Coronavirus (COVID-19): Global business, economics, and stock markets updates

[Xulonn]

Lets keep this topic separate from the pandemic news and discussion.
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USA - Dow opens this morning down $2,250 (9.71%) - and trading is suspended.

To learn more about the US stock market, Google "limit down" and "trading curb"

With the advent of high-speed programmed trading, the market could fall off a cliff almost instantly, so a trading curb (for equities) allows humans to evaluate and "reset" their parameters before trading resumes. From Investopedia:

The purpose of trading curbs is to allow the market to catch its breath when it is rocked by extreme volatility. Temporary halts to trading give market participants time to think about how they want to respond to large and unexpected movements of market indexes or individual securities when the curbs are lifted. The circuit breakers apply to all equities, options, and futures on U.S. exchanges. The S&P 500 Index serves as the reference index for daily calculations of three break points (Levels 1, 2, and 3) that would cause trading halts.

• Level 1 is a 7% decline from the previous day's close of the S&P 500 Index, which will result in a 15-minute trading halt; however, it the the 7% decline occurs within 35 minutes of market close, no halt will be imposed.
• Level 2 is a 13% decline that will also cause a 15-minute halt; similarly, there would be no stop in trading if the 13% decline occurs within 35 minutes of market close.
• Level 3 is a 20% drop that will result in the closing of the stock market for the remainder of the day.

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[ElNino]

What surprises me a little is that even with all these big drops, most stocks are still very expensive compared to the big market crises I've seen in my life. e.g., Procter&Gamble is still sitting at a PE above 63, paying only a 2.6% yield. That's not crisis pricing, and it tells me we still have a long, long way to go down.

 

[LeftCoastTim]

My Doom-and-Gloom theory goes like this:

1. Even without many deaths, social distancing will hurt consumer spend. Many food service, entertainment, retail, transport companies will go bankrupt and workers in those industries who are mostly working class and living without any savings will go bankrupt as well. That means default on loans and mortgages will spike.
2. The above could mean something like a second Great Depression.
3. In the near term, the market will be driven by bad news. If US gets hundreds of deaths per day, which is likely for a modest total death count (50k), or thousands of deaths per day (in the case of 100k+ total deaths), market sentiment will not be rosy.
4. A long lasting US market depression will shift the global capital to somewhere else. Our bubbly stock market had been driven by low interest rates and slow global growth. If US stops growing, that money will likely go to China instead, who still has a large and growing economy.

That’s my doom and gloom version. Check back with me 6 months from now

 

[RickSanchez]

One of the concerns (for the U.S., although that has global impacts) is the perception -- valid or not, I won't comment either way -- that the Federal Reserve has used their primary tools too quickly and too aggressively.

Michael O’Rourke, chief market strategist at JonesTrading: “They blew it. The Fed panicked and the market is spooked. The S&P 500 registered all time highs less than a month ago and the Fed has expended all its conventional and unconventional tools. The key takeaway will be that they have truly expended all of their ammunition and this is the action of a central bank that is scared.”

source: https://www.bloomberg.com/news/arti...-even-more-stimulus-after-the-fed-s-shock-cut


There are a fair number of perspectives in the article so I encourage people to read it. I simply cherry-picked that quote to make a point. And obviously there are still numerous measures / policies that can be implemented elsewhere in the federal government, outside the Fed, that can positively impact the U.S. economy. But I can say I was surprised when I read that the Fed dropped the benchmark rate by 100 basis points yesterday.

 

[Xulonn]

DOW down 3,000 points today which is 12.95%. By far the biggest point drop ever, and 2nd biggest percentage drop.

22.61% on October 19, 1987 was the biggest percentage drop, but the above rules are designed to prevent such drops in these days of automated high-speed electronic trading.

 

[BDWoody]

That’s my doom and gloom version. Check back with me 6 months from now

I'll take the under...(in the less disastrous direction)

Although, I'm prepared for the over.

 

[Lbstyling]

Waiting to see if SnP to drop to 1500. Will personally go in on big margin if it drops that low. *Not a move I will recommend to anyone!*

Will be interested to see if Berkshire Hathaway falls this much. If they do, I'm all in on this.

Interest rates at zero or near means companies that have large loans should be able to keep going as long as their not zombies. The zombies will die, but I hate to say it, they were supposed to 10 years ago. Goodbye GE.

 

[Midwest Blade]

Fed has over reacted, virus threat is still growing and it’s effects are adding up creating a great unknown. The market does not like the current view of the horizon. I fear our recovery will be somewhat tedious pending the length of time it takes for covid-19 to run it’s course. The current debt and deficit puts us in a particularly precarious position to fund a recovery.

 

[Lbstyling]

My Doom-and-Gloom theory goes like this:

1. Even without many deaths, social distancing will hurt consumer spend. Many food service, entertainment, retail, transport companies will go bankrupt and workers in those industries who are mostly working class and living without any savings will go bankrupt as well. That means default on loans and mortgages will spike.
2. The above could mean something like a second Great Depression.
3. In the near term, the market will be driven by bad news. If US gets hundreds of deaths per day, which is likely for a modest total death count (50k), or thousands of deaths per day (in the case of 100k+ total deaths), market sentiment will not be rosy.
4. A long lasting US market depression will shift the global capital to somewhere else. Our bubbly stock market had been driven by low interest rates and slow global growth. If US stops growing, that money will likely go to China instead, who still has a large and growing economy.

That’s my doom and gloom version. Check back with me 6 months from now

Thats just the catalyst.
Most of the money in the stock market is pensions, and the majority of that is old ppl. Its old ppl who will suffer the most losses. This will remove a lot of the *real* money from the market (money not on margin), the money on margin will then have to follow to avoid losses (which due to the historical low interest rates over the last 8 years is most of it). The PE of most developed nations is already at ridiculous levels. The closures etc will kill the earnings part of the equation further.

then you start to deal with a new problem. Trackers. The exit is too small for price discovery to work properly, so the sale price of stocks will be driven through the floor as managers cannot choose to delay selling as the price is depressed ATM as they will be forced to sell right now by bereaved family.

If the US lost 15% of their over 75s, they are really in trouble. Japan even more so.

70-80% fall is really not that crazy a concept.

 

[Lbstyling]

Fed has over reacted, virus threat is still growing and it’s effects are adding up creating a great unknown. The market does not like the current view of the horizon. I fear our recovery will be somewhat tedious pending the length of time it takes for covid-19 to run it’s course. The current debt and deficit puts us in a particularly precarious position to fund a recovery.

Not personally with you on this one, but totally get where your coming from. At near 0% interest, they have reduced the risk for solvent (read actually viable companies that make small but real profits) companies to survive to 100%. They can borrow at no carry cost, so there is no reason for any non permanent event to kill them off.

Now the banks could drive the knife in if they want too and refuse to lend, but this risk should be vastly reduced due to the post 2008 measures....should.

 

[direstraitsfan98]

The worst part of anything is that another strain of virus may come to light at any moment in the future. So more virus pandemics are not out of the question and in fact are more than likely to happen after enough time has passed.

 

[Wes]

What is Warren Buffett buying or planning to buy....

He's been sitting on a huge cash hoard for a while now

 

[Lbstyling]

Some real valuation metrics for you....

https://www.starcapital.de/en/research/stock-market-valuation/

 

[Ron Texas]

Today was the worst day so far for the US stock markets this year.

 

[Lbstyling]

What is Warren Buffett buying or planning to buy....

He's been sitting on a huge cash hoard for a while now

Would not be surprised if he didn't buy up any individual buisnesses himself. But if he did, cash making businesses only, with no debts and large amounts of cash on hand.

Airlines. Amazon, Apple.

Apple is a awesome choice (I hate the products mind) even if it doesn't drop much because you would be buying a company that has ALL the cash itself ready to buy more companies. Its like taking your $1k and giving it to the only boat builder left after a storm. They have a monopoly on buying anything they like of any size for peanuts with no one to bid against.

Why should he bid a price up against apple when he can buy apple and they both win even more!

 

[FrantzM]

The worst part of anything is that another strain of virus may come to light at any moment in the future. So more virus pandemics are not out of the question and in fact are more than likely to happen after enough time has passed.

This is the real doom and gloom scenario. This pandemic has shown us that we don't know how to cure viral disease. We can treat some of them but for the most part we are left to our overextended and abused immune systems.

Buried under the pile of sensational news is the fact that this is a new strain of a known virus.. It has evolved, adapted. That is a scary.

 

[Rockfella]

Today was the worst day so far for the US stock markets this year.

Worst day in many decades I guess.

 

[MarcT]

To me, the question is, how long can we keep the economy shut down like this? It seems to me that at some point, we will simply have to go back to work to survive economically.

 

[Lbstyling]

To me, the question is, how long can we keep the economy shut down like this? It seems to me that at some point, we will simply have to go back to work to survive economically.

If the whole world does it at the same time? A LONG time. We can survive on 1% of our peak economic output. Machine automation development would accelerate by several orders of magnitude as this can be worked on from home for the most part.

 

[Wes]

Be glad we have an internet and widely owned PCs.

Imagine what this would be like in 1991...