Economic Shenanigans / Market Crisis

[edyzmedieval]

https://www.bloomberg.com/news/artic...s-markets-wrap

Well well well... it looks like the goose has been thoroughly cooked, seared and grilled. The past days have been a monster problem for the stock market as the global economy grinds to a halt.

Thoughts?

[rory_20_uk]

I'm waiting for it to reach a nadir in a few months then invest.

It could help remove some of the zombie companies.

[Montmorency]

Today was the 2nd largest percentage decline of the Dow in history. The worst was in 1987. Today was the worst absolute drop in history. RIP pensions.

5 of 5 largest point drops ever have been in the past month. 2 of 5 of the largest drops percentage-wise. The worst being 1987, the other two being October 1929. Today it closed 12.94% down. The worst day in 1929 was a decline of 12.82%.

Global recession risk seems high.

Don't compare this to other Panics because this is a crisis in the real economy, not (primarily) in the banking/finance system. Remember, interest rates and Treasury yields keep going lower and lower. Credit is cheaper and more readily available than ever, even now. The problem isn't the money markets per se, it's the collapse of supply and demand in a vulnerable, overextended recovery, on a global scale. Wowee.

If this is a looming recession, after a 2019 of weak global growth, hopefully we get it right this time.

[Crandar]

IMO its long term effects will be minimal. It's a recession originating from a special crisis, which, even if the most pessimistic scenarios are confirmed, will not last for ever. This means that the markets will receive some dramatic hits, but they will gradually recover, regaining their strength in probably less than a year. Not to mention the fact that once such sudden "disasters" are overcome, we usually experience an economic boom of however limited duration. On the contrary, systemic issues, like that of 2008, lie in the structure itself of the economy and are much more difficult to fix. Even impossible, sometimes, without breaking some eggs. I'd argue that Europe and the US even today have not completely recovered from 2008, but that won't be the case for the coronavirus collapse. Just my uneducated two cents.

[Greyblades]

Its the chinese that have most reason to be economically worried; now is not a good time for investors to be worried that thier slaves might end up dying before the end of a 14 hour shift. Lot of strings being pulled to keep people from wondering if the chinese are going to have yet another epidemic in the near future.

It's probably the reason they sat on it for a month and a half, the less charitable interpretation being a "if we're going down everyone else is going with me" move.

[Seamus Fermanagh]

We were, according to many analysts, "due" for a bout of recession as part of the inevitable up and down cycling of the economy. Prior to any concerns with the virus economic impacts, a near-future recession was already presumed likely. With the economic curtailment resulting from Covid-19 as a trigger, tipping into recession from where we were was a virtual guarantee. How bad will it get and for how long are, of course, the unanswered salient questions. And, until a vaccine is developed or other significant mitigations in place it may be too early to really answer those questions anyway.

[Pannonian]

Its the chinese that have most reason to be economically worried; now is not a good time for investors to be worried that thier slaves might end up dying before the end of a 14 hour shift. Lot of strings being pulled to keep people from wondering if the chinese are going to have yet another epidemic in the near future.

It's probably the reason they sat on it for a month and a half, the less charitable interpretation being a "if we're going down everyone else is going with me" move.

Or as someone who reads more about them and doesn't have a paranoid streak may think, there is a conflict between local government officials who want to keep a cushy job and a central government that expects local government to be more competent than they frequently turn out to be.

A related question would be, do Brexiteers still think that democracy trumps reality? If experts tell them there will be a mess unless they do things a certain way, does democracy override expert opinion?

[Montmorency]

IMO its long term effects will be minimal. It's a recession originating from a special crisis, which, even if the most pessimistic scenarios are confirmed, will not last for ever. This means that the markets will receive some dramatic hits, but they will gradually recover, regaining their strength in probably less than a year. Not to mention the fact that once such sudden "disasters" are overcome, we usually experience an economic boom of however limited duration. On the contrary, systemic issues, like that of 2008, lie in the structure itself of the economy and are much more difficult to fix. Even impossible, sometimes, without breaking some eggs. I'd argue that Europe and the US even today have not completely recovered from 2008, but that won't be the case for the coronavirus collapse. Just my uneducated two cents.

That's kind of what I had in mind. Structural issues carried over, like (consumer) weak spending with high debt accumulation, may undermine the economic and political recovery without special correctives.

And let's keep in mind the kind of predictable consequences that are in store for us as we enter any coronavirus contraction. We're talking chronic broad mass unemployment, with service sectors hardest hit. Unknown duration (and some probability of aftershocks).

A lot really does depend on how serious governments get with social programs and direct stimulus during and after the emergency. If the marketists have their way here in the US we will dole out hundreds of billions in industrial subsidies while leaving the public with payroll tax cuts.