US Stock market, the elephant in the room

[Peterw42]

What are peoples thoughts on the current market fall ? Down 10%, the biggest one day fall in history.

Is it the beginning of the end, a blip that will bounce back ?

 

[CNXexpat]

All crises are over after a while and Dow&Co. will rise to new records. A good opportunity to buy when the panic comes to an end. Take a look at the long term charts. 

 

I am trading since more than 30 years and I am living good from it.

[bkk6060]

I by now means am an expert, but have had most of my money in the US markets for 35 years.

 

This has to be one of the biggest over reactions I have ever seen due to the CDC statement. 

And I agree, tremendous buying opportunity I bet the Dow will be 30,000+ by the end of the year.

 

 

[cmarshall]

We do not know how the corona virus epidemic/pandemic will play out.  It could peter out like SARS and MERS or it could wipe out tens of millions of people like the Spanish Flu of 1918 - 1920.  The current estimate of the mortality rate, which is unreliable, because there is not enough information, is 2%.  The Spanish Flu had a mortality rate of 1.9% while the common annual flu has a mortality rate of 0.1%.  So, the potential for a catastrophe is present, but without knowing the transmission rate the mortality rate is really just a guess.

 

In the face of such large uncertainty the stock market typically shows a panic reaction such as now.  Investors have more to lose from an adverse outcome than they have to gain from an early return of the status quo.  Roughly in the period of the Spanish Flu the US experienced one recession and one depression (not the Great Depression) although the cause of the economic contraction is not usually attributed to the Flu Epidemic.

 

Most feared catatastrophes do not materialize in the end, but some do.  So my guess is that the corona virus will be made manageable by a vaccine in the next 12 - 18 months.  In the meantime mortality will probably be less than currently feared.  Some industries, like the cruise business, will suffer for a long time.

[tjo o tjim]

Not stressed personally, expect the market to stabilize some time next week. The talking heads are saying de-leverage, have cash handy. The market has had huge (illogical?) gains in the past two months, so a correction is expected. 
 

...but I would like it to go back to last week’s numbers soon. 

[digibum]

55 minutes ago, cmarshall said:

We do not know how the corona virus epidemic/pandemic will play out.  It could peter out like SARS and MERS or it could wipe out tens of millions of people like the Spanish Flu of 1918 - 1920.  The current estimate of the mortality rate, which is unreliable, because there is not enough information, is 2%.  The Spanish Flu had a mortality rate of 1.9% while the common annual flu has a mortality rate of 0.1%.  So, the potential for a catastrophe is present, but without knowing the transmission rate the mortality rate is really just a guess.

 

In the face of such large uncertainty the stock market typically shows a panic reaction such as now.  Investors have more to lose from an adverse outcome than they have to gain from an early return of the status quo.  Roughly in the period of the Spanish Flu the US experienced one recession and one depression (not the Great Depression) although the cause of the economic contraction is not usually attributed to the Flu Epidemic.

 

Most feared catatastrophes do not materialize in the end, but some do.  So my guess is that the corona virus will be made manageable by a vaccine in the next 12 - 18 months.  In the meantime mortality will probably be less than currently feared.  Some industries, like the cruise business, will suffer for a long time.

 

An important note about those mortality rates everyone keeps quoting, it's not 2% across the board.  It's an average of 2%.  Some age groups have a much higher mortality rate and some groups have a much, much lower mortality rate.  They average out to 2%. 

 

For instance, if you're 80+ the mortality rate is 14.8%.  If you're 30 - 39 years old it's 0.2%. 

 

Similarly, the mortality rate is highly dependent on pre-existing conditions.  Someone with no pre-existing conditions a 0.9% mortality rate.  Someone suffering from a cardiac condition has a 10.5% mortality rate. 

 

https://www.worldometers.info/coronavirus/coronavirus-age-sex-demographics/

 

Personally, I think most countries have responded quickly and appropriately (yes, even Thailand - if you lower your expectations a bit to match what is realistically possible from the Thai government).  However, I think the media is on super-hype alert and trying to whip people into a frenzy so they'll go into full panic mode (which is good for news publishers). 

 

I've seen people talking about having trouble sleeping, nightmares about the virus, people going nuts on social media following every new reported case, conspiracy theorists who are conducting their own internet investigations about how the virus got loose and who's covering up what, etc. 

 

I hate to laugh but there was a guy on Reddit who had me in tears.  He posted this rant about how he failed basic statistics in college and yet he's having arguments online with people about quadratic equations and reading non-peer reviewed medical studies.  He says he's finally come to the conclusion he has no clue what he's talking about.  He's a pen salesman and his best buddy Mike who has been his partner in crime in researching the virus is a hummus delivery driver. 

 

https://www.reddit.com/r/China_Flu/comments/f74ns0/so_many_of_us_literally_dont_know_anything_and/

 

It just reminds me so much of every other online debate where someone who has no expertise in an area will just go fishing for the first answer that pops up on Google and will take a fight to the death stance on an issue against someone who is actually an expert. 

 

That's what the media is doing to people.  It puts that paranoia in overdrive. 

 

The market seems to be reacting less to the scare and more to the ways that reactions to the virus will impact businesses.  Tourism is taking a huge hit.  Conferences and conventions are being cancelled.  Some manufacturing sectors are already having trouble getting product out of China.    People are less likely to go out and go shopping.  People are starting to talk about the impact on the Summer Olympics. 

 

Bottom line is, from a business perspective, the market is reacting partly out of hysteria but there is a real threat to the world's economies as a result of this.  Even if it's a quarter or two of lowered economic output, it's going to hit earnings. 

 

 

 

 

[tjo o tjim]

3 hours ago, digibum said:

The market seems to be reacting less to the scare and more to the ways that reactions to the virus will impact businesses.  Tourism is taking a huge hit.  Conferences and conventions are being cancelled.  Some manufacturing sectors are already having trouble getting product out of China.    People are less likely to go out and go shopping.  People are starting to talk about the impact on the Summer Olympics. 

 

Bottom line is, from a business perspective, the market is reacting partly out of hysteria but there is a real threat to the world's economies as a result of this.  Even if it's a quarter or two of lowered economic output, it's going to hit earnings. 

I would say the US markets at least have overreacted.  I don’t follow tourism or airline type stocks, but watching Microsoft (ultimate rent-seeking company at this point, that people cannot avoid paying) dropping 14% in a week seems irrational.  (Granted they are up 6% in the last 3 months.)

 

It is pretty hard to draw any conclusions at this point on the real effects of the disease. About the only solid data I can find, that is easily corroborated, is that when you have more than 1 person in a population of 10,000 requiring hospitalization you are likely to overwhelm the system and have accelerating impacts on survival.

 

Oh, and that people all over the world lie and make poor decisions in order to protect tourism.

[Why Me]

Irrational hysteria, Greenspan might say. I put in 30k yesterday. According to the futures I am going to lose off the gong today. But I expect to be ahead late next week.

 

Go ahead, virus, prove me wrong. I dare you, I double dare you.

[KeeTua]

Looks like the C virus created an excellent opportunity for profit taking. Look how far above the 200 day moving average the S&P has been trading, a correction was past due. But there have also been early warnings of recession in the bond markets.

 

Some serious comments from Warren Buffet from May 2019 about the US economy like him or not he's smarter than us when it comes to the US economy and takes a very long view.

 

    "Buffett highlights that unemployment remains so low, yet interest rates and inflation are not rising. At the same time the U.S. government continues to spend more money than it takes in.

    These conditions are not sustainable for the long term, Buffett says.

    "No economics textbook I know that was written in the first couple of thousand years that discussed even the possibility that you could have this sort of situation continue and have all variables stay more or less the same," he says."

 

https://www.cnbc.com/2019/05/03/buffett-no-textbook-predicted-the-strange-economy-we-have-today.html

[unsubscribe]

I'm shorting, I wouldn't be surprised if we get down to 2009 levels.

 

Correction way overdue, central banks don't have much ammo to fight it, but I'm sure they will helicopter money as much as they can and the Apples will buy back stocks like they do... but with the massive supply chain disruptions and spread of this disease, I think it's going to take a very long time to get back to the all time highs we just experienced.

 

We will see a slow staircase down over the coming months. 

[mshs]

16 hours ago, Peterw42 said:

16 hours ago, Peterw42 said:

Down 10%, the biggest one day fall in history.

1) Down more than 10% this week

2) The biggest 1-day fall in history for the Dow Jones

2a) The Dow Jones is 30 "industrials" - does not include AMZN, GOOG/GOOGL, FB, BRK-B.  It includes Visa but not Mastercard, includes Verizon but not ATT 

2B) The Dow is price-weighted.

3) The S&P 500 is market-cap weighted.  The biggest 1-day fall was 20.47% on the 19th Oct. '87

 

 

 

[mshs]

7 hours ago, unsubscribe said:

I'm shorting, I wouldn't be surprised if we get down to 2009 levels.

The market is up 438.329% (with dividends  re-invested) since 2009.

Your lifestyle would have been some much better; rather than the $3,000/m you live on today, you could be living on $13,000/m.

 

[DaRoadrunner]

16 hours ago, Peterw42 said:

Is it the beginning of the end, a blip that will bounce back ?

Its a blip that will bounce back. An overreaction to a virus that will burn itself out. Question is timing ... when to buy the dip?

 

 

[Langsuan Man]

The virus may have psychology started the down slide but the black and white evidence of this administration's total incompetence is what sustained it

 

Trump's hyperbole on all subjects has finally sunk in to the masses, they no longer buy his BS

[cmarshall]

14 minutes ago, Langsuan Man said:

The virus may have psychology started the down slide but the black and white evidence of this administration's total incompetence is what sustained it

 

Trump's hyperbole on all subjects has finally sunk in to the masses, they no longer buy his BS

Yes and no.  They weren't reassured by his ridiculous lies about corona, but they are still going to vote for him.  

[cmarshall]

18 hours ago, digibum said:

 

An important note about those mortality rates everyone keeps quoting, it's not 2% across the board.  It's an average of 2%.  Some age groups have a much higher mortality rate and some groups have a much, much lower mortality rate.  They average out to 2%. 

 

For instance, if you're 80+ the mortality rate is 14.8%.  If you're 30 - 39 years old it's 0.2%. 

 

Of course, the currently estimated mortality rate of 2% is an average.  So was the estimated mortality rate of Spanish Flu at 1.9% an average.  The rates for each demographic group are never the same.  In 1918 young people died at higher rates while corona seems to kill older people preferentially.  We have to keep in mind that the current estimates of corona's mortality rate are just guesses that may be wide of the mark.

 

If you are trying to estimate your own chances of survival the differential rate of death for your own demographic may be useful.  If, however, you are trying to judge the impact on the global economy then the average number is quite good enough.  The Spanish Flue killed between 50 and 100 million people worldwide.  An effect approaching that size today could well have large economic effects, although the Spanish Flue apparently did not.

 

The stock market is reacting to the fact that we are now in the period of maximum unknowns.  Eventually the facts will emerge.  The odds are that the outcome will not match the most extravagant fears, but it could.  In either case when enough of the facts become known the stock market will adjust.  I think the odds are that the market will recover somewhat at that point, but it's far from certain.  The Great Depression in Europe spread when a single Austrian bank failed.  The chains of causality at this level aren't well understood.

[ross163103]

Buy low, sell high! Lots of buying opportunities coming up once the dust settles.

[digibum]

50 minutes ago, cmarshall said:

 

Of course, the currently estimated mortality rate of 2% is an average.  So was the estimated mortality rate of Spanish Flu at 1.9% an average.  The rates for each demographic group are never the same.  In 1918 young people died at higher rates while corona seems to kill older people preferentially.  We have to keep in mind that the current estimates of corona's mortality rate are just guesses that may be wide of the mark.

 

If you are trying to estimate your own chances of survival the differential rate of death for your own demographic may be useful.  If, however, you are trying to judge the impact on the global economy then the average number is quite good enough.  The Spanish Flue killed between 50 and 100 million people worldwide.  An effect approaching that size today could well have large economic effects, although the Spanish Flue apparently did not.

 

The stock market is reacting to the fact that we are now in the period of maximum unknowns.  Eventually the facts will emerge.  The odds are that the outcome will not match the most extravagant fears, but it could.  In either case when enough of the facts become known the stock market will adjust.  I think the odds are that the market will recover somewhat at that point, but it's far from certain.  The Great Depression in Europe spread when a single Austrian bank failed.  The chains of causality at this level aren't well understood.

 

No offense, but I pointed out the difference in the hope that it would obvious that you can't just look at a single number and then project the impact of the disease based on that. 

 

For instance, with the Spanish Flu, many countries like Germany, France, the US, and UK censored it in the media (remember, there was a war going on) to keep people from freaking out.  In fact, the reason it is called the Spanish Flu is because Spain's government didn't censor the media which reported unrestricted, which made people, at the time, believe that Spain was getting hit harder than any other country. 

 

I really don't think we have that same issue today where the media is pumping out Corona Virus scare stories by the minute. 

 

In fact, countries that are suspected of under-reporting can quickly find themselves quarantined by other countries that don't trust their numbers. 

 

For instance, Israel recently banned anybody that has visited Thailand, Singapore, Hong Kong and Macau within 14 days before arriving in Israel.  I believe Gibraltar has done the same (someone I know cancelled his trip to Thailand because he wouldn't be able to get back home without going to a third, non-Asian country for 14 days before returning). 

 

Also, the knowledge about infections, ability to communicate/educate people, ability to track and monitor outbreaks, etc is all far, far more advanced today than it was in 1918. 

 

So, it's not a question of mortality rate, it's more about the ability for the virus to spread.  It can't kill people it doesn't infect. And today, we're much more capable of handling transmittal than they were in 1918. 

 

And just to be clear, I'm not saying that I think we can stop a virus that is aggressively communicable (though we would be far more successful today than we would have been in 1918), I'm just saying that this particular virus doesn't seem to be much more aggressive in terms of spreading than any other flu virus. 

[cmarshall]

18 minutes ago, digibum said:

 

No offense, but I pointed out the difference in the hope that it would obvious that you can't just look at a single number and then project the impact of the disease based on that. 

 

For instance, with the Spanish Flu, many countries like Germany, France, the US, and UK censored it in the media (remember, there was a war going on) to keep people from freaking out.  In fact, the reason it is called the Spanish Flu is because Spain's government didn't censor the media which reported unrestricted, which made people, at the time, believe that Spain was getting hit harder than any other country. 

 

I really don't think we have that same issue today where the media is pumping out Corona Virus scare stories by the minute. 

 

In fact, countries that are suspected of under-reporting can quickly find themselves quarantined by other countries that don't trust their numbers. 

 

For instance, Israel recently banned anybody that has visited Thailand, Singapore, Hong Kong and Macau within 14 days before arriving in Israel.  I believe Gibraltar has done the same (someone I know cancelled his trip to Thailand because he wouldn't be able to get back home without going to a third, non-Asian country for 14 days before returning). 

 

Also, the knowledge about infections, ability to communicate/educate people, ability to track and monitor outbreaks, etc is all far, far more advanced today than it was in 1918. 

 

So, it's not a question of mortality rate, it's more about the ability for the virus to spread.  It can't kill people it doesn't infect. And today, we're much more capable of handling transmittal than they were in 1918. 

 

And just to be clear, I'm not saying that I think we can stop a virus that is aggressively communicable (though we would be far more successful today than we would have been in 1918), I'm just saying that this particular virus doesn't seem to be much more aggressive in terms of spreading than any other flu virus. 

Actually both the US and Chinese government have indeed tried to limit news about the corona infections.  The Sec'y of Health and Human Services just imposed a gag order on US govt scientists speaking to the public about the epidemic.  The Chinese tried to conceal the outbreak and punished the doctor who sounded the alarm.  Both did so for political propaganda reasons.  As of a couple of days ago the number of Americans tested was 500.  Meanwhile S. Korea is in the process of testing 200,000 people.

 

The Japanese govt also declined to launch a large scale testing program, so there is no reliable data on the scale of the infection there either.

 

It is certainly true that the transmission rate is a critical, but as yet unknown piece of the data.  But we do know that the transmission rate is high, because it has spread to 60 countries this week.  The cat appears already to be out of the bag.  SARS, MERS, and Ebola never spread like this.  With a high transmission rate, a high mortality rate, even if it turns out to be lower than 2%, and failure of containment measures, the global effect could well be pronounced.  In terms of the effectiveness of containment measures the situation may not be all that much better than 1918, even if other aspects of the public health system have advanced.

[rwill]

Of course it will rebound.  Now is a good time to put more money in.  Don't sell what you have it will recover as long as you bought into sound businesses to start with.  Some of my stocks went way up on Friday.

[Ventenio]

money has INFORMATION.  big money has big information.  Nobody with big money is selling because they fell for some show on television.  Nobody with big money and big information is letting someone on TV know what they are doing....and why.

 

they are rich, you are not.  the made the top, you reacted to what they did.  

 

either bet it all and get lucky or invest for decades and hope.

it's safer to buy property back home.   d'uh.  if you haven't been doing that for the last few decades, then you are gambling.  

 

and never listen to anyone on "financial advice."  they have zero idea.

[Tayaout]

29 minutes ago, Ventenio said:

and never listen to anyone on "financial advice."  they have zero idea.

You just advised me to buy stock and hold for a decade and buy real estate. I don't know who to believe anymore! 

[elgenon]

The market is reacting to what Our Dear Leader is saying. No smart person believes him so that creates uncertainty. There is no grand plan. The Pandemic Response Team was fired in 2018. If the government decides to be open and say what the real situation is and take the appropriate actions things will get a bit calmer. After the mess is over things will resume. Different types of businesses will be affected differently. Buy the ones less affected and/or will recover soonest and/or best.

[cmarshall]

Here's a good video to visualize the differential rates of infection of Corona, SARS, MERS, Ebola, and Swine Flu (H1N1 2009).  The first half of the video is the more interesting.  Notice that at the point we are currently at corona has a much higher infection rate than Swine Flu had at the same point.

 

Swine Flu infected 60 million people with a fatality rate of 0.1% to 0.8%.  The common flu by comparison has a mortality rate of 0.1%.  The current estimate for corona is 2%, but that number is soft.  If it turns out that the mortality rate is really 2% with a transmission rate at least as high as Swine Flu then 1,200,000 people will die.  

 

 

 

[Zillod]

COV19 is a pandemic of stupidity and fear mongering.  USA has zero death and 100% survival.  Statistically you cannot improve on that, no matter how much you spend!.  Trump said that 60,000 people died in the USA of normal boring flu.  That's an average of 5000 per month.  But that should be overlaid by a winter bell curve. so may-be nearer to 10,000 in the winter months.  I would be far more worried about being one of the 10,000 dead victims of boring flu than one of the 100% COV19 survivors.  Flu is less prevalent and has milder symptoms in the warmer months.  The treatment for COV19 is to interlock your fingers and rotate your thumbs for 30 days.  The only real downside is how much Judge Judy you get to watch.  As I understand it, nobody dies of COV19 they die of complications such as Pneumonia.  But only a few COV19 infected develop those symptoms.  One of the big problems is the web sites show alarmist information sch as the number of COV19 infected since Jesus.  This figure will never diminish.  We need to know currently infected, dead and recovered.  The underlying problem is too many people have watched Zombie apocalypse movies.  People think pandemics cause the dead to walk.  They want to know if the dead were head shot with a silver bullet or decapitated by a katana.  Its the bloody FLU!

[Spike1938]

16 hours ago, KeeTua said:

Looks like the C virus created an excellent opportunity for profit taking. Look how far above the 200 day moving average the S&P has been trading, a correction was past due. But there have also been early warnings of recession in the bond markets.

 

Some serious comments from Warren Buffet from May 2019 about the US economy like him or not he's smarter than us when it comes to the US economy and takes a very long view.

 

    "Buffett highlights that unemployment remains so low, yet interest rates and inflation are not rising. At the same time the U.S. government continues to spend more money than it takes in.

    These conditions are not sustainable for the long term, Buffett says.

    "No economics textbook I know that was written in the first couple of thousand years that discussed even the possibility that you could have this sort of situation continue and have all variables stay more or less the same," he says."

 

https://www.cnbc.com/2019/05/03/buffett-no-textbook-predicted-the-strange-economy-we-have-today.html

Most leading economists have been predicting a recession. This may be a beginning.

[rumak]

1 hour ago, Ventenio said:

 

and never listen to anyone on "financial advice."  they have zero idea.

I have a 100%  success rate !    If i buy it goes down.   If i sell it goes up.   100 %  !

 

I thought about buying on Friday.   did not.   Monday will prove me correct once again.

[IAMHERE]

There is room for it to fall much more. I'm sure I read where Warren Buffet said it could drop 50%; so another 10,000 point drop would not surprise me.

[khunken]

I don't think that the SPX is reacting to the co-virus itself but far more to the effect it is having on travel & trade. Added to that is the 'irrational exuberance' of the market continually rising due to rich people & funds flush with cash buying. It is due a real correction.

Whether that will lead to a recession, I've no idea.

[Expat Brad]

On 2/28/2020 at 12:15 PM, CNXexpat said:

All crises are over after a while and Dow&Co. will rise to new records. A good opportunity to buy when the panic comes to an end. Take a look at the long term charts. 

 

I am trading since more than 30 years and I am living good from it.

This whole thing has been set up to make the 1% yet more money. This will amount to BLOOD MONEY!!!