LaxPower Back-Up Stick

Farfromgeneva wrote: ↑Thu Mar 12, 2020 12:53 pm

holmes435 wrote: ↑Thu Mar 12, 2020 11:52 am The DJIA was at ~19827 on Inauguration Day. S&P 500 was at ~2271.

We could very easily hit those numbers again today or tomorrow

Thank you for citing S&P 500. Small thing but always bugs me when people talk DJIA, which is 30 human selected companies meant to represent the economy, almost always lagging, and stock price weighted (which is insane except when it was created maybe 100yrs ago). S&P is 500 is a free floating market capitalization weighted indices that much, much, much better reflects the stock market (and economy). Dow gets a lot of headlines but I try to push everyone to be focusing on SPX.

Kismet wrote: ↑Thu Mar 12, 2020 1:05 pm Interesting piece in today's NYT - would be curious on feedback from those with experience in markets here

"Something Weird Is Happening on Wall Street, and Not Just the Stock Sell-Off
A sinking feeling reminiscent of the global financial crisis, when all kinds of obscure markets went haywire.

Wednesday was an unsettling day on global financial markets, and not just because the stock market fell sharply enough to bring a decade-plus bull market to an end.

Underneath the headline numbers were a series of movements that don’t really make sense when lined up against one another. They amount to signs — not definitive, but worrying — that something is breaking down in the workings of the financial system, even if it’s not totally clear what that is just yet.

Bond prices and stock prices were moving together, not in opposite directions as they usually do. On a day when major economic disruptions resulting from the coronavirus pandemic appeared to become likelier — which might be expected to make typical market safe havens more popular — many of them fell instead. That included bonds of all sorts and gold.

And there were reports from trading desks that many assets that are normally liquid — easy to buy and sell — were freezing up, with securities not trading widely. This was true of the bonds issued by municipalities and major corporations but, more curiously, also of Treasury bonds, normally the bedrock of the global financial system.

People, it is fair to say, are worried about bond market liquidity.

Any one of these moves on its own wouldn’t really matter. Markets can move for all kinds of reasons, most of which affect only the investors and traders involved. But these types of swings give experienced financial market watchers a sinking feeling, the kind last felt widely during the global financial crisis when all kinds of obscure financial markets went haywire.

Suppose you looked at the score of a football game, and it was a 31-3 blowout.

You would have a pretty good guess about what had happened. The winning team’s offense must have gained huge amounts of yardage, enabling it to score all those points, while its defense was tough and prevented the opposing team from gaining much yardage.

That guess would usually be correct, but once in a while, when you look deeper into the statistics you might see that the opposite happened — for example, a winning team that scored lots of points despite not gaining much yardage, with an opponent that did the reverse. It would tell you that a deeply strange game had been played.

The global financial markets this week, and especially Wednesday, have been that very weird game of football. At some point, the weirdness can be as important as the final score in terms of understanding what is likely to happen in the future.

Consider the most basic two types of assets: stocks and bonds. Normally, especially in times of financial stress, these move in opposite directions. When there is good news and the outlook is bright, it is known as a “risk-on” day, meaning people are comfortable buying risky assets like stocks, driving up their price, while driving down the price of safer assets like bonds.
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A “risk-off” day is the reverse — a day that investors plow money into safe assets out of fear of what will happen next. It reflects a flight to safety and a reasonable expectation that if conditions worsen, the Federal Reserve is more likely to lower interest rates, which as a matter of arithmetic justifies higher bond prices.

That has been an extremely powerful relationship through most of this year and, indeed, most of the 12 years since the global financial crisis. That’s why it was odd that on Tuesday and Wednesday, as the S&P 500 was down nearly 5 percent, the benchmark 10-year Treasury bond yield rose by 0.06 percentage points."

foreverlax wrote: ↑Thu Mar 12, 2020 1:09 pm

Farfromgeneva wrote: ↑Thu Mar 12, 2020 12:53 pm

holmes435 wrote: ↑Thu Mar 12, 2020 11:52 am The DJIA was at ~19827 on Inauguration Day. S&P 500 was at ~2271.

We could very easily hit those numbers again today or tomorrow

Thank you for citing S&P 500. Small thing but always bugs me when people talk DJIA, which is 30 human selected companies meant to represent the economy, almost always lagging, and stock price weighted (which is insane except when it was created maybe 100yrs ago). S&P is 500 is a free floating market capitalization weighted indices that much, much, much better reflects the stock market (and economy). Dow gets a lot of headlines but I try to push everyone to be focusing on SPX.

The RSP is a MUCH better indicator vs the SPY....RSP has the same 500 stocks that make up the SPY, but they aren't weighted by market cap - in other words, one stock, one vote.

Since 2/19

Dow - down 19.75
SPY - down 19.04
RSP - down 21.68

foreverlax wrote: ↑Thu Mar 12, 2020 1:13 pm

Kismet wrote: ↑Thu Mar 12, 2020 1:05 pm Interesting piece in today's NYT - would be curious on feedback from those with experience in markets here

"Something Weird Is Happening on Wall Street, and Not Just the Stock Sell-Off
A sinking feeling reminiscent of the global financial crisis, when all kinds of obscure markets went haywire.

Wednesday was an unsettling day on global financial markets, and not just because the stock market fell sharply enough to bring a decade-plus bull market to an end.

Underneath the headline numbers were a series of movements that don’t really make sense when lined up against one another. They amount to signs — not definitive, but worrying — that something is breaking down in the workings of the financial system, even if it’s not totally clear what that is just yet.

Bond prices and stock prices were moving together, not in opposite directions as they usually do. On a day when major economic disruptions resulting from the coronavirus pandemic appeared to become likelier — which might be expected to make typical market safe havens more popular — many of them fell instead. That included bonds of all sorts and gold.

And there were reports from trading desks that many assets that are normally liquid — easy to buy and sell — were freezing up, with securities not trading widely. This was true of the bonds issued by municipalities and major corporations but, more curiously, also of Treasury bonds, normally the bedrock of the global financial system.

People, it is fair to say, are worried about bond market liquidity.

Any one of these moves on its own wouldn’t really matter. Markets can move for all kinds of reasons, most of which affect only the investors and traders involved. But these types of swings give experienced financial market watchers a sinking feeling, the kind last felt widely during the global financial crisis when all kinds of obscure financial markets went haywire.

Suppose you looked at the score of a football game, and it was a 31-3 blowout.

You would have a pretty good guess about what had happened. The winning team’s offense must have gained huge amounts of yardage, enabling it to score all those points, while its defense was tough and prevented the opposing team from gaining much yardage.

That guess would usually be correct, but once in a while, when you look deeper into the statistics you might see that the opposite happened — for example, a winning team that scored lots of points despite not gaining much yardage, with an opponent that did the reverse. It would tell you that a deeply strange game had been played.

The global financial markets this week, and especially Wednesday, have been that very weird game of football. At some point, the weirdness can be as important as the final score in terms of understanding what is likely to happen in the future.

Consider the most basic two types of assets: stocks and bonds. Normally, especially in times of financial stress, these move in opposite directions. When there is good news and the outlook is bright, it is known as a “risk-on” day, meaning people are comfortable buying risky assets like stocks, driving up their price, while driving down the price of safer assets like bonds.
Editors’ Picks
Swimrun, Sweden’s Island-to-Island Race, Comes to America
There Are Too Many Celebrities. Here’s How We’re Dealing With Them as a Society.
The King of D.I.Y. Dwellings

A “risk-off” day is the reverse — a day that investors plow money into safe assets out of fear of what will happen next. It reflects a flight to safety and a reasonable expectation that if conditions worsen, the Federal Reserve is more likely to lower interest rates, which as a matter of arithmetic justifies higher bond prices.

That has been an extremely powerful relationship through most of this year and, indeed, most of the 12 years since the global financial crisis. That’s why it was odd that on Tuesday and Wednesday, as the S&P 500 was down nearly 5 percent, the benchmark 10-year Treasury bond yield rose by 0.06 percentage points."

Hearing that banks have been selling "bond" to raise cash to meet liquidity needs from draw-downs on credit lines. Fed injecting all kinds of money in to money markets and doing some QE buying.

Let's hope they are as sound as we are being told.

It's why I keep saying Trump and Congress have to do something NOW, BEFORE the damage snowballs...

Farfromgeneva wrote: ↑Thu Mar 12, 2020 2:07 pm I’m not sure how much I agree that the government has to backstop business now. Wasn’t for it in the crisis either, the banks and certainly not auto (except ford who didn’t need or take the money because they started addressing their problems earlier in the decade). I’ve seen probably 250 bank loan books for M&A and also spent time in leveraged finance. Creditors stress their businesses for various shocks. Businesses should have appropriate sources to handle 3-6mo and if they don’t that’s not something worthy of a govt backstop.

If we’re talking subsidizing employee sick leave or some other direct to individual efforts that’s different but we always run to backstop various groups whenever any stress occurs and all it does is make the next problem more severe (OCanada, if you liked Black Sean then check out his follow up effort called Antifragile). Governments can’t solve all problems and when they do they create worse ones most of the time. Hence why we don’t have an effective monetary tool now because we blew that load t trying to push folks out the risk curve out of the last problem.

Andersen wrote: ↑Thu Mar 12, 2020 2:04 pm

It's why I keep saying Trump and Congress have to do something NOW, BEFORE the damage snowballs...

What do you think would be helpful?

Farfromgeneva wrote: ↑Thu Mar 12, 2020 2:31 pm It becomes a slippery slope. But I’ve been consistent, bounce ag subsidies, FDIC insurance and most other subsidies. It creates improper incentives that pervert people’s decision making in ways that almost universally cause larger problems down the road. Failure has to exist.p

a fan wrote: ↑Thu Mar 12, 2020 3:22 pm You don't need a theory. If you're an American, would you work for $5 per day?

The answer is no. So that means using your theory, American farming would disappear. So would much of rural America, because there would be no reason to live there.