
Stocks Halt; Oil and Bonds Drop in Sync - JumpCrisscross
https://www.wsj.com/articles/u-s-futures-fall-asian-markets-mixed-11584498324
======
short_sells_poo
It'll be interesting to know how will WeWork fare, because this is exactly
their nightmare scenario. They are leveraged to the hilt. Their clients can
now bail out of contracts on very short notice, which I'm sure they are doing
already en mass. WeWork however is on the hook for the long term and they have
to pay rental on any property they do not own. Meanwhile, the price of
property they do own will be going down, depending on how long the crisis
lasts. This can very quickly run into issues on servicing anything they bought
on debt and spiral into a liquidity crisis.

~~~
thih9
> Meanwhile, the price of property they do own will be going down, depending
> on how long the crisis lasts.

Could you explain why you think this will happen?

~~~
martincmartin
With lots of companies struggling or going under, the demand for commercial
real estate should be lower. Supply roughly constant, demand significantly
down.

~~~
lkbm
Companies might also realize that now that they've figured out how to work
remote, they should keep doing that and save ten grand or so a month. I
believe the smallest offices in the WeWork we're housed in are $6k/mo. Those
are generally used by teams of 3-6 people.

~~~
wool_gather
Employees are not universally going to just eat the costs of working from home
(or from shared spaces) on behalf of their employers, though. If this becomes
a more regular situation, employer subsidies for remote essentials will be
expected features of jobs even more than they are now, i.e., not just perks.

The monthly bills for 100 remote workers is easily 10K -- their internet
connections alone would probably hit that. A single person renting a desk at a
co-working space is going to spend a few hundred a year.

~~~
londons_explore
I see employers just requiring you to have a workspace at home.

> Your crappy internet keeps cutting out? Not our problem. Poor work
> performance. You're fired.

~~~
wool_gather
Would an employer with that kind of attitude even be trusting enough to let
people to work from home in the first place?

~~~
blaser-waffle
Absolutely. Easy way to shift blame and then trim the fat.

------
lordnacho
If you assume the US is a few weeks behind Europe, there's more and more bad
news to come. It's always hard to know how much is priced in, or even how to
price in something so alien to financial people.

Also keep in mind there's a number of mechanisms that pushed the market up
that will now push it the other way:

Credit cycle makes collateral worth more, giving more capacity to extend
credit.

Momentum funds buy when things have gone up.

Risk parity funds add when risk is low. And risk as measured by realised
volatility gets lower as we creep up.

Retail sees the market is going up, much like momentum funds.

Selling options makes sense when there's barely ever a move in the market.

Now try these in reverse.

~~~
marban
The only lesson from Europe so far is that no matter how much money you throw
at the problem, the market is going to respond with another steep sell-off –—
because that's what the US is already doing; without success.

~~~
paganel
At some point we'll have to adopt a combination of what Boris first said and
only a partial lockdown, and I say that as a guy who has voluntarily self-
isolated for almost a week now. There's no way for the whole Western economy
to function on made-up money for more than a month, let's say a month and a
half. Yes, that will most probably mean triaging people in hospitals, which
will probably force elderly people to remain isolated in their homes a little
more than the rest of the population, but to be honest I do not see any other
solution at this moment.

~~~
Retric
The workforce is largely made up of heathy people under 60, so it’s at minimal
risk. My suspicion is gatherings like movie theaters will shut down until a
vaccine is available, restaurants are going to swap to carry out, and the sick
or elderly are going to be expected to self isolate. That’s still a huge
economic hit, but far from the end times.

Looking at Wuhan, a total shutdown can dramatically reduce the number of new
cases. We can’t really afford that for long, but it buys time to prepare and
may be required if things start to fall apart.

~~~
at-fates-hands
>> We can’t really afford that for long, but it buys time to prepare and may
be required if things start to fall apart.

AFAIK Wuhan and South Korea are both at the tail end of their their infection
trajectory and they are still not back to normal working
situations/environments. I'm still not sure if this will be a short, blunted
infection with all the quarantines taking place, or something we have yet to
see the top side of.

Either way, this is going to crater a ton of small/medium sized businesses.
All of the gains the market made in the last few years has been completely
erased by this virus.

~~~
Retric
Two and a half month of draconian quarantine may work, but unless all travel
is also shutdown reinfection is a huge risk.

A middle ground between doubling every 3 days and total shutdown looks really
appealing in that context.

~~~
dragonwriter
> Two and a half month of draconian quarantine may work

That will probably be insufficient in duration:

”We [...] show that policy strategies which aim to mitigate the epidemic might
halve deaths and reduce peak healthcare demand by two-thirds, but that this
will not be enough to prevent health systems being overwhelmed. More
intensive, and socially disruptive interventions will therefore be required to
suppress transmission to low levels. It is likely such measures – most
notably, large scale social distancing – will need to be in place for many
months, perhaps until a vaccine becomes available.”

[https://www.imperial.ac.uk/news/196234/covid19-imperial-
rese...](https://www.imperial.ac.uk/news/196234/covid19-imperial-researchers-
model-likely-impact/)

> A middle ground between doubling every 3 days and total shutdown looks
> really appealing in that context.

A middle ground between “do nothing” and “don’t do enough to stop the
healthcare system from collapsing” sounds really appealing?

~~~
Retric
Wuhan is on track for zero new cases by the end of this month after starting
the quarantine on January 23. So, in no way is the collapse of their heath
system part of a total quarantine. But, I am saying what happens after that?
Do you shut everything down on the next case, when infections it 100 or 10,000
etc.

Basically the quarantine option has a known outcome in the short term, and
doing nothing as millions die is another option. But, they have such high
costs and are so far apart a middle ground seems desirable.

------
partiallypro
Oil is the crazy part to me, I read an article that said oil could technically
even go -negative- because the cost to store it would become more expensive
than to give it away. With Saudi Arabia pumping, and the economy in a
standstill, there is a massive glut. Bonds are selling off, and I don't if
it's because people are re-balancing with stocks down so much or if the market
is reacting to the likely future of massive bond issuance from the US
government.

~~~
SilasX
I'm just confused at today's drop in long-term government bonds (and thus
increase in interest rates) -- normally they go in the opposite direction of
the stock market, which is what it's done this year. Vanguard's long-term govt
bond ETF (VGLT) is up 13% so far this year:

[https://www.ytdreturn.com/vglt/](https://www.ytdreturn.com/vglt/)

Edit: rephrase to clarify what I'm confused about

~~~
gniv
Here's a potential explanation quoted by Matt Levine in his March 13
newsletter:

“The risk in the current environment is that sustained illiquidity of the UST
market … could cause leveraged UST investors to reduce their Treasury
positions on a large scale. This would essentially result in a Treasury
‘supply shock’ as these funds reduce their positions & force dealers to sell
those positions in a very illiquid market. Significant position reduction from
one large leveraged UST investor would likely lead to a cascading effect
whereby U.S. Treasury yields rise sharply and force liquidations from other
similar investors. This would worsen conditions for dealers to intermediate
risk in the U.S. Treasury market, exacerbate the rise in U.S. Treasury yields,
and further cheapen Treasuries.”

~~~
SilasX
But haven't the Fed's constant injections (like the recent $0.5/1.5 trillion
one) indicated it's going to keep the Treasury market liquid by buying them
all up at par?

------
neonate
[https://archive.md/y9Mxy](https://archive.md/y9Mxy)

~~~
jiveturkey
you da real mvp

------
ryansmccoy
Supposedly, some of the large hedge funds are being liquidated...

[https://twitter.com/MarkYusko/status/1238672312699887622](https://twitter.com/MarkYusko/status/1238672312699887622)

~~~
609venezia
Yikes.

Which funds is he referring to? Do we have any references more solid than a
tweet?

~~~
ryansmccoy
That tweet is by someone who would know. I've also verified this with some
people I know in the industry.

~~~
Infinitesimus
Are you at liberty to say which hedge funds these were?

~~~
Infinitesimus
Rumor has it that it's Bridgewater for anyone reading this later

------
sct202
Dang it seems like the circuit breaker gets hit every other day now.

~~~
mkagenius
Now its probably in control of machines. And they don't know if its corona
(which might pass as it did in china), they are probably thinking something
like 2008 has happened.

~~~
Slartie
The virus did not "pass" in China. China managed to get the spread to slow
down to a crawl, by implementing a severe total shutdown of everything and
keeping that up for some weeks. They are still in the process of removing
those brakes again, and as far as I know, they are still at a pretty early
point in that process, meaning lots of brake power is still applied.

There is absolutely nothing preventing the virus from resuming to spread as
soon as economic and social activity continues to return towards normal level.
In fact, most experts expect exactly that to happen, albeit maybe at a bit of
a slower speed than before (due to some people being immune and people
generally being a bit more cautious in their daily lives now).

Oh, and due to the incubation time, you'll not see any negative effect in
testing results from removing the brakes for about 10-12 days. It's the same
thing as when they were applied. So what's described above will happen, even
though for 10 days you might wonder "What's the deal? The infection numbers
still look good!".

This is far from over, in China and anywhere else.

~~~
kart23
Chinas new cases per day rate is effectively zero at this point. They beat it,
plain and simple. And only 3,000 people died from coronavirus. Compared with
literally any other cause of death, it's a tiny blip, even negligible. Around
11 million people died in china last year. How does such a contagious virus
simply stop spreading? after infecting a just tiny percentage of the
population. Their economy is coming back up and life is pretty much back to
normal over there, while the rest of the world is just headed into it.

~~~
irishcoffee
Occam 's Razor: china is lying.

~~~
kart23
about which part is the question. Or our media was lying to us.

------
DailyHN
Is now the time to opt for the "higher risk" option in your retirement
portfolio?

~~~
IvyMike
They call this "trying to catch a falling knife". Good luck.

~~~
leggomylibro
You don't buy all at once, though - you can "dollar cost average" into the
market by buying index funds in small chunks when there are big dips, and stop
buying when it stops falling.

You won't predict the bottom, and you might not get all of your money in in
time, but you'll still wind up ahead when the markets recover.

And they will recover, unless we somehow get to a point where the entire
monetary system collapses. The only question is whether it will take a few
weeks, months, years, or decades.

Pick your starting point depending on how long you can wait. Buying early
makes you less likely to miss the dip, but it might take longer to start
seeing green numbers. Buying late means that you stand to gain more in the
short term, but you might not get all of your money in in time.

Personally, I think we're still straddling the "early" line around now, but
your guess is as good as mine. This is what they call a 'roller coaster' :)

------
JDiculous
Can someone explain why bond yields are going up? Normally you'd expect people
to be investing in safer assets (eg. bonds) during times of crises, especially
with the Fed slashing interest rates and embarking on QE.

~~~
beefman
A natural explanation is that the government is considered less creditworthy.

There's also been news this morning that the government will bail out
commercial paper and corporate bonds, and that this has caused investors to
move from treasuries to corporates.

It strikes me that both explanations may be true.

------
voisin
If equities, bonds, and commodities all drop, where is the money going?
Certainly not as unsecured deposits at banks. The money has to cycle somewhere
and I don’t see any asset classes jumping by enough to account for all the
sales of the remaining asset classes.

~~~
mgsouth
Doesn't work that way. "Market value" isn't a count of funny-looking pieces of
paper, or the total weight of various commodities. It's a popular consensus of
the power to command future use of resources. It's a general I.O.U. If the
market says I'm worth $100, then everyone is agreeing that sometime in the
future I'll probably be able to request a certain amount of resources in
exchange for passing on control of the I.O.U. So the market may say I can get
ten hamburgers, or get four suits dry-cleaned. Changes in total market value
happen when that consensus changes. If everyone realizes I'm only going to be
able to get five hamburgers, or two suits, then I've lost 50% of my worth. If
the market decides _everyone_ is in the same boat, then the market has lost
50%.

------
realtalk_sp
The market hasn't yet priced in an important reality: we have no way to stop
the spread at the moment.

Best that can be done are quarantines, but they're crushing the economy. Many
outlets are reporting that a vaccine is at least a year out. So all we can do
is slow this down and stagger cases. The Harvard epidemiologist who projected
40-70% of the world's adult population ultimately contracting covid was
probably right.

At some point, governments will likely realize that they need to send younger
segments of the population back to work (a la the UK), respecting the medical
system's capacity, or risk triggering a depression. The economy was already
systemically vulnerable for a number of reasons and this situation threatens
to push it over the edge.

It's possible the market has not yet fully priced in extended quarantines or
the likelihood of much of China and most other important economies
experiencing a significant disease burden. The paradox is that the quarantines
have slowed down the progression but are not an economically sustainable tool
to fight this, so the numbers being reported are artificially deflated. On the
other side, you have the medical system's limited capacity. One way or the
other, we'll have to face the music on this.

~~~
nostromo
> they need to send younger segments of the population back to work

This is the only sensible approach moving forward.

We need to quarantine the very old and very ill and provide them with
financial assistance. Quarantining _everyone_ is an overreaction and
unsustainable.

When the not-very-old and healthy have built up antibodies and resistance,
we'll have heard immunity and the very old or ill can return to normalcy.

~~~
Brakenshire
Mortality rates for young people are not negligible, and we don’t know either
the long term health impacts of a severe episode of the virus or even whether
catching the virus gives immunity.

~~~
empath75
for young people, it's less deadly than the flu.

~~~
0xffff2
Citation needed. Everything I've read says that it's significantly more deadly
than the flu for all ages and that more importantly the error bars on any
mortality number are absolutely huge.

------
maallooc
Wow, and I thought 2008 was pretty bad.

~~~
TheHypnotist
Pretty bad? It was a complete economic shit storm, and as of this moment, it
was a whole lot worse.

~~~
0xffff2
2008 was a whole lot worse? The market is already down 35% from its peak
barely a month ago and we're clearly at the beginning of the crisis. It took
the market more than a year to drop ~50% from its peak in late 2007. The bond
markets are also kind of in a weird place right now. IMO 2008 doesn't look a
whole lot worse _right now_ , and might end up looking a whole lot better by
the time we hit the next peek after the current crisis is over.

------
lettergram
There's a lot of other news providers that aren't WSJ that report(ed) on this.
Perhaps we should use them over the pay-walled site?

~~~
coding123
It seemed like a few years ago 80 percent of sites were accessible... Maybe we
should have a block in hn submissions system that just blocks these.

~~~
adventured
There is typically an option to bypass the paywall posted with the articles,
that's why HN allows them.

In this case: [http://archive.is/y9Mxy](http://archive.is/y9Mxy)

~~~
Hydraulix989
This isn't an option, it's piracy.

~~~
leetcrew
I'm pretty sure WSJ would be suing Internet Archive right now if that link
actually constituted piracy.

------
antidaily
Like 2008 all over again. Except you could also die.

~~~
twomoretime
This is far worse than 2008. The market is crashing 1-2 times more rapidly
(points/day) than it did during the great depression.

There have been rumors floating around that the economy was basically running
on fumes. The yield curve was heavily inverted and the 7 year cyclical
recession cycle was skipped.

Life is about to get really hard in the US and will likely continue to be so
after the virus - and even that will probably drag on for 2-6 months. Get
ready for Soviet Union style living. Bank runs are probably coming soon. This
is unprecedented - both the virus and the rate at which the market is
crashing.

Edit: even CNN is warning about triggering bank runs!

[https://www.cnn.com/2020/03/18/economy/banks-cash-
coronaviru...](https://www.cnn.com/2020/03/18/economy/banks-cash-
coronavirus/index.html)

~~~
dbancajas
will our broker accounts suddenly disappear?

~~~
twomoretime
How will you access your money if the internet goes down? How will you buy
food if your credit card isn't accepted, either because their connection or
power is out or worse?

A society built on top of perpetual growth is about to grind to a halt for 2-6
months, after already showing signs of poor economic health. This doesn't even
get into the potential political mess that awaits us.

~~~
curiousllama
This a biological virus, not a computer virus. Electricity will be fine. The
water will still run.

Why would we bother continuing to quarantine if people are dying in the
streets from (presumably) the roving band of cannibals you'll predict next?

Stop scaring people. It has real impacts. The world has survived pandemics
before. It will again. Our 401(k)s will be fine

~~~
twomoretime
Your thinking is myopic. The virus is a geopolitical trigger. Among the
fallout is the US economy.

The world is rapidly changing. It will not return to normal once the virus is
eliminated. The signs are everywhere. Governments in flux.

We just had two $1.5T federal stimuli effectively fall on their faces.
Treasury Secretary is predicting 20% unemployment. That's great depression
level and I suspect they were being conservative to avoid even worse panic.
This is going to continue for many months if not years after the virus
troubles are over.

~~~
0xffff2
That still doesn't mean the power is going out or the water is going to stop
running. Another depression is in no way a good thing, but it's not the
apocalypse. Zombies are not going to take over the water treatment plants. No
one is going to nuke the power stations.

Yes, life will get hard. Yes, this really sucks if you were planning on
retiring soon. But life will go on. Calm the fuck down.

------
markus_zhang
They are going to start a war in ME to turn this around...

~~~
inscionent
They?

