7 ms·

$3.4T has been wiped out of the stock market in a week

35 points by LinuxBender 7y ago

nostromo 7y ago
Seems like an overreaction, but healthy for people who are long. Interesting take: “Flu worse than corona.” https://www.reddit.com/r/wallstreetbets/comments/fau9wo/flu_worse_than_corona_diamond_princess_statistics/.compact https://www.reddit.com/r/wallstreetbets/comments/fau9wo/flu_...
- jmnicolas 7y ago
  Once again, if this is so benign the why China quarantined half the population ? One of the possibility would be that the virus might much more virulent on Asians (I assume the Diamond Princess passengers are mostly white).
  - nostromo 7y ago
    China acted before having the full picture. We still don’t have the full picture, but this is looking to be much milder than originally feared.
    - katmannthree 7y ago
      I wouldn't bet on that. China halted it with extremely drastic measures, quite possibly more than we'd be able to muster in the US. Not that many people here have sick leave, and few can afford to not work for a month. Given how virulent this is and the statistic that 20% of cases require medical attention, once the hospitals fill this could get quite ugly. Compounding that is the US government's response, which has been quite weak so far.
    - gdubs 7y ago
      This is something we’ll really only know in hindsight, but it’s reminiscent of the reaction post-y2k. People put in a lot of work to ensure there wasn’t a crisis, but the media narrative was that it was an overreaction (igniting all the work put in). China — and this is not meant to give them a pass on all sorts of errors and shortcomings — took fairly dramatic measures and were well equipped. My concern with this virus compared to SARS is that it spreads much easier, making the problem one of infrastructure and capacity to deal with a large number of cases all at once. E.g., how quickly can we ramp up to deal with a potential outbreak at scale in terms of ventilator beds, etc. And if not for this, then the next one. Coronavirus has raised a lot of questions about our preparedness and strategy for coping with a pandemic — and personally it feels like we’re sleepwalking a bit here in the West.
      - deleted 7y ago
        [deleted]
  - user5994461 7y ago
    China acted based on SARS, the previous virus they got that had a fatality rate around 10%. The new virus could have been the same and wipe double digits of the Chinese population so the central government went all in as soon as they heard of it.
  - srcmap 7y ago
    Another possibility might be the dead rate is much higher once the hospital systems are overwhelm like in Wuhan or in Iran. Worst if Medical personals were infected and unknowingly transmit the virus.
- saberdancer 7y ago
  It's based on an assumption that most people do not report being sick and aren't tested. In this situation where vast majority of people are aware of Coronavirus I doubt this is true. Diamond princess case is an interesting one, but it is also highly quarantined ship where they stopped the spread early on and then gave huge amount of medical attention to people on board. Even in such a situation, there were 10 deaths and apparently 30 or so people are in serious condition. Let's say half of those die, so we get to 25 deaths of 700 infected. We get 3.5%. One more issue is that apparently testing is not adequate, there have been numerous cases where someone tested negative several times only to test positive after a while. This means that containment processes in the western world will not work, no one is willing to blockade a huge region like China did. In the end, we could end up in a situation where China understood the issue and acted decisively to stop the spread while the western world does half measures and ends up having a huge pandemic on their hands.
- istorical 7y ago
  Percentage of patients who need ventilator support is magnitudes higher than for the flu. Around the world, no country has enough ICU beds and respirators to cope with the 10-20% of infected that will need them. Current death rate is a joke compared to what it will be once hospitals become swamped. Social distancing measures may prevent that outcome but will devastate the economy even further. Look behind the surface level information.
  - sigstoat 7y ago
    > Social distancing measures may prevent that outcome but will devastate the economy even further. it would be nice if we could encourage low-consequence social distancing now, instead of being mindlessly told not to "panic". we'd have more leeway to keep running the parts of the economy that require social contact.
- sfoley 7y ago
  You linked to WSB.
ipnon 7y ago
This seems like a lot of money in terms of personal finance. It's hard to imagine having $3,400,000,000,000 less money in your savings account. But global nominal GDP was $80,934,771,028,340 in 2017 [0]. This is a pothole. [0] https://www.worldometers.info/gdp/gdp-by-country/ https://www.worldometers.info/gdp/gdp-by-country/
- taywrobel 7y ago
  It's a 4.2% drop, using your numbers. That's not a pothole. If looking at my savings account, I saw a sudden 4.2% drop it would not just be a "meh, it happens, no problem here" type situation.
  - entropea 7y ago
    That would be like $10 for most of the country.
    - Finch2192 7y ago
      That isn't really the point, though, is it?
    - easton_s 7y ago
      When a person has $240 bucks in their account they know exactly what that $10 is for.
      - gentleman11 7y ago
        Fair, but back when I had $240 in my account, I didn’t have any stocks. Stocks were rich person problems to me back then
    - vikramkr 7y ago
      And for someone for who that 10 bucks is 4 percent of their total savings, that's a few days or a week or a month in some parts of the world without food to put on the table.
- 7y ago
buboard 7y ago
3.4 imaginary trillion
- samsonradu 7y ago
  Not sure why you were downvoted, considering the past central bank actions and current debt/deficit levels.
- ars 7y ago
  If you consider that money to be imaginary, then all money is imaginary. Money only has value because people assign it value. So since people assign stocks value they have value. It's logically inconsistent to consider this loss imaginary but other money to be real.
  - buboard 7y ago
    this is not money, it's market cap
    - gowld 7y ago
      Which people sell for money.
jithurjacob 7y ago
Can someone please explain how the money gets wiped out?
- ActorNightly 7y ago
  This is gonna be sort of basic but i think it conveys the main point Lets say that you own x units of item y. You sell one of item y to someone for $100 dollars on an established exchange. According to the exchange, you have 100*(x-1) dollars of wealth. Next day, some person comes along and tries to sell the same item for $100, but can only find a buyer for $50. Your wealth has now been cut in half.
  - saidajigumi 7y ago
    Then there's Warren Buffet's approach, which is to understand the "value" of the asset. He uses an example around a farm he purchased, one of his early investments. He likened the stock market to a (hypothetical) crazy neighbor to his farm, who every morning shouts a purchase price over the fence at him. One day, the price is half what it was the prior day! Buffet's lesson is that he learned to remain calm, because the underlying value of the investment didn't change. Thus the challenge is separating market feedback reactions (aka fear and bidding robots) from real-world valuation adjustments (aka mere delayed demand vs. destruction of long-term value).
    - strbean 7y ago
      This is an excellent analogy. The stock market is an aggregate of people's sentiments and numerical analyses (which often have absolutely no predictive power). I think the old George Carlin quote applies perfectly to it - "Think of how stupid the average person is, and realize half of them are stupider than that." If you've ever tried to pick stocks, you'll see countless examples where the stock price just seems to ignore the realities of a company. Level Three Communications taught me that lesson. Huge backbone fiber provider, growing and scoring major contracts continually, increasing revenues/profits for a decade, and the stock prices was practically constant. Then they rebrand as a CDN (with zero impact to how they operate) and their price rides the buzzword wave right into a big acquisition.
jiveturkey 7y ago
OMG. I love lite.cnn.com. Please oh please, HN moderators, change all CNN links to lite.cnn.com automatically from now on.
- taywrobel 7y ago
  I ran a quick comparison between this and the same article served via AMP. Lite: - 6 Resources Loaded - 396ms Load Time - 452KB total size (majority of which is two analytics JS scripts) AMP: - 241 Resources Loaded - 4.87s Load time - 6.15MB total size - 31 JS Errors - 10 JS Warnings AMP is no replacement for a good, minimalist design. FYI, there's an equivalent for NPR as well - https://text.npr.org/about.html https://text.npr.org/about.html
- sfoley 7y ago
  It really shows how little content is in a typical 2020 journalism article.
_bxg1 7y ago
"Stocks are on sale this week"
- gentleman11 7y ago
  I still think they’ll be on bigger sale next week
  - katmannthree 7y ago
    I imagine they'll stay on sale until the US reaches the point China is at right now, signs of containment and tentative resumption of normal economic activities.
    - alpineidyll3 7y ago
      Monetize your bet then. :P Sell some calls a few weeks in the future. Implied volatility is very high right now.
      - ohiovr 7y ago
        You can bet on volatility with etfs like VIXY. Now that the dynamics of the economy have changed an anti fundamentals trade might be ok.
      - katmannthree 7y ago
        If I could afford to do that I would. I remain an observer, I'm concerned about remaining solvent through whatever the next few months bring.
alpineidyll3 7y ago
To use 'wiped out' to describe market price changes doesn't really help people understand why this happens. It's this type of thinking which has killed interest rates, and has grown wealth inequality. A better headline would be: "Demand for equity in companies with flat earnings potential returned to levels seen earlier in the year." The subheadline would be: "speculative purchases banking on buybacks issued with cheap debt financed with promised rate cuts temporarily paused" The sub-sub-headline would be: "CEO's plan aggressive debt financing to secure bonuses tied to stock price, not performance."

35 points by LinuxBender 7y ago

Seems like an overreaction, but healthy for people who are long. Interesting take: “Flu worse than corona.” https://www.reddit.com/r/wallstreetbets/comments/fau9wo/flu_worse_than_corona_diamond_princess_statistics/.compact https://www.reddit.com/r/wallstreetbets/comments/fau9wo/flu_...

jmnicolas 7y ago
Once again, if this is so benign the why China quarantined half the population ? One of the possibility would be that the virus might much more virulent on Asians (I assume the Diamond Princess passengers are mostly white).
- nostromo 7y ago
  China acted before having the full picture. We still don’t have the full picture, but this is looking to be much milder than originally feared.
  - katmannthree 7y ago
    I wouldn't bet on that. China halted it with extremely drastic measures, quite possibly more than we'd be able to muster in the US. Not that many people here have sick leave, and few can afford to not work for a month. Given how virulent this is and the statistic that 20% of cases require medical attention, once the hospitals fill this could get quite ugly. Compounding that is the US government's response, which has been quite weak so far.
  - gdubs 7y ago
    This is something we’ll really only know in hindsight, but it’s reminiscent of the reaction post-y2k. People put in a lot of work to ensure there wasn’t a crisis, but the media narrative was that it was an overreaction (igniting all the work put in). China — and this is not meant to give them a pass on all sorts of errors and shortcomings — took fairly dramatic measures and were well equipped. My concern with this virus compared to SARS is that it spreads much easier, making the problem one of infrastructure and capacity to deal with a large number of cases all at once. E.g., how quickly can we ramp up to deal with a potential outbreak at scale in terms of ventilator beds, etc. And if not for this, then the next one. Coronavirus has raised a lot of questions about our preparedness and strategy for coping with a pandemic — and personally it feels like we’re sleepwalking a bit here in the West.
    - deleted 7y ago
      [deleted]
- user5994461 7y ago
  China acted based on SARS, the previous virus they got that had a fatality rate around 10%. The new virus could have been the same and wipe double digits of the Chinese population so the central government went all in as soon as they heard of it.
- srcmap 7y ago
  Another possibility might be the dead rate is much higher once the hospital systems are overwhelm like in Wuhan or in Iran. Worst if Medical personals were infected and unknowingly transmit the virus.
saberdancer 7y ago
It's based on an assumption that most people do not report being sick and aren't tested. In this situation where vast majority of people are aware of Coronavirus I doubt this is true. Diamond princess case is an interesting one, but it is also highly quarantined ship where they stopped the spread early on and then gave huge amount of medical attention to people on board. Even in such a situation, there were 10 deaths and apparently 30 or so people are in serious condition. Let's say half of those die, so we get to 25 deaths of 700 infected. We get 3.5%. One more issue is that apparently testing is not adequate, there have been numerous cases where someone tested negative several times only to test positive after a while. This means that containment processes in the western world will not work, no one is willing to blockade a huge region like China did. In the end, we could end up in a situation where China understood the issue and acted decisively to stop the spread while the western world does half measures and ends up having a huge pandemic on their hands.
istorical 7y ago
Percentage of patients who need ventilator support is magnitudes higher than for the flu. Around the world, no country has enough ICU beds and respirators to cope with the 10-20% of infected that will need them. Current death rate is a joke compared to what it will be once hospitals become swamped. Social distancing measures may prevent that outcome but will devastate the economy even further. Look behind the surface level information.
- sigstoat 7y ago
  > Social distancing measures may prevent that outcome but will devastate the economy even further. it would be nice if we could encourage low-consequence social distancing now, instead of being mindlessly told not to "panic". we'd have more leeway to keep running the parts of the economy that require social contact.
sfoley 7y ago
You linked to WSB.

ipnon 7y ago

This seems like a lot of money in terms of personal finance. It's hard to imagine having $3,400,000,000,000 less money in your savings account. But global nominal GDP was $80,934,771,028,340 in 2017 [0]. This is a pothole. [0] https://www.worldometers.info/gdp/gdp-by-country/ https://www.worldometers.info/gdp/gdp-by-country/

taywrobel 7y ago
It's a 4.2% drop, using your numbers. That's not a pothole. If looking at my savings account, I saw a sudden 4.2% drop it would not just be a "meh, it happens, no problem here" type situation.
- entropea 7y ago
  That would be like $10 for most of the country.
  - Finch2192 7y ago
    That isn't really the point, though, is it?
  - easton_s 7y ago
    When a person has $240 bucks in their account they know exactly what that $10 is for.
    - gentleman11 7y ago
      Fair, but back when I had $240 in my account, I didn’t have any stocks. Stocks were rich person problems to me back then
  - vikramkr 7y ago
    And for someone for who that 10 bucks is 4 percent of their total savings, that's a few days or a week or a month in some parts of the world without food to put on the table.
7y ago

buboard 7y ago

3.4 imaginary trillion

samsonradu 7y ago
Not sure why you were downvoted, considering the past central bank actions and current debt/deficit levels.
ars 7y ago
If you consider that money to be imaginary, then all money is imaginary. Money only has value because people assign it value. So since people assign stocks value they have value. It's logically inconsistent to consider this loss imaginary but other money to be real.
- buboard 7y ago
  this is not money, it's market cap
  - gowld 7y ago
    Which people sell for money.

jithurjacob 7y ago

Can someone please explain how the money gets wiped out?

ActorNightly 7y ago
This is gonna be sort of basic but i think it conveys the main point Lets say that you own x units of item y. You sell one of item y to someone for $100 dollars on an established exchange. According to the exchange, you have 100*(x-1) dollars of wealth. Next day, some person comes along and tries to sell the same item for $100, but can only find a buyer for $50. Your wealth has now been cut in half.
- saidajigumi 7y ago
  Then there's Warren Buffet's approach, which is to understand the "value" of the asset. He uses an example around a farm he purchased, one of his early investments. He likened the stock market to a (hypothetical) crazy neighbor to his farm, who every morning shouts a purchase price over the fence at him. One day, the price is half what it was the prior day! Buffet's lesson is that he learned to remain calm, because the underlying value of the investment didn't change. Thus the challenge is separating market feedback reactions (aka fear and bidding robots) from real-world valuation adjustments (aka mere delayed demand vs. destruction of long-term value).
  - strbean 7y ago
    This is an excellent analogy. The stock market is an aggregate of people's sentiments and numerical analyses (which often have absolutely no predictive power). I think the old George Carlin quote applies perfectly to it - "Think of how stupid the average person is, and realize half of them are stupider than that." If you've ever tried to pick stocks, you'll see countless examples where the stock price just seems to ignore the realities of a company. Level Three Communications taught me that lesson. Huge backbone fiber provider, growing and scoring major contracts continually, increasing revenues/profits for a decade, and the stock prices was practically constant. Then they rebrand as a CDN (with zero impact to how they operate) and their price rides the buzzword wave right into a big acquisition.

jiveturkey 7y ago

OMG. I love lite.cnn.com. Please oh please, HN moderators, change all CNN links to lite.cnn.com automatically from now on.

taywrobel 7y ago
I ran a quick comparison between this and the same article served via AMP. Lite: - 6 Resources Loaded - 396ms Load Time - 452KB total size (majority of which is two analytics JS scripts) AMP: - 241 Resources Loaded - 4.87s Load time - 6.15MB total size - 31 JS Errors - 10 JS Warnings AMP is no replacement for a good, minimalist design. FYI, there's an equivalent for NPR as well - https://text.npr.org/about.html https://text.npr.org/about.html
sfoley 7y ago
It really shows how little content is in a typical 2020 journalism article.

_bxg1 7y ago

"Stocks are on sale this week"

gentleman11 7y ago
I still think they’ll be on bigger sale next week
- katmannthree 7y ago
  I imagine they'll stay on sale until the US reaches the point China is at right now, signs of containment and tentative resumption of normal economic activities.
  - alpineidyll3 7y ago
    Monetize your bet then. :P Sell some calls a few weeks in the future. Implied volatility is very high right now.
    - ohiovr 7y ago
      You can bet on volatility with etfs like VIXY. Now that the dynamics of the economy have changed an anti fundamentals trade might be ok.
    - katmannthree 7y ago
      If I could afford to do that I would. I remain an observer, I'm concerned about remaining solvent through whatever the next few months bring.

alpineidyll3 7y ago

To use 'wiped out' to describe market price changes doesn't really help people understand why this happens. It's this type of thinking which has killed interest rates, and has grown wealth inequality. A better headline would be: "Demand for equity in companies with flat earnings potential returned to levels seen earlier in the year." The subheadline would be: "speculative purchases banking on buybacks issued with cheap debt financed with promised rate cuts temporarily paused" The sub-sub-headline would be: "CEO's plan aggressive debt financing to secure bonuses tied to stock price, not performance."