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18 March 2020

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John Lee

And how are you going to close the markets ?

Close the US markets, and traders will sell elsewhere. Cant sell the spoos ? Short the DAX/FTSE - whatever - it does not matter - this thing is a global riskoff in a scramble for USD. And as soon as you open the US markets you will just lock limit down until the US indicies catch up with the rest of the world. Your shutdown just did nothing.

Unless you shut down ALL markets, it will not work.

Amir

Putting a incremental transaction tax increase on trading, when holding a stock less than 1 year, 3 month, 1 month, 1 week and 1 day would benefit the long term investors and weed out the speculators. Similar transaction tax scenario should be considered for foreign exchanges. The tax money can be used to fund the fight against ALL TYPES of emergencies in the future, including healthcare, bank bailouts, defense emergencies ...

Also, Adam Smith needs to be revived instead of speculator crony/corona (sic) capitalism

Morongobill

Some market guru made an incisive comment a couple weeks ago and I paraphrase: this is not a "buy the dip market", this is a "don't try to catch a falling knife market."


Artemesia

LondonBob -- Even someone as unsophisticated as I knew that the bubble was going to burst, big, at some point. The market was at or near a peak on Dec 31, the basis date for USA retirees to calculate Required Minimum Distribution (RMD) for the following year.

We're in a situation where RMD based on Dec 31 2019 is going to be a far greater proportion of the amount -- if any -- remaining in retirement account.
Now, that's going from one pot with my name on it to another pot with my name on it, but in the middle, IRS takes at least 15%.

--
Col Lang -- Yes, the equity market meltdown is a major problem. But shutting down small businesses for an uncertain time -- I think that's at least equally ruinous.

One more thought -- years and years ago the Shaker Heights Public Library had a bookmark that said, "We can get thru a time with books and no money better than a time with money and no books."
Closing the libraries has been devastating.

English Outsider


Colonel - I don't know about the States but the damage all this will do in Europe is great. The vivid phrases used by your contributors - "bugs in search of a windshield" or "This is a far larger crisis than 2008, the steps taken by governments and central banks are unprecedented, the old system has died, what comes next?" are no more than sober truth when it comes to Europe.

I may be a day behind the fair on this, but I don't see in Europe the sense of urgency in dealing with this crisis that I see in the States. Whether the Fed and the Government have the firepower to stabilise the markets, whether the means you suggest for calming them can be effected, isn't something one can guess at. But at least there's a sense they're having a go!

I don't think the ECB, nor yet HMG in the UK, really know what's hit them yet. Fiddling around on the margins isn't going to work this time round and inevitably that will backfire on the States, however well or ill the situation is being handled there.

On the virus itself, I don't think that even now we're handling it right. The institutional dysfunction that has characterised us in England for so long is now being paid for. I've linked to a UK expert before here and with your permission will do so again; we're really in no shape to get on top of the crisis even were we to know how to do it -

http://www.eureferendum.com/blogview.aspx?blogno=87551#disqus_thread

All reminds me of Solzhenitsyn's imaginative reconstruction of the Russian Army stuck in the Masurian swamps in WW1. The men were there, that army was still in reasonable shape, but with a dud HQ they were screwed.

Barbara Ann

So Trump will get to be a wartime president after all - and without having to start a war.

Spring in this hemishpere is upon us. The sun still rises, rain still falls and the crops still grow. The farmers and other folk who keep the real economy going and for whom Mini Mike reserves such disdain, will ensure everyone still get fed. A great reappraisal of our priorities is upon us and I believe it will be cathartic for America and the World in general.

Fred

Jack,

Where is all that margin investment you keep bringing up coming from, it isn't 401ks, IRAs, or pension funds doing that; it is also not many individual investors. We should "... allow for some Shumpetrian creative destruction."

That worked out really well for the folks in what is now the Russian Federation. As a self described "depression era kid " you won't be around long to live with the results.

turcopolier

blue peacock

Capitalism like free trade should not be a suicide pact among believers.

Stueeeeee

The issue is not the drop in the Dow, but the US dollar and its role in the international system. Triffin's dilemma is here, and any "remedies" will further undermine the dollar and its reserve status. The end of the US dollar as the reserve currency will come a lot sooner than most people realize.

The calamity we will be facing was IMO understood by the financiers...hence, the LCTM, Dotcom, Housing crises. Permitted by the willful blindness of the Federal Reserve, the knowledgeable financiers for the past two decades have siphoned off/cashed in on the wealth of our real economy. The repeal of Glass Steagall formally sanctioned the looting and let loose the dogs. Shutting down the markets now will do nothing but intensify the "correction"/siphoning.

Upstate NY'er

Colonel:
The last thing I would do is sell.
I survived 2009 without breathing hard.
I have a multi-layered construct of income;if one goes down, I reach back to another layer.
I am able to life comfortably - no outrageous spending
My balance sheet will come back.
I don't day trade.
Majority of day traders LOSE money YoY.

JJackson

I would be interested to know how long you would all expect the markets to be shut. I am no economist but if they are shut and then reopened at some point while the situation is no better than today then I would have thought those who could not sell would take the opportunity causing a crash requiring the market to re close. If you wait for obvious signs that the worst is over that could take in excess of a year.

JJackson

When I have seen C-span footage of Congressional or Senate proceedings the average age seem to put most of them in to the high risk category, likewise for the Senior members of the Judicial branch, cabinet secretaries etc. Given the very high fatality rate in these age groups what effect is that likely to have on governance once we do return to a semblance of normality.

turcopolier

upstateNYer

I built my position in the same way and am in the same situation.

turcopolier

JJackson

We had elaborate preparations for something like that during the Cold War and can return what we call "Continuity of Governance" methods. Senator Portman of Ohio proposed that this AM. Essentially we are discussing running the government from a dispersed deployment.

turcopolier

JJackson I would keep the securities markets closed until the panic passes. I think that will happen soon because of quick development of therapies using existing combinations of drugs.

blue peacock

Col. Lang

I agree that ideological utopias don't exist and there is no pure expression of either capitalism or communism. Cronyism among the elites exists in both systems.

The larger question here is about socialization of private sector speculative losses. When is it appropriate and who benefits?

In the 2008 financial crisis, the decision was to make the managements, shareholders and creditors of Wall St whole and foreclose individual homeowners. The Bush/Obama administrations and both parties in Congress picked winners and losers.

Why is it that all these extraordinary calls for socialization occur only when speculations go awry and not when government and central bank aided credit-fueled speculations are let loose? Are we essentially arguing that we want a one-way street where financial assets only go up?

I have not seen any criticism among the Wall St cognoscenti as central banks "printed money" to acquire debt and equity stakes in private enterprises ostensibly to increase the share price and to prevent a reckoning for the private creditors and shareholders. What is the logical outcome of such policies? How far should that be taken? Are we going to "nationalize" all insolvent enterprises whose managements are large donors to political campaigns? What about the cornerstone owner? Does he not get a bailout too?

Market cap destruction has no long term deleterious impact on sound businesses. In the 2000 market selloff in technology and telecom, companies like cisco, Microsoft, Adobe and others saw their market cap decline by nearly 90%, yet as businesses they thrived. Growing their sales, profits and headcount after the artificial excess demand for their products evaporated. Yes, many cash burning start-ups did die. But many new companies with sounder business models like Google were also created.

This is not about ideology but about what should the policies be. What are folks arguing for and why? Since LTCM the implicit policy has been that speculative finance can keep their speculative gains but their losses must be socialized.

eakens

They need to close the markets, keep the inflation target of 2%, and print as much money as is required to keep the same level of employment (and crime) as was in place on February 24 until this Virus is under control.

Once the Virus is under control, or we have a vaccine, then they can start opening the markets again.

The debt that was issued during this time, with 0% interest, backed by the people (not the Fed), can be waived.

There is no other solution.

Jack

Fred

Many Americans have neither 401K nor pension assets. They don’t really care if the stock market goes up or down as they have no stake. They do care however that the small business they work for and earn a hand to mouth existence is shutdown through an own goal by our government.

https://en.m.wikipedia.org/wiki/Wealth_inequality_in_the_United_States

I get it many are for socialism for Wall St and managements of the S&P 500 companies and their stock portfolio in their 401k. Of course it’s all for our good.

You know that Schumpetrian creative destruction is a fact of life among small business entrepreneurs who don’t have access to the government trough when they go belly up. The collapse of the Soviet Union is analogous?

Barbara Ann

"I think that will happen soon because of quick development of therapies using existing combinations of drugs."

I agree. There is already very promising news of the effectiveness of chloroquine, for example.

Artemesia

My very large bank is limiting the amount of cash withdrawals. And the bills are brand new. Did Mnuchin have pallets of paper currency printed up just as was done in US foreign wars?
Is the currency going to be rendered worthless when the PTB so decide?

elaine

Colonel, I assure you I'm not happy about any of this however don't
think anything can ever totally stop business. If things proceed
in their present state a real depression could be @ hand.

I don't feel safe even holding tangible assets like land as last year I received a 300% property tax increase so no asset is safe.
Safety is an illusion on all fronts @ all times IMHO. "Safety" is a
fantasy we employ in our minds to get us from point A to point B;
it's a physiological defense mechanism

james

@ blue peacock.. your comments and questions are bang on.. i don't know if pat wants to address them head on.. he was unwilling to post my more blunt comment - privatize profit and socialize losses... pat? don't have an answer?? what's up?

turcopolier

James

It seems you are slow on the uptake. I don't want anything from you on SST at all. this is the last post or comment from you that I will allow. If someone else approves something from you I will delete it.

Socal Rhino

My understanding is that equity markets can drop without causing lasting damage and recover, e.g. the internet bust. Corrections happen after long up periods, virus or not. The real risk is in the much larger credit markets. The fed will be rolling out additional programs such as being the buyer of last resort for commercial paper just like post Lehman to keep credit flowing.

Not a pundit but i can foresee a market holiday to stop a self reinforcing panic. A natural progression from the intra-day circuit breakers in place now.

Deap

Call this the Greta Thunberg virus. It is delivering everything she asked for. Zero carbon emissions. Expect global cooling to start tomorrow.

(Yeah, I stole this moniker from someone else on line, but how appropriate. )

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