9 ms·

S&P 500 drops 9%, extending losses after 15-minute trading halt

111 points by rococode 7y ago

stuff4ben 7y ago
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.
- 0xffff2 7y ago
  It has been proposed [0]. The sheer fact of how unprecedented it would be makes it unlikely. 0: https://www.bloomberg.com/opinion/articles/2020-03-16/data-and-psychology-may-argue-for-us-stock-market-closure?sref=1kJVNqnU https://www.bloomberg.com/opinion/articles/2020-03-16/data-a...
loopz 7y ago
No real solutions until credible leadership takes charge. For example: https://www.who.int/emergencies/diseases/novel-coronavirus-2019/media-resources/press-briefings https://www.who.int/emergencies/diseases/novel-coronavirus-2...
adtac 7y ago
Edit: looks like I was wrong about this being the Fed's biggest tool to correct the market. See below. 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. 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.
- mech1234 7y ago
  The zero reserve requirements are intended to prevent the problems caused by a potential bank run. Once the economy is running smoothly again, reserve requirements will be made more stringent again. It seems likely that the Fed is more well informed of how quickly lending is drying up than most people are, and their injection of ~$1.5 trillion must have been prudent. QE was the bullet the Fed still had in 2008, and it is the bullet the Fed still has in 2020. It seems that QE worked better than the negative interest rates Europe used.
  - thawaway1837 7y ago
    Didn’t they also announce a QE program of 700Bn?
- martythemaniak 7y ago
  The reasoning I read is that this is the Fed basically passing the buck and saying "we're done, we can't and won't do more" and telling congress it's Fiscal Stimulus time.
  - llampx 7y ago
    Three words: negative interest rates. Trump won't be happy until the US has the most negative interest rates of the world.
    - a3n 7y ago
      Which will be good for industries that depend on large loans for development and construction. Like commercial real estate.
- JumpCrisscross 7y ago
  > The 0% interest rate cut was supposed to be the last bullet Not really. > What can they do now? The Fed has a vast array of tools, the Fed Funds rate being only one. Open market activities, interest on excess reserves, QE (i.e. non-Treasury asset purchases), discount window lending, et cetera remain.
andrewjrangel 7y ago
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.
- romanovcode 7y ago
  It already is a full-scale financial crisis. People in travel industry are laid-off as we speak.
- PragmaticPulp 7y ago
  > Is there any aggregated source to see how Angel Investors and other startup financial investments are tracking? I know it seems like an eternity, but we're only a few weeks into this. Startups are generally expected to be unprofitable for a long time anyway. They're not going to implode after a few weeks of a slowed economy. The real effects will take months or years to see.
  - londons_explore 7y ago
    But they do tend to need new rounds of investment every few months... If those dry up, the startups will too.
unlinked_dll 7y ago
I got worried when Kai Ryssdal opened Marketplace 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. 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.
- realusername 7y ago
  That's also my opinion, monetary policies have no effect because this isn't a financial crisis, it's an existential crisis because economies needs to stop with a lot of uncertainty, no amount of money can solve that.
  - jmisavage 7y ago
    This rate cut is just feeding into fears.
- nemo44x 7y ago
  I think a lot of people are trying to get out before the markets as closed and impossible to liquidate if needed.
- the_snooze 7y ago
  >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. There's a Planet Money that talks about the virus and the economic response to it. The main takeaway is that it's completely misguided to think about economics now. The underlying problem is a public health crisis. One of people interviewed in that episode likened the administration's response to wringing out your shirt as a storm is rolling in, when in fact we should be seeking shelter to stay dry. https://www.npr.org/2020/03/13/815677688/episode-979-medicine-for-the-economy https://www.npr.org/2020/03/13/815677688/episode-979-medicin...
brenden2 7y ago
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. 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.
- tomp 7y ago
  > big company CEOs will get large government handouts Indeed, which is why I'm against emergency loans, but for emergency equity... it's free market capitalism, if your company isn't able to survive on its own (due to your lack of planning) and needs government help, then you don't deserve to own (all of) it.
- obituary_latte 7y ago
  I'm a layman so apologies, but any examples of these highly leveraged companies you can give?
  - brenden2 7y ago
    Here's some information about it: https://en.wikipedia.org/wiki/Corporate_debt_bubble https://en.wikipedia.org/wiki/Corporate_debt_bubble
- PragmaticPulp 7y ago
  > We've got a long way to go down, IMO. By definition, the market will bottom out when everyone's pessimism peaks. Earnings season will be interesting. Seeing the world governments' fiscal stimulus plans will be interesting.
  - dennisgorelik 7y ago
    > market will bottom out when everyone's pessimism peaks Do you think we are at the peak of pessimism?
- 7y ago
llcoolv 7y ago
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'.
- llcoolv 7y ago
  The truth is that by printing money and stealing value from someone you don't make the pie larger...
rococode 7y ago
I feel bad for the Fed folks because they were stuck in a terrible position. Their options were basically: Don't do anything - "Fed won't save us!" Do something as scheduled (March 18) - "wow, we already priced this in and that's really all they're doing?" 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!"
- thawaway1837 7y ago
  The Fed lost its independence at least a year ago, since the President has maintained a sustained and public campaign to pressure them. But the real issue here is that people don’t see this as a monetary issue and the fiscal side is dependent on an administration that has only just come around to recognizing it as a problem after having spent weeks trying to minimize it and actively discourage steps to reduce the impact of COVID 19.
  - bluGill 7y ago
    Your first paragraph has been said by various people for various reasons for at least the last 10 years.
    - ardy42 7y ago
      >> The Fed lost its independence at least a year ago, since the President has maintained a sustained and public campaign to pressure them. > Your first paragraph has been said by various people for various reasons for at least the last 10 years. It's truer now that it's ever been: Yesterday: Trump Says He Could Demote Fed Chair Powell, Risking More Market Turmoil (https://www.nytimes.com/2020/03/14/business/economy/trump-powell-fed-chair.html https://www.nytimes.com/2020/03/14/business/economy/trump-po...) Today: Trump congratulates Fed for rates cut, calls action 'terrific' (https://www.reuters.com/article/us-health-coronavirus-central-banks-trum-idUSKBN2121B6 https://www.reuters.com/article/us-health-coronavirus-centra...)
    - thawaway1837 7y ago
      The difference being no other president in at least the past 3 decades has publicly tried to influence the Fed. I’m sure every president has done so privately. Doing it publicly is not the same thing. There’s also the fact that no other president did so during a boom cycle. That was new as well. It’s possible Obama and Bush tried to influence Bernanke and Greenspan. But it’s definite Trump did so. I only need to look at his twitter history to confirm that.
adrianN 7y ago
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.
- em500 7y ago
  Robert Shiller (1980): "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?" (https://www.nber.org/papers/w0456.pdf https://www.nber.org/papers/w0456.pdf) Answer: yes they do, ergo stock prices are affected by much more than just estimates of futures cash flows.
  - adrianN 7y ago
    That's a great reference. Thanks.
    - em500 7y ago
      The article was later published as American Economic Review 71(3): 421-436, one of the absolute top journals in economics, and selected as one of its top-20 papers in the past centuries[1], and one of the works that won Shiller his Nobel Prize in 2013[2]. [1] https://www.aeaweb.org/articles?id=10.1257/aer.101.1.1 https://www.aeaweb.org/articles?id=10.1257/aer.101.1.1 [2] https://www.nobelprize.org/prizes/economic-sciences/2013/shiller/facts/ https://www.nobelprize.org/prizes/economic-sciences/2013/shi...
- tehlike 7y ago
  Market these days is not about fundamentals or future cashflow, but is about sentiment. Sentiment is what takes this all down.
- orblivion 7y ago
  A few years? How would people run those companies? Not everybody can work from home right?
ceejayoz 7y ago
> The White House coronavirus briefing has been moved from 10:30am to 3:30pm, per updated White House guidance. https://twitter.com/KFaulders/status/1239540793213366273 https://twitter.com/KFaulders/status/1239540793213366273 Guess they're gonna try the "goose it right before the close" thing again.
VBprogrammer 7y ago
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. It's amazing how quickly the whole world can be flipped upside down.
- skrtskrt 7y ago
  With good credit, your car loan will be sub 4% interest. Putting an extra $300 into the market every month should still give 4% if you have a long enough investing horizon. Also, if times get tough, you'll be glad you don't HAVE to pay that extra $300 a month toward the car.
- graeme 7y ago
  That sort of talk from regular folk is often given as being the sign markets are too high. But indeed every day is a week or a month now.
- enraged_camel 7y ago
  >>taking a 7 year car loan to buy a car and using their saving to buy mutual funds Those are two extremely different things, and you're being very disingenuous by implying they aren't.
  - wil421 7y ago
    They are different and it doesn’t matter. You shouldn’t be extending a car loan just to put a $100 or so a month into a mutual fund.
- sparkling 7y ago
  It all depends on how long your investment horizon is. If you have another 30 years until retirement it would be foolish not to buy stocks now. Not saying to dump every penny you have into the market at once, but increase your buying NOW. The dollar is being devalued as we speak, holding cash makes little sense. When all the dust and panic around this virus has settled, many quality companies will still be around. Procter & Gamble will still be selling detergents and tampons, McDonalds will still be frying hamburgers and Microsoft will still be selling office subscriptions.
a3n 7y ago
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?
- moneywoes 7y ago
  How big are the fees involved?
  - glial 7y ago
    Typically around 1% of the mortgage amount, I think?
- mathieutd 7y ago
  Mortgage rates have moved surprisingly little. They usually trade at around a 2% premium over the 10-year government bonds for a 30-year fixed. Right now that would mean about 2.8% but my local bank quotes 3.5%. My guess is that spread is going to shrink over time but who knows. I'm waiting...
  - edoceo 7y ago
    It dipped last week, but popped back up from refi surge. I'm thinking to give a few weeks to settle. Hoping to see 3.0
- toast0 7y ago
  Setup a spreadsheet to show how many months it takes to payback the refi costs at today's rates. Then see how much lower the rates would have to go for the payback to be a reasonable number of months again. If you don't think the second one is going to happen, maybe wait for a bit lower before doing a refi, but who knows if it'll go lower. Other things to consider right now. If your job goes away, and it's hard to pay your mortgage, it might be better to be on an existing loan and not a new loan.
nemo44x 7y ago
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. We will be fine eventually. I don’t claim to know when - just that eventually better days will come.
- vimslayer 7y ago
  Problem is that dollar cost averaging becomes nigh impossible if you loose your job because of the situation.
  - nemo44x 7y ago
    Yeah you shouldn't gamble your cash cushion. Just if you have extra cash you've been waiting to invest, or have been cost averaging, etc. Prepare to not have a job - always.
lordnacho 7y ago
Former fund manager here. A few thoughts: - 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? - 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? - 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. - 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. - 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. Interesting times.
- AnthonyMouse 7y ago
  > Certainly people will protest if fiscal stimulus means just handing money to people and companies who aren't in dire straights. How is it not the opposite? Bailing out only the people who have lived beyond their means or made poor decisions is a big moral hazard. Moreover, it doesn't do everything you want -- if you give money to people who are in debt, they use it to make their loan payments and pay rent. Which is better than defaults and evictions, but you also want some of the money to go to people who will actually spend it and stimulate new demand. You also have to worry about some kind of emergency "dire straights" metric being off by a significant amount in one direction or another and as a result you either end up paying most of the money to whoever is most willing to play accounting tricks or lie on forms, or it doesn't go where it's supposed to and you still get the defaults and evictions, or both. As a result it seems like the best option is to distribute money evenly, to everybody.
adrianN 7y ago
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.
tinyhouse 7y ago
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. 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. Currently no one knows what will happen. But long term investors should sleep well at night.
wycy 7y ago
We have a virus problem, not a credit 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). 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 without actually putting out the fire. With no one at the wheel addressing the actual problem, the outlook feels grim. RIP my retirement account.
- moneywoes 7y ago
  What else can they do? Watch people's portfolios burn down tot he ground? Will that make the situation better?
  - mertd 7y ago
    Fix the outbreak then fix the financial system. The first one isn't the Fed's job.
  - wycy 7y ago
    If the Fed had done nothing at all, it's conceivable that the markets would still be in exactly the same shape they are now (or even possibly better), except we'd still have those tools at our disposal. To an extent, that the Fed took such drastic action probably helped to spook investors even more, since (1) now those tools are gone, (2) it implied that the Fed is panicked and doesn't know what to do, (3) it implied that the Fed thinks the market will sink dramatically. As to what I think they should do: address the needs of the people who will be hardest hit. Interest-free moratorium on mortgages, rents, debts, and/or full FMLA. This will actually help with the underlying virus problem more quickly, and consequently should help fix the underlying market problem (lack of demand) more quickly.
  - enraged_camel 7y ago
    Sometimes the right thing to do is to do nothing.
  - fuzzfactor 7y ago
    That may be the least of your worries. Those without portfolios will have been totally devastated much earlier and might become incentivized to burn all kinds of other things to the ground.
eximius 7y ago
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.
- smcg 7y ago
  as a normal consumer investor your choices are a drop in the ocean.
- 2sk21 7y ago
  If you have a cash buffer sit tight. The market will eventually find a relatively constant level to price in the disruption
Scirra_Tom 7y ago
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.
chadmeister 7y ago
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.

111 points by rococode 7y ago

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.

0xffff2 7y ago
It has been proposed [0]. The sheer fact of how unprecedented it would be makes it unlikely. 0: https://www.bloomberg.com/opinion/articles/2020-03-16/data-and-psychology-may-argue-for-us-stock-market-closure?sref=1kJVNqnU https://www.bloomberg.com/opinion/articles/2020-03-16/data-a...

loopz 7y ago

No real solutions until credible leadership takes charge. For example: https://www.who.int/emergencies/diseases/novel-coronavirus-2019/media-resources/press-briefings https://www.who.int/emergencies/diseases/novel-coronavirus-2...

adtac 7y ago

Edit: looks like I was wrong about this being the Fed's biggest tool to correct the market. See below. 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. 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.

mech1234 7y ago
The zero reserve requirements are intended to prevent the problems caused by a potential bank run. Once the economy is running smoothly again, reserve requirements will be made more stringent again. It seems likely that the Fed is more well informed of how quickly lending is drying up than most people are, and their injection of ~$1.5 trillion must have been prudent. QE was the bullet the Fed still had in 2008, and it is the bullet the Fed still has in 2020. It seems that QE worked better than the negative interest rates Europe used.
- thawaway1837 7y ago
  Didn’t they also announce a QE program of 700Bn?
martythemaniak 7y ago
The reasoning I read is that this is the Fed basically passing the buck and saying "we're done, we can't and won't do more" and telling congress it's Fiscal Stimulus time.
- llampx 7y ago
  Three words: negative interest rates. Trump won't be happy until the US has the most negative interest rates of the world.
  - a3n 7y ago
    Which will be good for industries that depend on large loans for development and construction. Like commercial real estate.
JumpCrisscross 7y ago
> The 0% interest rate cut was supposed to be the last bullet Not really. > What can they do now? The Fed has a vast array of tools, the Fed Funds rate being only one. Open market activities, interest on excess reserves, QE (i.e. non-Treasury asset purchases), discount window lending, et cetera remain.

andrewjrangel 7y ago

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.

romanovcode 7y ago
It already is a full-scale financial crisis. People in travel industry are laid-off as we speak.
PragmaticPulp 7y ago
> Is there any aggregated source to see how Angel Investors and other startup financial investments are tracking? I know it seems like an eternity, but we're only a few weeks into this. Startups are generally expected to be unprofitable for a long time anyway. They're not going to implode after a few weeks of a slowed economy. The real effects will take months or years to see.
- londons_explore 7y ago
  But they do tend to need new rounds of investment every few months... If those dry up, the startups will too.

unlinked_dll 7y ago

I got worried when Kai Ryssdal opened Marketplace 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. 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.

realusername 7y ago
That's also my opinion, monetary policies have no effect because this isn't a financial crisis, it's an existential crisis because economies needs to stop with a lot of uncertainty, no amount of money can solve that.
- jmisavage 7y ago
  This rate cut is just feeding into fears.
nemo44x 7y ago
I think a lot of people are trying to get out before the markets as closed and impossible to liquidate if needed.
the_snooze 7y ago
>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. There's a Planet Money that talks about the virus and the economic response to it. The main takeaway is that it's completely misguided to think about economics now. The underlying problem is a public health crisis. One of people interviewed in that episode likened the administration's response to wringing out your shirt as a storm is rolling in, when in fact we should be seeking shelter to stay dry. https://www.npr.org/2020/03/13/815677688/episode-979-medicine-for-the-economy https://www.npr.org/2020/03/13/815677688/episode-979-medicin...

brenden2 7y ago

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. 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.

tomp 7y ago
> big company CEOs will get large government handouts Indeed, which is why I'm against emergency loans, but for emergency equity... it's free market capitalism, if your company isn't able to survive on its own (due to your lack of planning) and needs government help, then you don't deserve to own (all of) it.
obituary_latte 7y ago
I'm a layman so apologies, but any examples of these highly leveraged companies you can give?
- brenden2 7y ago
  Here's some information about it: https://en.wikipedia.org/wiki/Corporate_debt_bubble https://en.wikipedia.org/wiki/Corporate_debt_bubble
PragmaticPulp 7y ago
> We've got a long way to go down, IMO. By definition, the market will bottom out when everyone's pessimism peaks. Earnings season will be interesting. Seeing the world governments' fiscal stimulus plans will be interesting.
- dennisgorelik 7y ago
  > market will bottom out when everyone's pessimism peaks Do you think we are at the peak of pessimism?
7y ago

llcoolv 7y ago

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'.

llcoolv 7y ago
The truth is that by printing money and stealing value from someone you don't make the pie larger...

rococode 7y ago

I feel bad for the Fed folks because they were stuck in a terrible position. Their options were basically: Don't do anything - "Fed won't save us!" Do something as scheduled (March 18) - "wow, we already priced this in and that's really all they're doing?" 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!"

thawaway1837 7y ago
The Fed lost its independence at least a year ago, since the President has maintained a sustained and public campaign to pressure them. But the real issue here is that people don’t see this as a monetary issue and the fiscal side is dependent on an administration that has only just come around to recognizing it as a problem after having spent weeks trying to minimize it and actively discourage steps to reduce the impact of COVID 19.
- bluGill 7y ago
  Your first paragraph has been said by various people for various reasons for at least the last 10 years.
  - ardy42 7y ago
    >> The Fed lost its independence at least a year ago, since the President has maintained a sustained and public campaign to pressure them. > Your first paragraph has been said by various people for various reasons for at least the last 10 years. It's truer now that it's ever been: Yesterday: Trump Says He Could Demote Fed Chair Powell, Risking More Market Turmoil (https://www.nytimes.com/2020/03/14/business/economy/trump-powell-fed-chair.html https://www.nytimes.com/2020/03/14/business/economy/trump-po...) Today: Trump congratulates Fed for rates cut, calls action 'terrific' (https://www.reuters.com/article/us-health-coronavirus-central-banks-trum-idUSKBN2121B6 https://www.reuters.com/article/us-health-coronavirus-centra...)
  - thawaway1837 7y ago
    The difference being no other president in at least the past 3 decades has publicly tried to influence the Fed. I’m sure every president has done so privately. Doing it publicly is not the same thing. There’s also the fact that no other president did so during a boom cycle. That was new as well. It’s possible Obama and Bush tried to influence Bernanke and Greenspan. But it’s definite Trump did so. I only need to look at his twitter history to confirm that.

adrianN 7y ago

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.

em500 7y ago
Robert Shiller (1980): "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?" (https://www.nber.org/papers/w0456.pdf https://www.nber.org/papers/w0456.pdf) Answer: yes they do, ergo stock prices are affected by much more than just estimates of futures cash flows.
- adrianN 7y ago
  That's a great reference. Thanks.
  - em500 7y ago
    The article was later published as American Economic Review 71(3): 421-436, one of the absolute top journals in economics, and selected as one of its top-20 papers in the past centuries[1], and one of the works that won Shiller his Nobel Prize in 2013[2]. [1] https://www.aeaweb.org/articles?id=10.1257/aer.101.1.1 https://www.aeaweb.org/articles?id=10.1257/aer.101.1.1 [2] https://www.nobelprize.org/prizes/economic-sciences/2013/shiller/facts/ https://www.nobelprize.org/prizes/economic-sciences/2013/shi...
tehlike 7y ago
Market these days is not about fundamentals or future cashflow, but is about sentiment. Sentiment is what takes this all down.
orblivion 7y ago
A few years? How would people run those companies? Not everybody can work from home right?

ceejayoz 7y ago

> The White House coronavirus briefing has been moved from 10:30am to 3:30pm, per updated White House guidance. https://twitter.com/KFaulders/status/1239540793213366273 https://twitter.com/KFaulders/status/1239540793213366273 Guess they're gonna try the "goose it right before the close" thing again.

VBprogrammer 7y ago

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. It's amazing how quickly the whole world can be flipped upside down.

skrtskrt 7y ago
With good credit, your car loan will be sub 4% interest. Putting an extra $300 into the market every month should still give 4% if you have a long enough investing horizon. Also, if times get tough, you'll be glad you don't HAVE to pay that extra $300 a month toward the car.
graeme 7y ago
That sort of talk from regular folk is often given as being the sign markets are too high. But indeed every day is a week or a month now.
enraged_camel 7y ago
>>taking a 7 year car loan to buy a car and using their saving to buy mutual funds Those are two extremely different things, and you're being very disingenuous by implying they aren't.
- wil421 7y ago
  They are different and it doesn’t matter. You shouldn’t be extending a car loan just to put a $100 or so a month into a mutual fund.
sparkling 7y ago
It all depends on how long your investment horizon is. If you have another 30 years until retirement it would be foolish not to buy stocks now. Not saying to dump every penny you have into the market at once, but increase your buying NOW. The dollar is being devalued as we speak, holding cash makes little sense. When all the dust and panic around this virus has settled, many quality companies will still be around. Procter & Gamble will still be selling detergents and tampons, McDonalds will still be frying hamburgers and Microsoft will still be selling office subscriptions.

a3n 7y ago

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?

moneywoes 7y ago
How big are the fees involved?
- glial 7y ago
  Typically around 1% of the mortgage amount, I think?
mathieutd 7y ago
Mortgage rates have moved surprisingly little. They usually trade at around a 2% premium over the 10-year government bonds for a 30-year fixed. Right now that would mean about 2.8% but my local bank quotes 3.5%. My guess is that spread is going to shrink over time but who knows. I'm waiting...
- edoceo 7y ago
  It dipped last week, but popped back up from refi surge. I'm thinking to give a few weeks to settle. Hoping to see 3.0
toast0 7y ago
Setup a spreadsheet to show how many months it takes to payback the refi costs at today's rates. Then see how much lower the rates would have to go for the payback to be a reasonable number of months again. If you don't think the second one is going to happen, maybe wait for a bit lower before doing a refi, but who knows if it'll go lower. Other things to consider right now. If your job goes away, and it's hard to pay your mortgage, it might be better to be on an existing loan and not a new loan.

nemo44x 7y ago

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. We will be fine eventually. I don’t claim to know when - just that eventually better days will come.

vimslayer 7y ago
Problem is that dollar cost averaging becomes nigh impossible if you loose your job because of the situation.
- nemo44x 7y ago
  Yeah you shouldn't gamble your cash cushion. Just if you have extra cash you've been waiting to invest, or have been cost averaging, etc. Prepare to not have a job - always.

lordnacho 7y ago

Former fund manager here. A few thoughts: - 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? - 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? - 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. - 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. - 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. Interesting times.

AnthonyMouse 7y ago
> Certainly people will protest if fiscal stimulus means just handing money to people and companies who aren't in dire straights. How is it not the opposite? Bailing out only the people who have lived beyond their means or made poor decisions is a big moral hazard. Moreover, it doesn't do everything you want -- if you give money to people who are in debt, they use it to make their loan payments and pay rent. Which is better than defaults and evictions, but you also want some of the money to go to people who will actually spend it and stimulate new demand. You also have to worry about some kind of emergency "dire straights" metric being off by a significant amount in one direction or another and as a result you either end up paying most of the money to whoever is most willing to play accounting tricks or lie on forms, or it doesn't go where it's supposed to and you still get the defaults and evictions, or both. As a result it seems like the best option is to distribute money evenly, to everybody.

adrianN 7y ago

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.

tinyhouse 7y ago

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. 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. Currently no one knows what will happen. But long term investors should sleep well at night.

wycy 7y ago

We have a virus problem, not a credit 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). 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 without actually putting out the fire. With no one at the wheel addressing the actual problem, the outlook feels grim. RIP my retirement account.

moneywoes 7y ago
What else can they do? Watch people's portfolios burn down tot he ground? Will that make the situation better?
- mertd 7y ago
  Fix the outbreak then fix the financial system. The first one isn't the Fed's job.
- wycy 7y ago
  If the Fed had done nothing at all, it's conceivable that the markets would still be in exactly the same shape they are now (or even possibly better), except we'd still have those tools at our disposal. To an extent, that the Fed took such drastic action probably helped to spook investors even more, since (1) now those tools are gone, (2) it implied that the Fed is panicked and doesn't know what to do, (3) it implied that the Fed thinks the market will sink dramatically. As to what I think they should do: address the needs of the people who will be hardest hit. Interest-free moratorium on mortgages, rents, debts, and/or full FMLA. This will actually help with the underlying virus problem more quickly, and consequently should help fix the underlying market problem (lack of demand) more quickly.
- enraged_camel 7y ago
  Sometimes the right thing to do is to do nothing.
- fuzzfactor 7y ago
  That may be the least of your worries. Those without portfolios will have been totally devastated much earlier and might become incentivized to burn all kinds of other things to the ground.

eximius 7y ago

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.

smcg 7y ago
as a normal consumer investor your choices are a drop in the ocean.
2sk21 7y ago
If you have a cash buffer sit tight. The market will eventually find a relatively constant level to price in the disruption

Scirra_Tom 7y ago

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.

chadmeister 7y ago

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.