The bolded part is something I’ve been telling people: The stock market has remained “up” (until recently) because the Trump Administration has been pumping liquidity into the market, primarily through the old standby RBMS* purchases. Trump has understood that the DJIA is used as a form of shorthand with how well the economy is doing, and his administration has been doing all they can to keep the market afloat.
However, there’s only so much bullshitting you can do and there’s only so much bullshitting people will accept. And the time for bullshit is about over, if it’s not already.
In 1930, Doc Joiner hit oil on the Daisy Bradford #3 well in Rusk County, Texas, tapping into the single largest reservoir of oil found until that point, the 45 mile long by 8 mile wide “Texas Giant” reservoir, sending East Texas into a frenzy of activity during the early days of the Great Depression.
As one can expect, oil prices plummeted, from $1.85/bbl to 1.00/bbl... and then lower. Panic set in as overproduction occurred, with the oilmen producing over 500,000 barrels of distressed oil every day, driving prices down to as low as .06/bbl by 1931, with some hot-runners selling it as low as $.02/bbl. Texas declared martial law, sent troops in to quell the rioting, then a federal judge ruled the martial law unconstitutional and the rioting and overproduction continued until the Department of the Interior, led by Harold Ickes, took control of the situation in 1934.
$1/bbl in 1932 is the equivalent of $18.50 today. The price of oil is expected to open @ $32/bbl tomorrow, only a 59% premium over the early part of the beginnings of the economically worst period in the history of the oil business.
Here in San Antonio, our frackers are fucked if SA, RU, and US go into a production war. This happened in 2015, but calm leadership in DC, working with RU and SA, prevented a production war, but for a few days there, it was possible that a repeat of the early 1930s was on the table.
However, this time may be different as the leadership in DC has… changed… and not for the better.
Can the Trump administration handle this crisis as well? Anyone want to take bets?
(For more on the East Texas Giant, I refer you to Daniel Yergin’s The Prize, Chapter 13, “The Flood”.)
Okay so what’s going on now? One of the circuit breakers was triggered and apparently stocks are still falling after the break. Does this mean anything or will it recover?
Yes. It will recover. Eventually. Just like eventually the sun comes up in the morning and summer follows winter.
The question is not “will it recover?” but WHEN.
What it means is that this pandemic is impacting the world economy. Which was expected by many people (including me). Where’s the bottom? I don’t know. Neither does anyone else.
PLEASE NOTE: this is NOT the zombie apocalypse. Personally, I’m certain we’re looking at a global recession. Maybe even a depression. The economy is taking a big hit. A lot of people are going to be running around looking for some sort of safe harbor. There isn’t one. Everyone has to ride out the storm, but yes, things will get better. Eventually. Just not today.
Yes it will recover eventually. I know there’s no crystal ball. I’m just sort of half expecting it to rebound sometime today or this week and then The Mango can claim he fixed it. And it’s very hard to tell what the virus is doing. Supposedly people are back at work in China.
I wonder how much credibility the Fed has now. Powell does seem prone to panic at this point, and he seems very susceptible to bullying by the president. A steady, independent hand at the Fed would be helpful, but even the perception of a steady, independent hand would probably help calm everyone. It does not appear that we have either.
We’re moving into a situation in which we are experiencing both supply and demand problems. Rate cutting just removes one more tool from the Fed tool box, and rate cuts frankly have encouraged some irresponsible behavior in equities. The banks are fine - I’m not talking about the banking (S&L) side of things. But I am talking about lenders to businesses that are leveraged, and frankly a lot of big business has been getting involved in riskier and economically unproductive borrowing, like stock buybacks, which prop up their fake stock value but don’t strengthen the employee/household (i.e, the average consumer).
People are about to find out that our “strong” economy…isn’t really that strong. Without question, this type of shock event would hurt an economy that was more focused on stability than growth (i.e. a more socialized economy), but because we’ve been trying to pump up the boom side of the cycle, the bust is going to hurt like a mother. Count on it. We’re headed for a deep recession. The only question right now is how long it lasts, and that depends a lot on the decisions that policymakers make - not just here in the US but elsewhere.
I think Jay Powell usually makes good decisions. He isn’t always the clearest communicator, but he generally seems to know what he’s doing. His challenge is that he’s trying to stiff arm a very strong-minded but dim-witted leader of the free world who wants negative interest for no other reason than to serve his corrupt self interests. And he’s got an army of dim-witted MAGAbots marching in lock step with him.
Who can POSSIBLY be surprised the stock market is plunging? I mean, precisely when it was going to happen wasn’t a predictable thing, but some event was going to trigger a collapse. As Broomstick phrased it, COVID-19 is the black swan, and the thing is, there will always be one sooner or later.
Since Trump’s election, it climbed fifty percent in three years, and that despite the fact that in November 2016 it has already been generally rising for years. It hardly takes a genius to tell you that the economy wasn’t really fifty percent bigger or more productive than it was 2016, and that stocks were a bubble. We are headed for a massive, massive recession.
Yes, a lot of people weren’t working, but that ignores everyone who continued to work, from the doctors and nurses to the folks pedaling food delivery bicycles.
Even if we get a brief bump upwards on a particular day an actual recovery isn’t going to be for weeks, probably not for months, maybe longer.
That’s correct - they didn’t, and that’s why I don’t trust reports that the virus is contained in China. In Wuhan? Maybe, but I think it’s still spreading in China as it is everywhere else. China can’t afford to just stop working. The reason they hid the damn contagion in the first place is that they were already feeling economic pressure from tariffs and a general slowdown in the global economy even before corona, and they didn’t want bad news causing fears that might disrupt production domestically and consumption globally. Turns out, it happened anyway.
But from what I can tell, China is going back to work in Shanghai, Beijing, and Shenzhen, virus be damned. They can be hyper-vigilant, but they’re still spreading the virus, and I don’t trust the government to report it accurately, not when their new internet laws basically ban “negative” or “harmful” information, or however it’s phrased. The CCP is going to go to Cultural Revolution-like extremes to contain not the virus, but the damage to reputation and the loss of face.
So more people will be affected there. The Chinese government will test, they will quarantine, they’ll round up the sick and the old and put them in make-shift death camps, er, hospitals, and they’ll send everyone else right back out to work. But they probably won’t tell the truth, and the virus will continue spreading there - and here - until it evolves into a less lethal strain (we hope).
And shit, from the looks of things, I kinda wonder if that isn’t what Trump would like to do here. Problem is, he’s going to be dealing with a lot of local health officials who will call it like they see it. And the local health officials will have the relatives of the sick, dying, and dead to back up their version of events, not Trump’s.
I pretty much agree with this. Even here in this country, I think there’s going to be an awfully strong temptation to minimize the dangers associated with this virus. It’ll be tempting to minimize it and let events like March Madness, golfing tournaments, marathons, graduation ceremonies, and the like continue as if this isn’t really a big deal. It’s still too commonly being compared to the flu, and the flu it is not. Granted, it’s not SARS, smallpox, or the plague. But it’s 10-20 deadlier than the flu, and I’m guessing that hospitalization rates are similar.
What ordinary people don’t yet realize is that when this virus really gets some legs under it and starts spreading among large groups, the first consequence will be that healthcare workers will be under siege. And they, too, will join the ranks of the victims. Soon thereafter, we’ll have a healthcare system that is already highly inefficient being placed under tremendous strain. I don’t think the panic over markets and supplies right now is unjustified at all, and what worries me is that the virus has just barely made it on our shores. One has to wonder what this will look like once the virus is deeply embedded within population centers with economic inequality, limited access to resources, and yes, let’s consider also the consequence of undocumented immigrants and their families who have no incentive to cooperate with local health officials at all. We’re sitting on a public health and economic ticking time bomb.
Hmm, trump has now invited Wall Street executives for a meeting later this week. He’s probably going to either ream them out for making him look bad or promise them some tax cuts to goose the markets to go back up or both. Apparently he already had meetings with cruise ship and airline CEOs.
Totally agree. To add to the fun, in the old days when oil prices tanked, consumers got a boost. Today that is balanced by the oil industry getting clobbered. It seems a lot of producers have borrowed a lot at cheap rates to expand production. We’ll see if they can survive.
Also, consumers seeing the crash and expecting a recession are not going to spend their gas cost cut. So that adds to the consumption cut.
See this thread. I’ve been expecting this for a while, and have moved my portfolio so the equity part is mostly stable, income-producing stocks.
My financial advisor told me a few months ago that the company guidance was that the market would stay strong for the rest of the because Trump would keep it up for the election. I thought this was over-estimating Trump’s competence. Looks like I was right.
Maybe? The flu isn’t one thing, so I’m not sure how to put a deadliness rating on it, and no one knows the deadliness of COVID-19 yet, since no one knows what the denominator of that fraction is (ie, how many people were infected.) AFAIK, the best data on that is still the Diamond Princess data, but it’s only one cruise ship with a potentially non-representative sample of the population. Here’s a good write up on that.
Now call me crazy, but wouldn’t now be the time FOR SOME BIPARTISAN MOTHERFUCKING COOPERATION?
If in the midst of a pandemic and an oil war that’s crashing the stock market, you should be able to set aside your partisan differences and convene a meeting with both parties.
If now’s not the time for compromise, we’re fucked.