I had a conversation on here with people suggesting that taking a 7 year car loan to buy a car and using their saving to buy mutual funds was a sound financial decision.<p>It's amazing how quickly the whole world can be flipped upside down.
I don't understand this at all. Stock prices are supposed to include estimates of all futures earnings of a company, discounted for distance in the future, right? Even in the worst case where four or five percent of the population die and the economy is impacted by quarantines for a few years until we reached herd immunity, I don't see how this lowers future earnings by 30% and more.
I feel bad for the Fed folks because they were stuck in a terrible position.<p>Their options were basically:<p>Don't do anything - "Fed won't save us!"<p>Do something as scheduled (March 18) - "wow, we already priced this in and that's really all they're doing?"<p>Do something ahead of schedule (Sunday rate cut) - "they're panicking! They have no other tools left! I thought the Fed was supposed to be independent of the President!"
It will turn around one day. It feels like that’s impossible but it will. If you’re holding anything the just keep holding them. If you have cash, start dollar cost averaging with it over a many, many months timeline.<p>We will be fine eventually. I don’t claim to know when - just that eventually better days will come.
Not surprising this is happening a day after many states are in almost lockdown. Too many unknowns and lots of small business that lost their income. People are fearful and they have good reasons. Clearly this cannot continue for too long.<p>No one knows what will happen but I'm optimistic that like in South Korea and a couple of other places, next month things will get start looking better in Europa and US. FAANG companies should be fine too. They all have services that must be surging in demand. Amazon shopping, Netflix and FB usage, etc. Apple is likely to be the one most in trouble but they have so much cash they will survive. Ad spending will take a hit as companies wide down on spending, but should be only temporarily.<p>Currently no one knows what will happen. But long term investors should sleep well at night.
Serious question: Is this now a good time to refinance a home mortgage? Or should we wait until negative interest rates, which would surely set up the minimum positive mortgage rates. Or does it become irrelevant to mortgage rates at some point?
Why not just close the markets down? If everyone has to take a break from congregating and in some cases working (think retail and restaurant workers), then the market should have to as well. Everyone take a 3 week break from working and partying and chill the F out.
I got worried when Kai Ryssdal opened <i>Marketplace</i> last Thursday with, "this is the scary part." For those not familiar, he's a voice of extreme moderation and calm regardless of what happened that day or week in the markets.<p>I think what we're seeing is the market trying to price in the complete halt of the worlds' economies for an unspecified length of time. Monetary policy doesn't cure coronavirus, and until we see the end of the health crisis I don't think we'll see the floor of this ongoing crash.
On the bright side, the virus might buy us a year or two before we hit climate change tipping points. Imho, climate change is the actual threat to future earnings.
> The White House coronavirus briefing has been moved from 10:30am to 3:30pm, per updated White House guidance.<p><a href="https://twitter.com/KFaulders/status/1239540793213366273" rel="nofollow">https://twitter.com/KFaulders/status/1239540793213366273</a><p>Guess they're gonna try the "goose it right before the close" thing again.
We've got a long way to go down, IMO. A lot of these highly leveraged companies are going to implode, and the companies that lent them money will also implode.<p>The biggest victims (out of survivors) of this coronavirus panic are probably going to be the millions of people who will lose their jobs and go broke for a variety of reasons. Foreclosures will jump, big company CEOs will get large government handouts, and the poverty gap will just get wider.
Is there any aggregated source to see how Angel Investors and other startup financial investments are tracking? I wonder if there is going to be a financial crisis on a smaller scale for startups running out of runway.
Compared to other crashes where there seemed to be an underlying economic issue - this one feels like it will bounce back quickly at some point in my amateur opinion. Am tempted by some 2022 SPY leaps for this reason.
God, as a normal consumer investor this is terrifying because I don't know what to do without contributing to the problem - if there's even anything I can do.
No real solutions until credible leadership takes charge.<p>For example: <a href="https://www.who.int/emergencies/diseases/novel-coronavirus-2019/media-resources/press-briefings" rel="nofollow">https://www.who.int/emergencies/diseases/novel-coronavirus-2...</a>
My mind is blown that the fed would cut rates again before the Senate passed that bill from the House. All they did was highlight the fact that this is a huge problem and that we have absolutely no plan in place to deal with the fall out. Powell caving to Trump's tweets is embarrassing, I've lost so much respect for the Fed.
Well. Now all the previous 10 years of growth through wild money printing, affirmative action, green subsidies, life-saving regulations, etc are showing their real 'worth'.
Edit: looks like I was wrong about this being the Fed's biggest tool to correct the market. See below.<p>The 0% interest rate cut was supposed to be the last bullet and the Fed has very likely used it up too early. I suspect there was pressure from Trump to do something right this instant, because I don't see the Fed doing this out of their own accord. Possibly election related, we'll never know.<p>What can they do now? Negative interest rates? Everybody will withdraw their accounts at the same time. Combining this with the zero reserve requirements that was put into force for most banks, this is a recipe for a disaster unlike any we've seen before.