WASHINGTON – After Monday’s closing bell on Wall Street, this columnist and likely most 401(k) holders and small investors here and around the world were in a state of shock as they examined at what remained of their portfolios. From Wall Street’s opening bell Monday, investors saw nothing but blood running down Wall Street. American and world markets alike nearly bled out in a massive, all-market crash of historic proportions. The Dow closed down a spectacular 2999 points. In just one horrible day.
A Tuesday sigh of relief
By Tuesday morning, investors were already feeling the early effects of post-traumatic stress disorder (PTSD). Except, of course, for the high-speed machines that were shorting the crappola out of everything they could find, banging it down with unbelievable speed and brutality a few minutes before Monday’s closing bell.
Recapping the brutal Monday crash
You can’t take epic losses like the one all investors and 401(k) holders sustained on Monday without feeling some regret and bitterness while pondering your useless and pointless lives. But wait! Were we saved? A nifty rally materialized, spreading great joy throughout most of Tuesday’s trading session.
And now for Wednesday’s reprise of Monday’s disaster
But Wednesday morning, there was once again no joy in Mudville. Or anywhere else. The Monday crash decided to resume for a variety of reasons. As we near the noon hour today, it seems that most remaining investor blood is running down Wall Street once again, as markets, almost predictably, violently reversed Tuesday’s rally. The shorts and machine sellers have returned to squeeze the remaining life out of whatever investments remain standing. Analysts attribute at least part of this Wednesday switcheroo to a sudden, substantial but unexpected upward reversal in Treasury yields.
But making matters much, much worse: the bottom just fell out of West Texas Intermediate (WTI) crude oil prices, now just $22.92 bbl. Brent crude (what international prices are generally based on) is barely above $26 bbl. as we write this. This is 2/3 lower than the per barrel prices we were seeing only a few months ago. Thanks, Saudis. And thanks to an intransigent Vlad Putin as well. Donald Trump needs to unfriend him, right, Nancy?
Looking for reality this week on Wall Street
What’s happening? Why has the world suddenly gone haywire. Who knows? But numerous facile theories are out there, as numerous as the lousy touts who dispense them with abandon on the cable news financial shows. We prefer to track reality. But in this chaotic environment, reality is hard to find let alone track.
What was truly weird about Monday’s market disaster was this: The Federal Reserve announced Sunday – actually days ahead of its usual monthly meeting and report this month – that it was undertaking a radical interest rate cut, taking the bank’s key rate down to, effectively, zero. Immediately.
Plus, those jolly Fedsters announced they’d be firing the central bank’s big cash bazooka by injecting virtually unlimited liquidity into the financial system, launching its long-denied but now necessary quantitative-easing (QE) / bond buying program.
A tardy Fed and a politically bloodthirsty media: The Gang that Couldn’t Shoot Straight
The punditocracy immediately dubbed this mass injection of liquidity “QE5,” naming it after the previous series of such “Quantitative Easing” programs conducted by the Fed under the Obama administration. All these actions were an ultimately successful attempt to bring the Great Recession’s crashing stock, bond and real estate markets to a screeching halt on the downside so recovery could finally begin. Looks like they’re hoping to bring our economic Lazarus back from the dead a second time.
Problem is, this is exactly what the screaming mobs of the blithering idiots populating cable news outlets in 2020 have been screaming for Fed to do since the markets began to fall apart late February. But, as has been consistently true of this Fed, these apparently clueless bankers waited to fire their bazooka, as usual, until it was too late. Or almost so.
So, instead of injecting a big booster shot of confidence for Wall Street and basking in its success, the Fed got egg smeared on its collective face. Funds and professional investors, aided by out of control machine trading algorithms, trained their “sell, sell, sell” canons on stocks. Even worse, those TV “analysts” who pushed the Fed to its current course promptly denounced them for giving into their demands. Creating a narrative of chaos and then blaming it on the Administration is actually great for these faux journalists. Anything to make Trump look bad, apparently. A foolish consistency is not the hobgoblin of these little minds.
Details on how this week’s unfolding disaster began
But back to the horrific Monday action that launched this week’s downward market plunge CNBC provided some stats and color.
“The S&P 500 dropped 12.1% while the Dow Jones Industrial Average fell 3,065 points, or 13.2%. The Nasdaq Composite traded 12.6% lower.…
“’The markets are getting no break with yesterday’s historic Fed actions and COVID-19 dominating the world’s headlines,’ Frank Cappelleri, executive director at Instinet, said in a note. ‘While the news continues to worsen and with the price action doing things we’ve only seen a handful of other times in the last century, it’s nearly impossible to keep things in perspective….’
“Monday’s losses put the Dow down 28% from its all-time high and the S&P 500 and Nasdaq more than 26% below their records last month. At one point, the Dow was down 30% from its record.
A trading halt. How’d that work?
“Trading was halted for 15 minutes shortly after the open as a then-8.14% drop on the S&P 500 triggered a so-called circuit breaker. It was the third time in the last week a circuit breaker was triggered. Before the open, futures contracts tied to the major averages hit their ‘limit down’ levels, meaning they could not trade below that threshold. Those limits — along with the regular session’s circuit breakers — are imposed by the exchanges to maintain orderly market behavior.
“‘The Fed blasted its monetary bazooka for sure,’ said Peter Boockvar, chief investment officer at Bleakley Advisory Group. ‘This better work because I don’t know what they have left and no amount of money raining from the sky will cure this virus.’”
But my favorite comment on Monday’s Destruction Derby came via ZeroHedge’s Twin Tylers.
“As one veteran trader exclaimed in FULL CAPS over text: ‘it’s total f**king global carnage’ as wherever you look today there is blood in the streets.”
We can’t improve at all on this description of what happened to the universe of investors Monday. Save for the fat bastards with pre-programmed high-speed computers whose algorithms, detecting historically high readings of the VIX volatility index proceeded to eviscerate what was left of the spectacular but now-concluded 11-year bull market.
Bring back the uptick rule
Making things worse, without the old uptick rule, foolishly abandoned years ago, machine algorithms on the short side can bang down the entire market of stocks at will and without current risk, cascading equities down, down, down in a never-ending cascade of misery for all the little guys out there who watch their 401(k)s getting gutted. There’s nothing to stop the losses, as we’re seeing again Wednesday, as blood is running down Wall Street again.
The high-speed machine traders are effectively extracting the entire value of Americans’ retirement accounts out of those accounts and into theirs with impunity. Either the Fed or the SEC need to put a stop to this before all the money on Wall Street is vacuumed into the accounts of George Soros and his globalist friends. What a damned mess.
Monday’s body count in world markets. From selling, not the Wuhan coronavirus
Shall we offer a metaphorical body count for Monday? Actually, the Tylers put one together in their recap.
- STOXX EUROPE 600 ENDS DOWN 4.9%, LOWEST CLOSE SINCE MID-2013
- SOUTH AFRICA’S FTSE/JSE INDEX FALLS AS MUCH AS 12.2%, MOST EVER
- MUNI BONDS EXTEND WORST ROUT SINCE 1987
- COPPER SLUMPS AS MUCH AS 5.2% AMID WEAKENING RISK APPETITE
- BRENT CRUDE OIL PLUNGES BELOW $30 FOR FIRST TIME SINCE 2016
- SILVER PLUNGES TO 2011 LOWS
- U.S. WHOLESALE GASOLINE PRICES PLUNGE 21%
- HYG WORST DROP SINCE 2008
- LQD WORST DROP SINCE 2008
“Year-to-date, the long-bond is the best-performing asset with stocks the worst and gold just dipping into the red today…”
Which brings us back to Wednesday’s reprise of Monday’s disaster thus far…
But now, back to the Wednesday action. Today’s still-developing disaster has the Dow off another 1300+ points as we approach the noon hour ET. The blood is running down Wall Street yet again.
So will we beat Monday’s disastrous point-loss record when shell-shocked NYSE employees ring the 4 p.m. closing bell? The way things are going, there’s at least a 50-50 chance, .
Meanwhile, here in The Swamp, the Administration is desperately trying to put together a compound rescue package as quickly as possible, even as Nancy Pelosi continues to gum up the works doing the usual clever progressive crap like trying to cram fun things like Federal abortion funding into a bill or bills that are a last-ditch attempt to save the economy and all those American jobs President Trump managed to recreate. Without much help from Nancy, I might add.
Should the Administration announce some kind of grand and potentially effective triage to stop the endless economic bleeding – not to mention helping to blunt the Wuhan coronavirus panic the media has been whipping up, markets could turn on a dime. But right now, no one seems to be able to find the dime.
This whole mess is a developing story. We’ll return with updates if and when they’re relevant.
– Headline image: What else? “The Scream” by Edvard Munch, 1893 version.
(Public domain image via Wikipedia entry on the painting, view modified to fit by this writer)