Stock Market Falls – The Wrongologist

Call It the Great Virus Crash of 2020

The Daily Escape:

Desert bloom on Siphon Draw Trail, AZ – photo by ericatect

That was the term used on Wednesday by Ed Yardeni, president of Yardeni Research:

“It’s all at once a health crisis, financial crisis and economic crisis. We need to fix the health part of it before we have it solved, but we can take financial and fiscal steps to blunt its effects.”

JPMorgan Chase said it forecasts a 14% decline in gross domestic product in the second quarter. That’s enough to scare anyone. In a partial response, the Trump administration suspended evictions, authorized the Defense Production Act, and is eyeing a stimulus package worth about $1 trillion.

The headline is that Trump wants to give Americans direct cash assistance. He wants to send two $1,000 checks to many Americans. Beginning April 6^th, $250 billion would be issued, and another $250 billion would be issued beginning May 18^th. Payments would be tiered based on income level and family size.

The Treasury Department is circulating a two-page sheet of priorities that it wants to see in the final deal:

Part of it is a $50 billion “airline industry secured lending facility” that would allow it to make direct loans to “U.S. passenger and cargo air carriers”.
The Treasury would also earmark $300 billion to help small businesses avoid mass layoffs.
- Eligible borrowers would be companies with less than 500 employees.
- Loan amounts would be limited to 100% of 6 weeks of payroll, capped at $1540 per week per employee.
The Treasury also wants Congress to allow it to temporarily guarantee money market mutual funds. Some are worried that an investor panic could lead to a run on these funds. This was done before during the Great Recession.
Finally, there would be a $150 billion fund to prop up other sectors, including hotels.

And Wednesday was another day when Trump appeared in front of the press, attempting to look as if he’s a war president. The bad news was that they again halted trading on the stock markets during his press conference.

At Wednesday’s close, the Dow was down another 1,338 points. We’ve now lost almost all of the gains accrued during the Trump administration. Nearly every asset class – stocks, bonds, gold, and oil – fell as investors fled to the safety of cash.

Mr. Market has decided that cash is king. The smart money can’t decide whether Trump’s offering too much stimulus. If so, things must be really bad. And if he’s not offering enough, then there’s no leadership.

Here’s one way to look at the Dow’s performance:

First 1153 days of Obama’s presidency +67%
First 1153 days of Trump’s presidency +0%

The WH needs to shut him up. Each time he speaks, things get worse for the rest of us.

Inside this crisis is perhaps the biggest political challenge for Democrats: They have to agree to help an incompetent president and his Party avoid killing their constituents.

That’s a bitter pill, particularly in an election year.

It isn’t a stretch to see how Democrats would be painted as obstructionists if they fail to support what Trump wants at a time when millions of people need a cash bridge to help them across economic difficulties.

Wrongo thinks helping people is a good idea, and a total of $2,000 is better than nothing, but what will it really do? The average US mortgage payment is over $1,000, while the median rent for a 1-bedroom apartment is $1,234. So for a couple, in most cases, one month’s housing costs will eat up about 25% of the total cash from the government. The rest will go to car expenses, the cell phone, perhaps student debt payments. Maybe, if people can stretch, it will last two months.

It’s helpful, but far from enough if employers remain closed for two months or more.

And loans to small businesses? Will small businesses willingly take on more debt when they can’t be sure when their income will return, or if the business will survive?

Any loans to large corporations is a huge mistake. The big four US airlines – Delta, United, American, and Southwest – whose stocks are getting crushed because they will run out of cash in a few months, would be the primary recipients of that $50 billion bailout. But together, they incinerated $43.7 billion in cash on share buybacks since 2012. Now they are looking to get that back from the taxpayers. Those buybacks enriched the very shareholders that Trump now wants to bail out.

Perhaps Trump said it best, although it was a while ago: “We’re seeing a stock market like no one has ever seen before.”

Trump spent the first three years of his presidency trying to erase Obama’s legacy. Now, The Great Virus Crash in Trump’s last year will erase his.

The Health Crisis Now Coincides With a Financial Crisis

The Daily Escape:

Sunrise, St. Augustine Beach, FL – March 2020 photo by Carl Gill

The WaPo reported that a Coronavirus-sparked oil war sent crude prices down on Sunday by 32.3%. That triggered a forced temporary halt of stock trading on Monday, when the S&P 500 index sank 7% shortly after the market’s opening.

This occurred on the 11^thanniversary of the current bull market. But, as Greg McBride, chief financial analyst at Bankrate.com, wrote:

“The uncertain economic impact of coronavirus continues to grip markets, with stocks, commodities and interest rates all dropping sharply. Markets hate uncertainty and there is a ton of it currently in play.”

There is no question that there will be more angry Americans now that a health crisis coincides with a financial crisis. Who they focus their anger on remains to be seen. Trump took credit for each rise in the stock market, so will he take ownership now that it’s tanking?

He’s not a broadly popular president, and this will make him less popular, so fewer people will believe him when he tries to lay the blame on others.

The oil price plunge was triggered when Russia announced on Friday that it would no longer stay within the OPEC+ quotas after April 1^st. Saudi Arabia then said it would slash prices for its customers in April. In addition, they hinted at increasing production from the current level of 9.7 million barrels per day to 10 million barrels per day.

This is the start of an oil price war between Saudi Arabia and Russia over market share. But the real target for both may just be the US shale oil sector. US banks and other investors have been fueling the shale oil sector’s growth with hundreds of billions of dollars of loans over the years. And the shale oil producers keep ramping up production, despite it being largely unprofitable. They continue to burn through cash.

Brian Sullivan at CNBC warns us: The US oil industry valued its oil reserves, as collateral for its loans, at $60 a barrel. Today’s price is now about $30/barrel.

By sending some of these shale-oil companies into bankruptcy, Saudi Arabia and Russia are hoping that new money will refuse to support the US shale oil sector. Then production in the US will decline and take some oversupply out of the oil market.

Their timing is impeccable. Oil demand is down due in part to the Coronavirus. Chinese manufacturers are producing less and airlines in particular have less need for jet fuel. If OPEC and Russia increase production, and assuming US production still increases while demand globally is in steep decline, then global markets will be awash in oil.

And what does an oil glut do for Iran, already fighting a severe Coronavirus outbreak, and needing higher oil prices for their own economy?

But no worries! We can count on the competent leadership in the White House. And if that doesn’t make you comfortable, you might ask yourself, “Is this 1929 all over again?”

Maybe not, but if it is, who will be our FDR? In the 1930s and 1940s, FDR spent money on America’s democratic infrastructure. That money gave jobs to people. He created a social safety net, and allowed industry to again flourish.

But in the past 30 years, all the money has gone to our industrial infrastructure and to the rich, through tax cuts and subsidies. The easy money party has helped to pump up both stock prices and asset prices, giving us an ever-growing income and wealth gap.

What happens to the health of the people and to the health of economy between now and November is going to be a huge political concern. There’s always a tension between the best health policy, and the best economic policy.

Trump wants economic policy to win out, but the primary beneficiary of that is industry and the rich.

We should remember that when leaders are seen to be incompetent and/or ARE truly incompetent, they try to divert the voters’ attention. What Trump attempts to do in order to divert our attention, is worthy of discussion.

As of today, the fuse is lit. It’s an election year, and we know that Trump won’t go away quietly.

Sunday Cartoon Blogging – March 1, 2020

Trump in charge of the Coronavirus crisis? Sure, that will work. He’s the guy who believes climate change is a hoax created by China. He claimed raking forests prevents fires. He asked advisors if a hurricane could be stopped by dropping a nuke on it. He thinks HIV and HPV are the same things. He tried to tell us the direction of a hurricane had changed by changing its trajectory on a map with a Sharpie.

Elections have consequences, and our consequences suck. On to cartoons.

What do we need to take on the Coronavirus?

Pence’s treatment plan seems to be working:

Trump’s new plan is revealed:

Stocks also need a Coronavirus cure:

Bernie faintly praises Castro and the wailing begins:

DNC is working hard to “help” Bernie:

Weinstein’s new casting couch:

Sunday Cartoon Blogging – December 9, 2018

Saturday morning in Paris brought Yellow Vest demonstrators and police together throughout France. You can see an English language live feed here that began at 10:00 am local time. Police used tear gas and arrested hundreds. The NYT carried this picture:

This could get rough. It seems that the anger is very intense. Macron responded with too little, too late. In the live feed, most people wearing the Yellow Vests yell that they want him to step down. On to cartoons.

The George HW Bush funeral created bi-partisan agreement:

This week there was also a funeral for our 401k’s:

The American Dream has been redefined:

Trump helps paint Muller’s office floor:

Trump’s house maid admits she’s an illegal. Double standard follows:

GOP stuffed ballots in NC’s Ninth Congressional District. Election fraud is real, my friends:

Tariff Man was seen flying over the economy:

Saturday Soother – February 10, 2018

The Daily Escape:

Lighting the Olympic torch – photo by Chang W. Lee

Did anybody see the bus that ran over Wrongo’s 401k?? It was a tough week on the retirement savings front for anyone who uses the capital markets to bolster their net worth. Retail investors are trapped – they can’t sell their holdings quickly, and there doesn’t seem to be a safe haven for their cash if they manage to get out of the markets only slightly bruised. Fear seems to be guiding Mr. Market.

Also, Washington finally passed a bi-partisan budget deal, but only after a brief shutdown. Sadly, it adds more than $1 Trillion to the national debt. It’s hard to square the Republicans’ deficit hawk ideology with their sudden willingness to spend whatever it takes to give the military whatever it wants.

During the recession, (Obamatime) the Republicans argued that responsible people tighten their belts when times are bad, just like people do with their household expenses. Now, we really shouldn’t use that argument for governments who can create their own currency. Despite that, if you really think the government should be run like a household, wouldn’t a responsible family increase their savings and pay down their debts when times are good? That would give them a “rainy day” fund that they could dip into when times were bad. Or, they could then go back into debt to get through the rough patch.

But today’s Republicans are saying: “Times are great! Let’s max out the credit card”. This will soon be followed by: “Oh shit, now I have to starve the kid so I can make the payments on my student loans”.

They won’t even follow their own dumb rules.

That was the week that was. A stomach-churning, no sleeping, hot steaming pile of anxiety. You need a real break.

To help you forget about your financial losses and your government’s foolishness, settle into a comfortable chair with a Vente cup of Volcanica Coffee’s Blue Mountain Peaberry coffee from the Clydesdale estate in Jamaica (only $89.88/lb.). You can’t afford it after what happened on Wall Street, but like Congress, you have a credit card. So go for it!

The Clydesdale coffee region is near the center of Jamaica’s Blue Mountain coffee area. The Clydesdale Estate was founded in the 1700’s.

Now, listen to a throwback to the 2012 Olympics in London. Here is the London Symphony Orchestra conducted by Sir Simon Rattle with a performance of “Chariots of Fire”. The performance includes physical comedy by Mr. Bean (the British comedian Rowan Atkinson):

This isn’t high art, but it is fun, and tangentially relevant to the Olympics.

Those who read the Wrongologist in email can view the video here.

Sunday Cartoon Blogging – January 17, 2016

Another jam-packed news week: David Bowie stepped through the door, the Dow fell through the floor, the SOTU had the lowest ratings ever, the Republicans debated, and you didn’t win Powerball.

So, something to cheer you up at the start your week:

COW Foxes

Gonna miss ol’ Ziggy:

COW Bowie2

Wall Street longs for yesterday:

COW Lost Pet

The GOP debate followed the usual script:

COW Big Tent

Republicans are beginning to rationalize about the probable primary winner:

COW Satan for Prez

In this primary season it has become clear that facts don’t matter. How you feel matters. Other people don’t matter. How you relate to your tribe matters. Irresponsible tax policies, silly monetary policies (gold!), destructive foreign policy, no climate policy, no healthcare policy, no infrastructure policy, charter schools as an education policy, these all matter. Except for militarism, do they have any public policy positions?

The Clintons begin to understand the threat:

COW First Word

Sunday Cartoon Blogging – January 10, 2016

Quite the week. You thought that the Saudi/Iran blow-up would dominate the news, until North Korea’s claim of a Hydrogen Bomb test took over the front page, but then, global stock markets melted down, following China’s markets into the crapper. And for relief, we had the President’s Executive Order on Gunz, the Bundy Brigade in Oregon, and the presidential candidates.

Some Asian explosions look alike:

COW H Bomb

Trump’s idea on North Korea’s new toy:

COW Trump Strategy

Between Lil’ Kim and Trump, the Donald having his finger on the button is a LOT mo scary!

Obama’s tears were not the only ones last week:

COW Tears The logical conclusion of 2nd Amendment Absolutism:

Clay Bennett, Chattanooga Times Free Press

Bundy Brigade take over causes momentary outrage:

COW Bundys Boys Saudi Arabia vs. Iran: Make sure we have no skin in their game:

COW Saudi Iran issue

Sunday Cartoon Blogging – August 30, 2015

That light from the city on the hill isn’t a beacon. It’s the flash of gun fire.

The snuff video of two TV journalists this week got everyone talking about gun ownership and gun control for the umpteenth time. Phys.org pointed out that despite the fact the US ranks in the middle among other industrialized countries in virtually every form of crime, and only has 5% of the world’s population, we have had 31% of the mass shootings since 1966.

By cutting off federal funding for research and stymieing data collection and sharing, the NRA has tried to do to the study of gun violence what climate deniers have done to the science of global warming. Mother Jones had a chart for you to consider:

Gun ownership is a part of our culture. We could have a conversation about why Americans need so many guns, but the current level of gun ownership is not going away. And there is a large disconnect between the current gun control proposals and the facts in the Virginia case. The TV killer wouldn’t have failed any test, either now in place, or contemplated under the new proposals.

A simple solution to the problem of gun deaths would be to require gun owners to have liability insurance for any gun that they buy. Mr. Market (beloved by the right) would then come up with solutions to keep that liability insurance costs low enough that people could own their guns, but fewer third-party deaths and injuries would occur, and there would be compensation for victims. You could still carry guns, but you would have to be able to produce proof of insurance. Like driving a car.

On to cartoons. The gun culture has a new Caliph:

New media and old media loved talking about the killings, live on your TV:

Hillary’s week didn’t improve, so she got help:

I’m you from 2015, Hillary. I’ve come back to help you set up your e-mail.

Biden called in a few favors:

Trump’s week was fine. Republicans? Not so much:

China’s stock market fell:

Sunday Cartoon Blogging – October 12, 2014

“Be afraid. Be very afraid.” In 20 letters, it’s the platform and program of the GOP:

Complete version: Be afraid of Africans, Hispanics, Democrats, Liberals, Muslims, Atheists, Foreigners, Gays, etc. If fact, be afraid of just about everyone except the GOP. Because those OTHERS will take your money, take your job, take your gun, infect you with diseases, break into you house, rape your women folk, strengthen and enlarge your government, spend your taxes, use your resources, raise your prices, insult your God, hurt your feelings (saying ‘Happy Holidays’ instead of ‘Merry Christmas’), corrupt your children, impoverish your descendants, enlarge your government, make life in your suburb or your condo no better than that of a slave on a plantation… and did we say enlarge your government?

If the above makes sense to you, then vote the Republican ticket in November. The GOP won’t accomplish anything, but they will validate your paranoia, and that will feel so good!

Stock Market gives back all of the year’s gain in one week: