I thought it would be a War in the mid-east that would get the dominoes falling. Turned out a real black swan. However much many think that the US stock market was on solid foundation, false premise. The underlying instabilities that caused 2008 crash never went away.
Injection of trillions, low Fed Interest rates almost free (now zero rates, i.e free) helped the stock market soar and insiders to take their money of the table. Middle class Tax payers, Pension funds, the small retail stock buyers are left holding the bag.
I expected a probable drop to 20K and a somewhat probable to 15K. The collapse and drop even surprises me, and other skeptics. Now even 15K seems highly probable. Thats why I say read alternative media, like ZeroHedge, RT and Unz (aka Fake news) to see the other side of the spin.
Boeing:
When Boeing management said it was the fault of foreign pilots (in other words non white) spelt their own doom. I said Boeing should drop below 100, I did not expect this fast. Hedge fund operated Boeing, cutting corners to maximize profits. Stock buybacks, were the norm to push up stock price. Investment in safety measures, research and development, was not part of management decisions.
Maybe Trump will inject money into Boeing to get the stock price up. The insiders will sell. Retail idiots who believe Boeing is a great American Company will buy, not knowing Hedge Funds, Bezos and the like are not real Americans, i.e. those who care about the deplorables and others.
Now Trump, like the Boeing guys wants to deflect his responsibility, saying racist Chinese Virus. I think going to end much like the Boeing management.
Unhappily for the US, the alternatives in leadership are equally horrible. Biden another Trump probably worse, in the stages of Dementia and will be a puppet. If Sanders is able to get the nomination (anyone opposing Trump will win), he will be blocked by his own party the Democrats.
Update: Article by
When Raghuram G. Rajan or Satyajit Das write I sit up and read and re-read carefully.
https://www.project-syndicate.org/commentary/covid19-economic-weaknesses-by-raghuram-rajan-2020-03
Dow Jones (DJI)
I like Zeroedge lately, too late to be of comfort though . Also Jesse Colombo, Charles Nenner , Sven heinrich, Tuomas Malinen who have correctly called the stock market collapse 2 months back. This rout is very deep and fast and the depression and stock market falls are going to be of 1929 proportions. In the aftermath of 1929 crash, DJIA lost about 90% spread over year. I suspect DJIA could go as low as 8000 from it’s peak of 28000 last month. As happens in all bear markets, there will be sucker rallies to give an illusion that people can still make money in stocks. To continue that illusion Fed and other Central banks are bringing interest rates to zero and throwing in trillions of $$. That would not wash and it will only prolong the bear market. It does not matter who the US Prez is and which party.
In a few months there will be a huge banking crisis , with Deutsch bank will be the first domino to fall
” The underlying instabilities that caused 2008 crash never went away.”
What according to u folks would entail a “real” recovery? What should they be doing to fix it.
a) Debt Jubilee, i.e. forgiveness of debt
b) Stop derivatives being used for speculation/betting. Can be used as hedge against asset on the books. If the asset is sold, the derivative needs to be unwound.
1. Let companies go bust if they are not profitable , instead of propping them up with more and more loans. Let bad companies go bust. No company is too big to fail
2. give direct aid to individuals
3. Share buybacks be made illegal.
When 1st WW started in August 2014, most ppl thought it will be over by Christmas – little did they know it will drag on for 4 dreadful years with millions of casualties. This economic and health catastrophe is also like that – no easy fixes , it will drag on a long time
VijayVan
Completely agree with all three points
sbarrkum
2 tweats that I saw
“Calls for government bailouts & helicopter money are deafening. But the government doesn’t have any money! Far from it! Establishment leadership has already racked up $24 Trillion in National Debt and $132 Trillion in unfunded liabilities.”
“Canada announced it had 500,000 unemployment claims filed THIS week. Extrapolating that to the US population of 300 million (vs 30 million in Canada) suggests there could be as many as 5 MILLION unemployment claims for this week’s estimate coming Thursday ”
Next week a tsunami of unemployed people will start.
Canada is using the unemployment system to provide stimulus money and financial support to people who are temporarily out of work because of the virus.
https://www.canada.ca/en/department-finance/economic-response-plan.html
This is not the same as regular unemployment.
My feeling is the feds going to do whatever it takes to prevent deflationary forces from wrecking the economy. If they succeed, then not so bad, they party continues. If they fail, then god help us all.
wow, just wow.
first time i have seen razib coming out so strongly against trump. ..and just when i had started to like the guy.
corona virus may be a serious menace, but isn’t trump doing all the right things by underplaying its threat and reassuring the markets. i mean, even if he lying a bit by underestimating the danger of the virus, isn’t it all for a good cause. we dont want a president who will get hysterical and cause a run on the banks, do we.
and don’t forget, he is also sending out a $1000 check to every US worker very soon. 🙂
but you are right about the bottom level of the market. my prediction – dow will bottom out at 17K and s&p500 at 2K.