Down 27% just today 
Last week I called for DOW 20k, might just get there tomorrow.
Crash and burn!
So the fed injected $1.5T into the stock market today and it reverse course… for thirty minutes. Have Republicans finally found the issue they can’t throw money at to make it go away?
Slate explains it in better detail over here, but the practical upshot is this: They didn’t stick 1.5 trillion into the stock market to reverse it’s course in the way you mean, they’re using their short-term lending power in the form of repurchase agreements to stop the market crashing entirely, and basically blowing the entire US economy less in an “Oh no the rich are slightly less rich” kind of way, and more in the “Oh you thought the Subprime morgage crisis was bad, that was baby’s first recession, and you’re now going to be irrelevant on the world trading stage for a decade or two” kind of way.
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That’s a lot of years from now. We can cancel student debt and achieve free tuition for all before then.
That actually sucks. If you had borrowed earlier, you could have effectively made money.
Anyone considered betting that the market continues to go down?
I read an analysis that when the Fed immediately injected cash the first time and then some of the other responses that have been done (reducing the interest rate) or discussed it signals to the market that:
- Shit is real yo, like this is scary so we are trying to get you traders to calm down a bit, please?
- We went big immediately, we don’t have much bigger we could go if this doesn’t work or if the world events continue to be bad.
Either way (or both), the market should have been allowed to respond in its way without government intervention, before immediately panicking and trying to hold the door closed as the monster is trying to break in. Then, as we see the situation unfold and we have time to strategically consider possible government responses the right moment is chosen for the best benefit.
So, to answer your question, I personally think that yes, the stock market is likely to go down more and otherwise be unsettled until a realistic balance is achieved based on the current reality.
The stock market is only partially based on current reality. Measuring current value is half of what it does. The other half is a judge of future possible value.
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Negative oil prices. Someone will pay us to take free oil off their hands because their storage is full. Will they pay us enough that it’s worthwhile to erect some oil storage tanks? Is this good for the environment because there’s no demand for oil, or is it bad because people can get a ton of oil cheap and use it excessively?
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The negative price event was a quirk of the market due to futures expiring mid-glut. Most trading firms never have the physical storage to accept the contracts themselves if they expire and are still holding them and are ultimately just looking for another buyer and in this case got stuck holding the bag.
Futures seems like a game of hot potato with a hand grenade anyway. This pandemic is having some weird (and hilarious) effects of the economy.
Futures are perfectly normal and very important for people that need to be involved in them. They are not something people should be involved in that don’t need to be.
For example, imagine a farmer who grows crop X. There’s a chance that the crop will be good or bad. They can’t just have their finances swing wildly out of control with the weather and other factors. So they hedge their bets and buy and sell futures in other crops. Maybe there’s a crop Y that does well when their crop does poorly. If crop X fails, they get a bunch of crop Y and make their profit that way.
These commodities markets that trade futures in resources like oil, hogs heads, corn, etc. That’s the reason they exist. That’s the original problem they are meant to solve. There are lots of farmers, mining companies, etc, in countries that don’t have access to advanced commodities futures trading markets, and they suffer greatly for it.
The problem is that we have the meta financial industry. They buy and sell commodities they have no intention of using. They are neither producers nor consumers of oil. Just people with money trying to make more money.
The thing with futures is they eventually come due. I buy 100 barrels of oil next year. If I don’t sell that 100 barrels of oil before next year, guess what? 100 barrels of oil is coming to my house. I don’t own an oil storage facility, so that’s where the negative price comes from. I’m now willing to pay someone to take this oil so it doesn’t get literally delivered to my house.
I obviously am just some dumbass who only knows the first thing about these markets, and not the second thing. But my bet is that if those purely financial companies were not trading in these markets, we would have a lot less problems. All the buyers would be people with the capacity to store, process, or find some use for the goods they were investing in. Producers would also be much less likely to overproduce and have to dump product because the market would more accurately reflect true demand. Instead, if a financial guy bets that there will be higher demand than reality dictates, that leads to oil wells drilling harder and faster than we need them to.
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I’m always reminded of this whenever futures trading comes up
Speaking of futures trading, Planet Money had a great podcast a couple years ago about the “Eddie Murphy Rule,” which came about based on the Trading Places movie:
After the podcast episode aired, the writer of Trading Places got in touch with NPR and wrote this:
Surprisingly, Trading Places did a really good job at portraying and explaining commodities trading.
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