Worst Single Day Since 1987
Despite emergency liquidity move by the Fed, today’s Stock Plunge is Worst Single Day Since 1987.
The furious falls in share prices on rising fears of a global slowdown due to the rapid spread of coronavirus occurred despite a $1.5 trillion intervention in short-term funding markets by the Federal Reserve.
For the day, the Dow industrials shed 2,352.6 points, or 10% to 21,200.62. The S&P 500 sank 260.74 points, or 9.5%, to 2,480.64. And the Nasdaq Composite slid 750.25 points, or 9.4% to 7,201.80.
Companies most exposed to the coronavirus outbreak were particularly hard hit, and airline and cruise shares helped lead the tumble. United Airlines Holdings dropped 25%, Delta Air Lines fell 21%, and Spirit Airlines tumbled 33%. Royal Caribbean Cruises plummeted 32%. On Thursday, Princess Cruises canceled all voyages for the next two months after two of its ships suffered coronavirus outbreaks.
But few parts of the market were immune. All 11 sectors of the S&P 500 tumbled, with losses led by the real estate and industrial sectors. Even companies that investors thought would reap the benefits of the virus tumbled. Clorox ended the day down 6.3%. Gilead Sciences, which has started testing a virus treatment, fell 6.1%.
Illogical Comments of the Day
“We are beyond the logical, mathematical approach to things,” said Steven Dudash, president of Chicago-based IHT Wealth Management. “We’ve got complete overreactions going on because of the fear of the unknown.”
“When you see that, you can’t expect to see a logical response to interventions,” he said.
If you do not know what is going to happen, how many people will die, or how long this will last, how the hell can anyone say the market reaction is illogical?
Who’s to Blame?
A friend of mine commented today that you cannot blame the Fed for the coronavirus.
That’s true enough.
But you can blame the Fed for blowing three massive bubbles in succession, each bigger than the prior one, in the nonsensical idea that something must be done about deflation.
Economic Challenge to Keynesians
Of all the widely believed but patently false economic beliefs is the absurd notion that falling consumer prices are bad for the economy and something must be done about them.
My Challenge to Keynesians “Prove Rising Prices Provide an Overall Economic Benefit” has gone unanswered.
BIS Deflation Study
The BIS did a historical study and found routine deflation was not any problem at all.
“Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive,” stated the BIS study.
Deflationary Outcome
Central banks’ seriously misguided attempts to defeat routine consumer price deflation is what fuels the destructive asset bubbles that eventually collapse.
Deflation is not really about prices. It’s about the value of debt on the books of banks that cannot be paid back by zombie corporations and individuals.
That is what the Fed fears. It takes lower and lower yields to prevent a debt crash. But it is entirely counterproductive and it does not help the consumer, only the asset holders. Fed (global central bank) policy is to blame.
Assessing the Blame
I don’t blame the Fed for the coronavirus.
However, I do blame the Fed for its erroneous inflationary tactics that blew three of the biggest economic bubble in succession: 2000, 2007, 2020.
Fiscal policies helped as well. Trump’s stimulus that went to corporations and the wealthy also fueled the stock market.
So if you want another finger to point, that’s the one. But it is secondary to cheap money.
Mike “Mish” Shedlock
Are algos driving the market higher with apparent disregard for fundamentals, and then cause the bottom to fall off on the way down?
What was the total value that was wiped out only today? How doe it compare to 5 trillion?
There’s no such thing as “the total value” of BS numbers on computer screens that cannot be redeemed when needed.
There’s a great solution for Trump: Article 25
It’s YUUUUUUUUUUUUGE!,!!!!!
Logic went out the window when QE barred the door.
Underneath the headline numbers were a series of movements that don’t really make sense when lined up against one another. They amount to signs — not definitive, but worrying — that something is breaking down in the workings of the financial system, even if it’s not totally clear what that is just yet. https://www.nytimes.com/2020/03/12/upshot/markets-weird-coronavirus.html
“Prove Rising Prices Provide an Overall Economic Benefit”
certainly not a benefit but it’s my observation that rising prices (and wages) masks a worker’s understanding they are economically standing still or more likely losing ground.
This just defined Trump’s presidency. Time to act and lead, in reality, NOT in the fantasyland of partisan politics, and he’s too cowardly to forward any effective solution or even acknowledge the scope of what’s going to happen in the next 3 months … and markets know it. All he’s got is rah-rah narcissism and blame (“foreign virus”!), while his CDC gives such courageous advice as: wash you hands! stay home if you have a cough!
The bailout line starts around the block down the street,another 20% drop and that could happen as soon as next week, and have the states will need a bailout,pension funds will crater,shale will need a bailout,banks (obviously)will need another massive bailout…you name it…and they’ll a need a bailout! Biblical levels of fresh money printing set to go down!
Gold and the miners were taken out and shot today. Safe haven indeed. $1200 here we come!!!
This is an historic panic. Aside from the stock markets, shelves at my grocery store have been cleared of toilet paper and disinfectants. There are a few cases of bottled water. The checkout lines were 5 deep. Late this afternoon the grocery store was more active than a major holiday.
The greatest surprise was plenty of bottles of cough syrup and decongestant on the shelves. Those can’t be purchased in bulk because they are ingredients to making methamphetamine. I was able to buy 2 bottles. I made multiple stops for my “bulk” purchase. Decongestant will be the greatest pleasure if I catch a virus. Two years ago I got an upper respiratory ailment. I was coughing so much my ribs felt they had been hit with a baseball bat. I was prescribed over-the-counter decongestant, but no antibiotics. I also have a big jar of ibuprofen to help keep swelling down.
Hopefully I won’t need to use my preparations.
It’s clear to me from this the Americans take great value in pooping.
We do have the world’s biggest toilets
I just think people don’t know what to do, so they’re doing whatever they think they can to prepare for this pandemic. Also, if you’ve ever been in a 3rd world country with no TP, then you really do learn the extrinsic value of it so might not be bad to have a few extra roles.
The DOW is now up just 7% since the Trumpster took office. If unemployment heads up he will have no record to run on.
I already had that post in mind
But it’s been a busy day
I agree. He will also be hammered by how unprepared he was and made a bad case for small government
The market was already in a bubble when he took office (his words), and it kept rocketing higher. Just think about it.
“you cannot blame the Fed for the coronavirus.”
But you can blame them for the incompetence in responding to it.
By transferring each and every resource in America; from people competent enough to create value, to absolute, 100.(infinite zeros), useless in every single meaning of the world morons who “make money of their house” or “their assets.”
So yes, when all resources are commanded, and “owned,” exclusively by the dumbest and most useless creatures ever to be attempted passed off as human; undifferentiated nationwide stupidity and incompetence in the face of absooutely everything, is the only possible outcome. Planes fall out of the sky, noone can get tested for a virus etc., etc.
While the dumbest and most utterly pointless people in America, sure have been enjoying the wealth The Fed stole for them.
Sir;
I am intrigued by your ideas , And would like to subscribe to your newsletter.
Mish, tinger should be finger.
Sad state of affairs. Maybe we’re better off with complete and massive total wipeout.
So if/when we get thru this in one piece(and who knows what’s up with our overseas war projects at the moment) do you care to bet on if they’ll finally start doing the right thing? HAHA.
I hope I live long e
…..enough to see what absurdity comes down the pike because this is just the tip of the ice berg.