
2020 Stock Market Crash - smnthermes
https://en.wikipedia.org/wiki/2020_Black_Monday
======
nimbius
im worried this article will eventually get whitewashed into "corona caused
the financial crisis." HN and others have repeatedly pointed out numerous
factors in the market that definitely were not corona, that would have caused
this crash eventually. untenable levels of credit card debt, automobile debt,
and unreformed student loan structures as well as stagnant wages and rollbacks
on a number of legislative efforts to police markets and protect investors.

~~~
nostromo
This is an unpopular opinion on HN, but government overreaction caused the
crash.

Rather than having at-risk people self-quarantine for a month, with government
financial assistance of course, while the rest of us build up antibody
resistance, we collectively lost our shit and decided all people needed to
self-quarantine for months -- just delaying the inevitable.

It's actually quite easy to self-quarantine everyone over 70, since they're
receiving government assistance anyway (Social Security). But now there are
already thousands of job losses from young, healthy, productive people that
have almost zero chance of dying from this disease.

The UK will be mostly done with Covid-19 in two months, with much less dire
economic consequences -- and the US will still be playing whack a mole and
killing the economy with healthy 25 year-olds holed up in their apartment.

~~~
thepete2
I estimate that it's quite risky to follow that strategy. If you allow the
virus to spread uncontrolled among younger people, who is to say that the then
smaller fraction of serious cases doesn't still overwhelm the health system?
There are rare cases where perfectly healthy people are in need of
hospitalization.

~~~
nostromo
That's definitely a risk. And I think the NHS in the UK allows them to better
respond to that risk by triaging patients and selecting who needs to stay at
home and who needs to be admitted.

But the point I keep hearing from knowledgable people is that rapid spread is
inevitable at this point. So many or most of the dramatic actions taken by
state and federal governments now are security theater.

~~~
jacobolus
> _point I keep hearing from knowledgable people is that rapid spread is
> inevitable at this point._

The point I keep hearing from every reputable epidemiologist, virologist, and
public health expert around the world is that people need to stay the fuck at
home because this virus is extremely dangerous and if left unchecked will
completely overwhelm every hospital system in the world.

Some public officials didn’t believe it when it was just Hubei, but after
seeing the same happen in Lombardy, a rich region in Europe with a strong
healthcare system, the situation became clearer.

Edit: here’s a nice summary written by a Bay Area marketing executive (based
on work by epidemiologists and others)
[https://medium.com/@tomaspueyo/coronavirus-act-today-or-
peop...](https://medium.com/@tomaspueyo/coronavirus-act-today-or-people-will-
die-f4d3d9cd99ca)

~~~
nostromo
I'm pointing to the decision made by the National Health Service -- and you're
countering with a bay area marketing executive's hot take on Medium?

~~~
jacobolus
No, I’m responding with a piece written by a nonspecialist with a general
data/technical background who is also an excellent writer, who spent a bunch
of time reading and digesting data and arguments published by epidemiologists
and public health experts, and then synthesized that into one clear and
coherent summary aimed at a lay audience, including many links to the direct
sources so that readers can click through to evaluate them.

* * *

If you spend some time hunting around for career epidemiologists and other
experts to read, they are as far as I can tell unified in opposition to the
British plan, and have been calling it out as sheer folly in published opinion
pieces and ranting about it on twitter.

For example, [https://www.theguardian.com/commentisfree/2020/mar/15/uk-
cov...](https://www.theguardian.com/commentisfree/2020/mar/15/uk-
covid-19-strategy-questions-unanswered-coronavirus-outbreak)

I guess we’ll all see how things play out in the next month or two, but I’d
much rather be in South Korea or Taiwan than England right now.

------
raiyu
Before coronavirus when a company missed earnings it was battered on the
public markets.

With Coronavirus 90%+ of companies will be directly affected in reduced
revenue. Either directly like companies that are focused on retail, or
indirectly, companies that are affected by challenges in logistics.

Was the market perhaps inflated, in my opinion yes, but I don't see how people
can say this crash wasn't caused by coronavirus.

Could we have had a crash or reset in the future without the virus? Most
likely. But that unknown reality didn't happen. Instead we have a global
pandemic, where the only real working solution is to institute various levels
of lock down and social distancing, which will slowdown economic spending
dramatically.

If the entire global market has to take 2-months off from generating revenue,
that is a huge blow to the system. Then you have the secondary effects. Job
losses, businesses closing, rent, evictions, closures, etc.

The economic impact of this will take 6 months to play out to see where the
bottom is. Not all companies and industries will be affected the same way, but
generally speaking only a small handful of companies will really get through
this without some sort of impact to their business.

~~~
defterGoose
You _could_ say that it was caused by the coronavirus, but that would be
highly reductive. This seems epecially true when you consider that of late,
there has been a waning of confidence in our economists' ability to accurately
model the markets, combined with the fact that a massive shift has occurred
over the past century from an economy largely based on equity, to one based
largely on debt.

~~~
raiyu
Losing 2 months of global GDP because of a virus which would reduce the
earnings of most companies directly and indirectly seems like a pretty solid
foundation for a reduction in market cap.

It's like saying we believe that the market was overheated due to zero
interest rates, but we were hoping to have the market head into a recession on
it's own, rather than have an outside event cause the global GDP to stop for 2
months. But since that is so obvious, we won't accept it.

How many households have two months of savings. How many businesses can go for
2-3 months with 80% reduction in revenue and if they have the savings to cover
that.

I think this event is much larger than a simple recession that would have
occurred as a result of speculation and low interest rates.

This is literally stopping the world economy for 2 months and seeing how many
households and businesses have enough savings to counter balance that while
stress testing the governments ability to intervene, not at the top end, by
providing funding to banks, but at the bottom end, of figuring out how to get
all of the people who work as waiters and waitresses to go without revenue for
2-3 months and not get evicted or rack up debt that they can never escape
from.

I think you are underestimating the impact of this.

~~~
defterGoose
I think your argument is largely orthogonal to mine. The virus is simply
acting as a catalyst to expose the shaky underpinnings we already have. I
think the impact is going to be massive, but the virus is more like the
snowball getting pushed off the top of the mountain, not the avalanche that
ensues.

If the middle class was on stable footing right now, lack of spending and
consequently revenues wouldn't experience such a huge shock. It's a house of
cards.

If you think that speculation, debt, and interest rates aren't capable of
causing a system wide collapse with far reaching effects, I'll go ahead and
refer you to the 2008 crisis.

~~~
raiyu
I'm actually arguing the opposite.

The shaky foundation aside, if everything was valued appropriately, and there
was no speculation, the impact of coronavirus alone would be enough to send
the global economy into a recession due to lockdowns, change in consumer
spending behavior, and the lack of income for million of people for even two
months who are already living pay check to pay check.

~~~
defterGoose
Fair enough. We're still in the early days of this, so getting down in the
weeds on causation is a bit premature. Your first comment made me think you
were saying people were glib for downplaying the effect the virus specifically
will have on this recession (depression?). I tend to think that's
shortsighted, when prior to any knowledge of the pandemic, there were obvious,
gaping holes in the reasoning used in shaping our economy in the modern era.

Bottom line is, it seems to me that when the world's richest nation has to
outsource the making of anything tangible to the place where the outbreak
started, and so much of our economy is based on services of questionable
value, we're in for a world of hurt. You can't fight _this_ war with military
hardware and social media VC.

------
ceilingcorner
I am genuinely worried that the plan of shutting everything down and
instituting a quarantine will turn out to be disastrous if it continues for
months on end.

The stock market is just the beginning - what about the millions of people
making ends meet as waiters, Uber drivers, AirBnb hosts, retail store clerks,
and every other in-person job? HN might not feel this much, as the tech
industry is making a pretty easy switch to working remotely. But do not be
blind to the facts: the overwhelming majority of the workforce doesn't have an
emergency fund and won't be able to ride this out easily, if at all.

~~~
nostromo
The tech industry will feel this if quarantine continues, it'll just be
delayed. People here shouldn't fool themselves.

Apple stores are closed. Ad spending will collapse for Google and Facebook.
Future financing rounds will dry up. Unless this is a short term quarantine
effort, layoffs are coming for tech too.

~~~
ThrowawayR2
Yep, I'm on a team that's not a profit center and I fully expect most of my
team and I to be laid off at the earliest moment that my employer thinks it
won't take a PR hit from doing so. Anyone else feel the same?

~~~
SwiftyBug
Well, now I do.

------
Vysero
Perhaps I am wrong but I get the feeling the 2020 stock market crash isn't
over.

~~~
llcoolv
You're absolutely right. We (EU+US) will be lucky to get over it with less
than 30% GDP loss. Mostly because the schmuckery that got us out last time
doesn't appear to work this time.

~~~
gizmo385
It's been said repeatedly, but this isn't a crisis that can be fixed with
monetary policy alone. The health crisis that was the catalyst needs to be
solved - everything else is just a bandaid.

~~~
rayhendricks
We need to pass legislation that includes 14 days of paid sick leave, waive
all medical bills related to coronavirus, postpone all student loan payments.
This is to minimize the impact to working members of society and to help
ensure a swift recovery.

 __Republicans are currently blocking this. __

If this continues to be blocked, we can expect to see 7% declines until such
legislation is passed and the market sees that there is a path to recovery.
Who knows maybe we’ll get another depression too.

~~~
llcoolv
I am sorry to disappoint you, but a serious depression lasting years is
already inevitable no matter what.

------
largolagrande
Doesn't this crash highlight a fundamental problem with stock markets ?

NASDAQ: -25% in one month. CAC40 (french stock market index) : -33% over the
same period.

These stock markets collapsing is just stupid, it just shows that it's pure
speculation...

The world economy takes a break during let's say 2 months (everything will
resume as before afterwards) and hundreds of billions of euros/dollars
disappear.

In fact, the question is: If everyone stops working because of the covid19, if
the whole economy is paused (which is basically what is happening) why doesn't
the stock exchange do not simply stop too? When a company presents quaterly
financial results, it's over a period of _activity_. But then at the moment
it's a period of total inactivity... ?!

~~~
edanm
I believe you're fundamentally misunderstanding what the stock market is and
does.

At its base, the stock market is just "you" owning a company. The economy
isn't paused for two weeks - many companies will have to continue paying
people money, paying their suppliers, paying rent on their offices, etc.

Let's say you own a company that usually has say 100k in earnings and 90k in
spending, making you 10k profit every month. That company now has, because of
the virus, say 50k in earnings instead, and 80k in spending (it reduces some
salaries where it can, but still has to keep the offices around etc.) That
company is now going to be losing money for a few months.

Now you own a chunk of this company. Yesterday you assumed it was worth 10
million dollars. Today, do you agree that it's worth less? After all, it's
going to be losing money for a few months at least.

Notice that it's only worth less on paper - if you don't sell your ownership
stake, then you haven't really seen a loss.

But a lot of people _are_ selling their ownership stake. And that makes sense!
If you're 60 years old and need cash right now, and you own a company that,
instead of earning 10k a month, will now be losing 40k a month, you might want
to sell your share to not lose money, because you need cash. Maybe some other
investor that can stomach losing a few months' of profit can take it off your
hands.

------
elamje
Remember that the dates referred to in this article are literally one week
ago, so it’s not reasonable to treat this like a past event. It’s very much
ongoing and the market will likely remain volatile.

~~~
reggieband
As an example of this, the article at the time of me writing this post doesn't
include the 8% drop from today. Of course, the market hasn't closed for the
day so it would be premature to add anything like that ... but if it stays
that low today then it is yet another massive drop to add to the list.

~~~
Balgair
To further reinforce this point: The DJIA closed ~13% down today, March 16th,
the largest ever fall on record. 8 of the top 10 losses are all within the
last 30 days.

To note here though, 4 of the top 10 largest gains on record have also
occurred in this timespan too.

Still, per the wikipedia article's point, the last 7 days has been _VERY_ bad
for the DJIA. There is no sugarcoating this.

[https://en.wikipedia.org/wiki/List_of_largest_daily_changes_...](https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Industrial_Average)

------
bitexploder
The markets have been looking for a reset for a while anyhow. I think the
market is well capitalized right now and this looks much more like a reset
than some fundamental crisis. There isn't any underlying financial event
triggering this, and I think we know roughly how bad this can and will get and
it is not financial crisis worthy. The world governments are already injecting
cash into the markets to stabilize them. I generally agree with the Goldman
Sachs memo on this event (except how it subtly downplays quarantine/self
isolation efforts)

[https://www.forbes.com/sites/abrambrown/2020/03/16/the-
priva...](https://www.forbes.com/sites/abrambrown/2020/03/16/the-private-
goldman-sachs-coronavirus-meeting-thats-setting-the-internet-on-fire/)

~~~
travisjungroth
> There isn't any underlying financial event triggering this

Flights are sharply down, large events all over the world have been cancelled,
millions of people are quarantined in their homes. If that doesn’t qualify as
an “underlying financial event”, I’m not sure what does.

~~~
sxg
None of those are primary events. Covid-19 is responsible for causing all of
those changes. Compare that to 2008 where the sub prime mortgage crisis was
the primary event.

~~~
travisjungroth
So, because they have a shared underlying cause they don't count?

There seems to be this weird idea floating around that because this financial
crisis was triggered by events in the real economy (instead of a financial
crisis blowing up the real economy, like normal) it somehow doesn't count or
it's overblown or something. Just look at the rest of the sentence I quoted:
"and I think we know roughly how bad this can and will get and it is not
financial crisis worthy."

Airline stocks have tanked because way less people are flying. Movie theater
stocks have tanked because way less people are going to movies. This financial
crisis seems to be firmly rooted in real world events. These companies are
truly worth a lot less than they were a month ago.

~~~
sxg
I'm not suggesting that this financial crisis doesn't count or is overblown.
It is real, and it is happening. I agree that airlines and movie theaters are
worth less today than they were a few weeks ago.

What I'm saying is that this financial crisis has a clear, identifiable cause:
covid-19. When covid-19 blows over (which it will in a few months time), the
market will recover. Without covid-19, travel bans will be lifted and people
will fly again. There's no reason to believe people are done with airlines
forever. Same with movie theaters and the restaurant industry.

My argument is that the underlying primary cause of the financial crisis
matters because it determines the path to recovery. I fully expect covid-19 to
disappear in a few months (as it has in China and South Korea), and I fully
expect the market to recover in the months afterward.

------
preommr
How do you guys think this will affect the software job market?

~~~
AznHisoka
I have friends whose startups are already freezing hiring, and cutting back on
unnecessary expenses (as they should).

Lowered demand for consumer goods and services naturally mean that these
companies will be trimming the fat on SaaS products, and infrastructure
(unless it's truly critical for work, ie Zoom) which in turn means less
technical jobs.

~~~
itake
Maybe? Enterprise SaaS deals are for year long commitments. Sure in 6 mo, they
may choose to renew less tooling and having less employees means less seats,
but I don't see a big shift here.

~~~
r00fus
You think that planning/sales/etc doesn't impact current operations?

~~~
itake
I think big companies are super slow to react, as they should be. There
definitely will be adjustments but companies are not going to stop paying for
software.

------
Havoc
Yeah think this is barely the start

US hasn’t even gotten proper sick yet and a big chunk of the world market cap
is US based

------
rvz
Oh dear, Remember the ridiculous 2020 predictions made by several soothsayers?
It appears my so called 'machine learning crystal ball' was to some extent
correct over this. Not that it was caused by coronavirus, but eventually in
2020 a crash will come. [0]

The next phase of this Act will claim all those profitless companies with high
costs and burn rate who will soon collapse.

[0]
[https://news.ycombinator.com/item?id=21926473](https://news.ycombinator.com/item?id=21926473)

~~~
lm28469
It never seemed ridiculous to anyone outside the hype bubbles. Automation and
AI is quite literally the same story since the 40s.

------
rafaele
a recession is happening, let's hope it doesn't turn into a depression

------
olivermarks
Intrigued by the authors
[https://en.wikipedia.org/w/index.php?title=2020_stock_market...](https://en.wikipedia.org/w/index.php?title=2020_stock_market_crash&action=history)

------
grey-area
The history of this crash starts in 2008.

~~~
lordnacho
Or the dotcom bubble. Rates were kept too low after that and we got the
mortgage crisis.

~~~
nabla9
Too low rates actually started around 1311

I highly recommend: "Eight centuries of global real interest rates, R-G, and
the ‘suprasecular’ decline, 1311–2018."
[https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3485734](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3485734)

Related to the paper:

\- Visualizing the 700-Year Fall of Interest Rates
[https://www.visualcapitalist.com/700-year-decline-of-
interes...](https://www.visualcapitalist.com/700-year-decline-of-interest-
rates/)

\- Macro Musing podcast with author: [https://soundcloud.com/macro-
musings/paul-schmelzing-on-the](https://soundcloud.com/macro-musings/paul-
schmelzing-on-the)

~~~
lordnacho
Yeah I've seen that. Going down doesn't mean too low though.

------
ngngngng
Grateful for the wikipedia contributors putting this together so fast and
well.

As a side note. I know a significant amount of people (relatives and friends)
that truly think this event is a big "liberal conspiracy" to stop Trumps
reelection. We've had to take my grandfathers keys because his favorite news
station is telling people this and he believes it so was continuing to go out.

~~~
burgerzzz
I think one can make an argument that left-leaning media is certainly
elevating arguments that Trump is the one individual that is most to blame for
the spread of the virus and the economic impact. Partisan paranoia runs deep
on both sides of the aisle anytime we have these crisis.

~~~
r00fus
His gaslighting is not helping. It's causing a deeper distrust of institutions
and the market does not like it. His historical tweet from 2014 about the
then-elected president's fitness to serve "causing" a 1000pt drop is apropos.

------
jarsin
honest question why is the market still open? So we all sit around and read
crazy news and watch investors get destroyed for the next 2 months?

~~~
outworlder
If you close the market and don't solve the underlying problems, the moment it
reopens you will wish it remained closed.

~~~
jarsin
Thats what i mean. Why is the market not closed while the world deals with the
virus? If and when the world deals with the virus reopen. This is forced
closure of most commerce in the world due to the virus and everyone is suppose
to speculate on the future earnings of every company in the world durring this
time...

Its unprecedented and it needs to be shutdown.

------
baybal2
For once, I am glad that I kept faith in yellow metal.

~~~
alkonaut
I moved my savings which were mostly in index funds into 2/3 index funds and
1/3 bear ETF with 2x leverage 3 weeks ago. Seems to keep it all at 0 for now.

~~~
fyp
Hmm why not sell everything and hold cash if you just want to keep everything
at 0?

You're just paying fees for no reason. Is it just some tax trick to keep long
term capital gains for the index funds? (does it even work like that?)

~~~
alkonaut
I wasn't planning on ending up with that it just happened to end up in a state
which basically doesn't move (just like cash). I forgot I had made one
transfer and then before I realized it all hell broke lose. I could just as
well sell all of it now, but instead I'll probably slowly move from the bear
to the index.

------
nikolay
I listened to Trump yesterday and I couldn't believe he was stupid enough to
encourage people with no basis! There's no higher demand after crisis as
people have no money and most of this hoarding is debt at high interest of
credit cards. Many were expecting the crash since last year, the pandemic just
gave no reason to wait more!

------
Hamuko
> _On 11 March, impeached US president Donald Trump gave a public address._

Someone _really_ wanted to work that in there.

~~~
rat87
To be fair if Republican Senators had simply done their jobs and removed him
from office we would at least be in a somewhat better position today

