
S&P 500 drops 9%, extending losses after 15-minute trading halt - rococode
https://www.cnbc.com/2020/03/15/traders-await-futures-open-after-fed-cuts-rates-launches-easing-program.html
======
wycy
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
What else can they do? Watch people's portfolios burn down tot he ground? Will
that make the situation better?

~~~
TrueDuality
Funding and effective virus response and admitting the severity of the problem
would be a start. Our country needs to be seen taking this seriously from the
top which it most certainly isn't.

I don't think there are any measures that will prevent this drop right now
though. Supply and demand are both heavily impacted. We should be looking
further down the line to the financial consequences we can prevent.

Layoffs have already started, part time workers are making significantly less,
and imports aren't as stable. This is going to have serious knock on effects
preventing a quick recovery once the pandemic is under control.

------
lordnacho
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.

~~~
throwaway_pdp09
> \- The news everyone wants now is fiscal stimulus

Market-clueless newbie here. How would fiscal stimulus help a market that is
seizing up due to reducing supply side (factories close) and reducing demand
side (pubs to be closed, airlines crashing because of border closures, & more)
and a disease that is likely to stress many countries medical provisions to
breaking point, and then beyond.

Didn't the US dump 1.5 trillion dollars in a few days ago, and the market
bounced but briefly? I mean it was obvious to me that it wouldn't work, why do
you (as an expert - and I don't mean that sarcastically) think more stimulus,
or indeed any, would help at this point?

~~~
aguyfromnb
> _How would fiscal stimulus help a market that is seizing up due to reducing
> supply side (factories close) and reducing demand side (pubs to be closed,
> airlines crashing because of border closures, & more) and a disease that is
> likely to stress many countries medical provisions to breaking point, and
> then beyond._

If we literally hand money to people, they can pay their bills on time while
we work through this thing.

I'm not sure what else will work at this point.

It's not feasible to simply have "rent holidays" or some such, as the OP
suggests, as that rent expense is someone else's income.

~~~
gizmo686
Most of that rent goes towards a mortgage, which can also be suspended. The
landlord still looses income, but not in a worse way then other bussiness
which had to close.

------
VBprogrammer
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.

~~~
sparkling
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.

~~~
graeme
If markets fall another 20-30%, it won’t have obviously been a good time to
buy today. These aren’t normal times.

In the depression, stocks fell for about three years. Also, your dollar
argument makes no sense: the stocks are valued in dollars, and are falling
faster than the dollar.

It’s great to buy at the bottom, but who knows if that’s it.

~~~
alexandercrohde
The point is that even in the worst-case-scenario, if you bought stock the
hour before the great depression, you'd still be way up when you retire in 30
years later.

~~~
graeme
The dow went from 400 to 50 in the depression. If you bought at the bottom
you’d have 800% more than if you’d bought at the top!

The fact that stocks go up long run isn’t an argument for pouring money into a
plunging market. This might be the bottom, it might not.

~~~
tybit
As you said _It’s great to buy at the bottom, but who knows if that’s it._ ,
so I’m going to continue investing whatever I can each fortnight.

I’d rather risk paying more now before a big crash and continuing to invest
through the big crash than risk missing this opportunity and the market going
back to a bull one in a few weeks.

~~~
graeme
That’s fine. The parent comment was recommending people increase their buying
right now however. My point was this isn’t necessarily a special opportunity
just because it’s off a peak.

------
adrianN
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.

~~~
ncallaway
I suspect that stock prices were artificially inflated over the last several*
years. If we were in a bubble, then this coronavirus ends up acting more as a
catalyst for popping the bubble, then you would see a significant drop to the
market beyond the immediate effects to the market.

> 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.

Though, that worst case scenario a 30% drop seems low to me. For some
particularly hard-hit sectors, a lot of business would go to 0 in the scenario
you described.

* For some pretty ambiguous definition of "several" that I can't pin down with precision

~~~
AnthonyMouse
> I suspect that stock prices were artificially inflated over the last
> several* years. If we were in a bubble, then this coronavirus ends up acting
> more as a catalyst for popping the bubble, then you would see a significant
> drop to the market beyond the immediate effects to the market.

I don't really get the bubble theory. Stock prices were "artificially
inflated" because the Fed was keeping interest rates low. That causes people
to borrow money and use it to invest with, because the risk-adjusted return on
the investments is higher than the interest they have to pay to borrow the
money. Which creates more demand for stocks and drives up the prices.

But that demand continues as long as the interest rates are low. It's the same
as housing -- low interest rates and easy money increased housing prices,
which then came to a head when interest rates started to rise and suddenly
that demand fell off, sale prices fell and people were underwater on their
mortgages. That's what happens when interest rates rise, which is why the Fed
has been keeping them low for more than a decade, but they just fell even
more. The "pop" happens when interest rates go _up_ too fast. Stocks are down
right now because of the coronavirus, not because interest rates went up.

The trick is how to get out of the low interest rates without causing the
market to decline, and there are two options. One is high economic growth, so
that natural demand can replace the demand created by low interest rates,
which you take if you can get it but hasn't been the case recently. The other
is inflation -- the government creates a bunch of new money and gives it out,
which creates a tendency for nominal prices to increase and offsets the
decrease caused by raising interest rates.

We may be at the point where that second one is making a lot of sense, because
"high economic growth" seems pretty unlikely in the immediate future, but
"print a bunch of money and give it to people" is _exactly_ the sort of thing
you want to do during hard times when there are existing deflationary forces
in effect. And then it sets you up for a subsequent recovery that allows
interest rates to rise as the deflationary forces wane and the inflationary
effect from creating the new money catches up and allows you to raise interest
rates without reducing nominal asset prices.

------
rococode
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
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
Your first paragraph has been said by various people for various reasons for
at least the last 10 years.

~~~
thawaway1837
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.

------
nemo44x
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
Problem is that dollar cost averaging becomes nigh impossible if you loose
your job because of the situation.

~~~
nemo44x
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.

------
tinyhouse
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.

------
a3n
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?

~~~
mathieutd
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
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

------
stuff4ben
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
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-a...](https://www.bloomberg.com/opinion/articles/2020-03-16/data-
and-psychology-may-argue-for-us-stock-market-closure?sref=1kJVNqnU)

------
unlinked_dll
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
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
This rate cut is just feeding into fears.

------
adrianN
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.

------
ceejayoz
> 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.

------
brenden2
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.

~~~
streetcat1
Since the government response is a LAGGING indicator (I.e. people are already
the steps to contain the virus before the government), we probably saw pick
virus.

Also, the stock market becoming cheaper actually reduces inequality since it
allows new savers to get in at a lower price. And the same thing for housing.

~~~
EarthIsHome
> Also, the stock market becoming cheaper actually reduces inequality since it
> allows new savers to get in at a lower price. And the same thing for
> housing.

It increases inequality: people lose their jobs, people can't pay their rents,
people can't pay their mortgages.

Most people can't put money in stocks and work paycheck to paycheck. Those
people are going to get hit the hardest.

When the stock market is doing the best ever, these people aren't benefiting,
but when the stock market crashes, these people have the most to lose.

It's exactly why our economy shouldn't be tied to the whims of the stock
market.

------
andrewjrangel
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.

~~~
PragmaticPulp
> 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
But they do tend to need new rounds of investment every few months...

If those dry up, the startups will too.

------
Scirra_Tom
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.

------
eximius
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
as a normal consumer investor your choices are a drop in the ocean.

------
loopz
No real solutions until credible leadership takes charge.

For example: [https://www.who.int/emergencies/diseases/novel-
coronavirus-2...](https://www.who.int/emergencies/diseases/novel-
coronavirus-2019/media-resources/press-briefings)

------
chadmeister
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.

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

------
adtac
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.

~~~
PragmaticPulp
> The 0% interest rate cut was supposed to be the last bullet and the Fed has
> very likely used it up too early.

The Federal Reserve isn't the only lever the government can pull to modulate
this.

Expect to see some fiscal policy measures implemented soon. I wouldn't be
surprised if Americans start receiving checks in the mail at some point.

~~~
londons_explore
"Thanks for being a citizen. Have $1000."

Sounds a lot like a Universal Basic Income...

~~~
jumbopapa
I think handing out checks during a crisis is vastly different than doing it
all the time.

~~~
a3n
It is, but it still "sounds a lot like." Not exactly like, but a lot like.

