24 Mar THERE ARE NO WORDS TO DESCRIBE TODAY
What can not remotely describe the markets. Implosion. Cataclysmic. Tectonic. Paralyzing.
What makes today different is the speed of the unrelenting decline where a liquidity issue is perhaps morphing into a solvency issue. The Federal Reserve threw everything in including the kitchen sink to perhaps to no avail.
In my view the total domination of the markets by technology has ended any human rationality. It is SkyNet gone amuck.
When the history is written about today, I am certain much blame will be placed upon levered algorithmic trading, a leverage that no one remotely thought existed, an unwinding at a velocity thought impossible. Corporate bond ETFs have failed miserably which will again usher in a different fixed income trading structure.
Equity derivative liquidity is also imploding.
Many are now starting to question as whether the cost is worth the cure? Society and the economy have been shuttered. Bloomberg reports over $26 trillion have evaporated from equity markets since mid-February. This does not include the carnage in the fixed income markets or overall economic costs.
In my view society is about 7-10 days away from fear morphing into anger. If anger becomes the dominant emotion, the past two weeks may be viewed as just a walk in the park.
Perhaps the only certainty to write is that today is indeed historic and life and the economy has forever changed.
I pray and adamantly believe that today will make all stronger and create a better tomorrow. Once I and all else lose this belief, then society is toast as the opposite of hope is despair.
I do not think despair will occur for we are Americans and we have overcome every other insurmountable obstacle through hard work, perseverance and belief in a higher power that will guide our actions.
What will happen today?
Last night the foreign markets were up. London was up 4.12%, Paris up 4.73% and Frankfurt up 6.17%. China was up 2.34%, Japan up 7.13% and Hang Sang up 4.46%
The Dow should open sharply higher as the stock futures hit limit up on optimism the US will pass a stimulus package. As indicated above, the foreign markets surged because of announced stimulus programs, measures that are necessary as we are facing the greatest economic challenge in at least two generations.
A rhetorical question to ask will today’s extreme measures sow the seeds for the next crisis. Probably but at this juncture we first have to save the patient so we could then start to worry about the side effects. If the patient dies, naturally there will be no side effects.
The 10-year is off 6/32 to yield 0.82%.