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Old 2020-02-27, 21:46   #12
Dr Sardonicus
 
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Default What's known as a "correction"...

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Old 2020-02-29, 03:59   #13
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Wolf Richter comments on the past weeks market action and today's last-15-minute "miraculous turnaround":

“Nothing Goes to Heck in a Straight Line,” Not Even Stocks Today | Wolf Street
Quote:
OK, all kinds of things were going on today. First, in mid-plunge this afternoon, the Fed came out and said it’s going to print antibodies or something. To soothe the rattled nerves of the Wall Street crybabies on TV, as the worst weekly sell-off in stocks since 2008 was heating up, Fed Chair Jerome Powell released a one-paragraph Fed-speak statement Friday afternoon (in full):

“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”

The thing is, interest rate cuts and QE or whatever other shenanigans the Fed concocts aren’t going to solve the problem posed by the appearance of the coronavirus. If you don’t want to get on a plane in order to avoid catching the virus, you’re not going to change your mind because T-bill yields dropped 50 basis points.
The second thing going on: “Nothing goes to heck in a straight line.”

This was predictable, with it only being a question of when. The effect – “Nothing Goes to Heck in a Straight Line” – is also printed on our handsome and hilarious heavy-duty WOLF STREET beer mugs, that are ideal for contemplating days and weeks like these, and for musing about the 15-minutes-before-the-close spike like this.
...
No market in my lifetime has ever been more overripe for an implosion than this one, and I have seen three big crashes going back to 1987. I said so on December 30, when I announced that I, Who Vowed to Never-Ever Short Stocks Again, Just Shorted the Entire Market. Because “the setup is just too juicy.”
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Old 2020-02-29, 13:27   #14
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Quote:
Originally Posted by ewmayer View Post
Wolf Richter comments on the past weeks market action and today's last-15-minute "miraculous turnaround":

“Nothing Goes to Heck in a Straight Line,” Not Even Stocks Today | Wolf Street
I noticed that. I checked the DJIA about a half-hour before the close and it was down something like 750 points. It had been down over 1000 points, and below 25000 at one point. It closed down "only" 357.28. I reckoned that somebody (or several somebodies) had decided not to let the market end the week closing down over 500 points, and started buying like crazy.

Maybe the statement by the Fed did calm jittery nerves for the moment. But there's nothing in the Fed's toolkit that can restore broken supply chains.

Curiously, I'd also checked it on Thursday about half an hour before the close, and it had been down less than 600 points. It closed down 1190. That last half-hour on Thursday must have been a doozy.
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Old 2020-03-03, 21:32   #15
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o “Wall Street Biggest Banks Shamelessly Try to Use Coronavirus to Get Federal Reserve to Weaken Rules”: Better Marketsby | Wolf Street: At first, banks leveraged the repo market to force the Fed to ease liquidity & capital rules; now they leverage the coronavirus. Whatever it takes.

As I've noted to several friends, the Covid-19 pandemic is going to expose the brokenness of the US for-profit greed-driven sickcare system in a big way. I mean, USians live in a country which spends anywhere for 2-4x what it should (depending on whose estimate you believe) for care-actually-delivered, compared to its developed-world fellow nations, and where the media consider tales of people reduced to begging on GoFundMe for donations to cover medical expenses to be heartwarming tales of individual pluckiness, rather than the exemplars of late-stage klepto-capitalism run amok they really are. Along "how did things get this bad?" lines:

o How the Senate Paved the Way for Coronavirus Profiteering | Intercept
Quote:
Before a vaccine to combat the coronavirus pandemic is within view, the Trump administration has already walked back its initial refusal to promise that any remedy would be affordable to the general public. “We can’t control that price because we need the private sector to invest,” Alex Azar, Health and Human Services secretary and a former drug industry executive, told Congress.

After extraordinary blowback, the administration insisted that in the end, any treatment would indeed be affordable. President Donald Trump on Monday morning tweeted that he would be meeting with “the major pharmaceutical companies today at the White House about progress on a vaccine and cure. Progress being made!” The federal government, though, under the Clinton administration, traded away one of the key tools it could use to make good on the promise of affordability.

Gilead Sciences, a drugmaker known for price gouging, has been working with Chinese health authorities to see if the experimental drug remdesivir can treat coronavirus symptoms. World Health Organization officials say it’s the “only one drug right now that we think may have real efficacy.” But remdesivir, which was previously tested to treat Ebola virus, was developed through research conducted at the University of Alabama at Birmingham with funding from the federal government.

That’s how much of the pharmaceutical industry’s research and development is funded. The public puts in the money, and private companies keep whatever profits they can command. But it wasn’t always that way. Before 1995, drug companies were required to sell drugs funded with public money at a reasonable price. Under the Clinton administration, that changed.

In the 1994 midterms, the Republican Revolution, built largely around a reaction to Bill Clinton’s attempt to reform the health care system, swept Democrats out of Congress. On its heels, in April 1995, the Clinton administration capitulated to pharmaceutical industry pressure and rescinded the longstanding “reasonable pricing” rule.

“An extensive review of this matter over the past year indicated that the pricing clause has driven industry away from potentially beneficial scientific collaborations with [Public Health Service] scientists without providing an offsetting benefit to the public,” the National Institutes of Health said in a 1995 statement announcing the change. “Eliminating the clause will promote research that can enhance the health of the American people.”

The move was controversial, and a House member from Vermont, independent Bernie Sanders, offered an amendment to reinstate the rule. It failed on a largely party-line vote, 242-180.

Then in 2000, Sanders authored and passed a bipartisan amendment in the House to reimpose the “reasonable pricing” rule. In the Senate, a similar measure was pushed by the late Paul Wellstone of Minnesota.

“Many in Congress find it hard to argue with Sanders’ line that ‘Americans must pay twice for life-saving drugs, first as taxpayers to develop the drug and then as consumers to pad pharmaceutical profits,’” Nature wrote at the time.

Then-Sen. Joe Biden of Delaware voted to table Wellstone’s amendment, and it was defeated 56-39...
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Old 2020-03-11, 11:56   #16
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Here is an odd couple: opposing views of who kicked off the Oil Price War.

From the LA Times-
https://www.latimes.com/business/sto...ice-war-output

"Saudis escalate oil price war with huge output hike; Russia follows"
Quote:
Saudi Arabia escalated its oil price war with Russia on Tuesday as its state-owned company pledged to supply a record 12.3 million barrels a day next month, a massive increase to flood the market.
The supply hike — more than 25% higher than last month’s production — puts Aramco above its maximum sustainable capacity, indicating that the kingdom is even tapping its strategic inventories to dump as much crude on the market as quickly as possible.
Moscow responded within minutes, with Energy Minister Alexander Novak saying Russia had the ability to boost production by 500,000 barrels a day. That would put the country’s output potentially at 11.8 million barrels a day — also a record.
“There is a significant amount of market posturing going on between Saudi Arabia and Russia,” said Jaafar Altaie, managing director of Abu Dhabi-based consultant Manaar Group. “They’re both getting ready to fight a pretty aggressive price war.”
Then there is this view:
"Putin Launches "War On US Shale" After Dumping MbS & Breaking Up OPEC+"
By Tyler Durden
http://www.informationclearinghouse.info/53089.htm
(Originally from Zero Hedge.)

Quote:
OPEC+ is no more, after a torrid 24 hours in which Russia overturned the balance of power in the oil world, leaving the members of OPEC+ dazed and confused, shocking Saudi which now faces social unrest with the price of oil far below Riyadh's budget, and - in a repeat of the Thanksgiving 2014 OPEC massacre - sending oil prices plunging by the most since the financial crisis.

And now, Bloomberg has the stunning backstory behind Friday's announcement that Russia is quitting its output deal with OPEC and its allies, after last week's Vienna summit meant to back a proposal by oil producers to cut output collapsed, causing a 10% plunge in oil prices, with some markets seeing their biggest one-day falls since the financial crisis.

Driving a stake right through the heart of his former OPEC colleagues, Russian Energy Minister Alexander Novak said that "considering the decision taken today, from April 1 of this year onwards, neither we nor any OPEC or non-OPEC country is required to make (oil) output cuts."

With global fears over coronavirus already severely impacting the oil market (down 30% since the start of the year), and with the Russians surprising oil ministers gathered at OPEC headquarters by suddenly abandoning a plan meant to keep oil prices steady, the biggest shock was felt by the Saudis, because as Bloomberg puts it, Putin has just effectively dumped crown prince MbS to start a war on America's shale oil industry:

Alexander Novak told his Saudi Arabian counterpart Prince Abdulaziz bin Salman that Russia was unwilling to cut oil production further. The Kremlin had decided that propping up prices as the coronavirus ravaged energy demand would be a gift to the U.S. shale industry. The frackers had added millions of barrels of oil to the global market while Russian companies kept wells idle. Now it was time to squeeze the Americans.

After five hours of polite but fruitless negotiation, in which Russia clearly laid out its strategy, the talks broke down. Oil prices fell more than 10%. It wasn’t just traders who were caught out: Ministers were so shocked, they didn’t know what to say, according to a person in the room. The gathering suddenly had the atmosphere of a wake, said another.
As I put this post together it starts to look like the seeming contradiction is just a matter of timing.
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Old 2020-03-11, 18:29   #17
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Poor, poor Saudis - where, oh where will they find the revenue needed to continue their murderous war in Yemen? And are there risks of funding cuts to all the Wahhabist-fundamentalist madrassas they sponsor across the Sunni-Islamic world?
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Old 2020-03-12, 12:55   #18
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Default Financial Meltdown: The Impending Credit Crunch; The Next Shoe to Drop?

http://www.informationclearinghouse.info/53096.htm
Quote:
Last week’s violent gyrations in the stock market are the result of a tug-of-war between two well-represented groups of investors. One group thinks the Coronavirus will severely impact the global economy pushing stocks further into the red, while the other group believes the Fed will intervene in the market once more and save the day.
The matter is likely to be settled as soon as next week as the drip, drip, drip of bad news continues to dampen investor expectations further intensifying the selloff.

Investors perception of the Fed’s role in fueling rallies, micromanaging the markets and providing a safety-net whenever stocks fall, has reached a critical tipping point.
For the last decade, the Central Bank’s low rates, endless liquidity and frequent interventions have conditioned investors to ignore fundamentals and, instead, base their decisions on the Fed’s accommodative policy. Thus, when the Fed trims its balance sheet to reduce its cache of Mortgage-Backed Securities (MBS), investors “sell” and when the Fed provides $400 billion in low interest loans to borrowers in the repo market, investors “buy”. Coronavirus’s impact on stocks has eroded confidence in the Fed and is gradually reversing years of Pavlovian conditioning that fostered a belief in the Fed’s omnipotence. This is no small matter. When investors finally realize that the Fed has lost control of the system, stock prices are likely to fall sharply. And, with all three main indices having tripled in the last decade, there’s no telling how low prices will go.

Despite the fireworks in equities, the real action is in the bond market. It’s the bond market that is signaling no inflation, no growth, and endless economic stagnation for as far as the eye can see. That is the unwavering verdict of the benchmark 10-year US Treasury whose yields sunk to an all-time low of 0.709% just last week. What this means is that investors are so terrified, they’re willing to lend money to the government below the rate of inflation. In other words, they would rather lose money and feel like their investment is safe, than take a chance on any other bond or security. This is an expression of the unalloyed fear that is presently gripping Wall Street.

Last fiddled with by kladner on 2020-03-12 at 12:56
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Old 2020-03-12, 19:36   #19
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"the other group believes the Fed will intervene in the market once more and save the day." -- Wolf Richter has of late taken to asking "What's the Fed gonna do - print antibodies?"
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Old 2020-03-12, 20:45   #20
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Quote:
Originally Posted by ewmayer View Post
"the other group believes the Fed will intervene in the market once more and save the day." -- Wolf Richter has of late taken to asking "What's the Fed gonna do - print antibodies?"
The Fed did intervene on March 12. The intervention did not save the day.
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Old 2020-03-12, 22:00   #21
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Quote:
Originally Posted by Dr Sardonicus View Post
The Fed did intervene on March 12. The intervention did not save the day.
That was pecisely Wolf's point - none of the tools in the Fed's market-goosing bag of tricks is likely to work in a crisis such as the current one. The only thing that might work would be outright risk-asset purchases, which the Fed has never done, but if stocks fall far enough - more than 50%, say - I wouldn't put it past them to consider. Other CBs (IIRC Japan is an example) have resorted to such desperate measures, which are the ultimate form of "confusing the risk-asset markets for the underlying economy", as central bankers are wont to do. Good related post on NC today, focusing on hard-hit Italy. I think the alleged worst-case 4-5% drop in 2nd-quarter GDP estimate from the Guardian article may prove rather optimistic, given that the huge tourism industry is completely shut down, and many domestic-focused companies are also in virtual shutdown mode. Do we really think a tourism-dependent country in nationwide lockdown will continue at economic activity levels of 95% or more or normal? I don't.

After Bloody Day, Coronavirus Meltdown Continues. Big Danger: Italian and Eurobanks Are Set To Blow | naked capitalism

Last fiddled with by ewmayer on 2020-03-12 at 22:01
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Old 2020-03-13, 01:16   #22
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Quote:
Originally Posted by ewmayer View Post
.....Wolf Richter has of late taken to asking "What's the Fed gonna do - print antibodies?"
ROFL
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